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Ericsson has strong quarter, but gross margins fall

With few exceptions it has been a very strong quarter for electronics companies. LM Ericsson continues the trend. Their fourth quarter earnings were 52% up from the previous year. The profit for the quarter was $1.18 billion, up from $730 million. That brings their annual profit to $3.19 billion. Sales for the quarter were also healthy. The $6.01 billion they realized for the quarter was 16% ahead of the previous year. The growth came from strong sales in North America and strong growth in services.

If you want to find a dark spot in this bright picture, you only need to focus on the gross margin. That number fell from 45.6% in 2004 to 44.2% last year. That has to do largely with the fact that the sales of services grew faster than the sales of products. Services traditionally have lower margins. As a result of this, stock prices fell slightly despite the strong earnings.

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