Samsung Forecasts Greater Earnings Decline Than Expected for the End of 2013

TOKYO — Samsung Electronics, the world’s biggest maker of smartphones, said Tuesday that its earnings in the last quarter of 2013 fell from the previous three-month period as well as from the same period a year ago, heightening investors’ concerns about competitive pressures in the industry.

As usual, the company, based in South Korea, released only a bare-bones forecast of its quarterly earnings, in advance of a full report later in the month, and provided no reasons for the expected decline in operating income. Analysts have said the company faced tighter profit margins on smartphones, along with higher employee bonus costs, during the quarter.

While the drop was expected, the earnings forecast was below analysts’ estimates. The company predicted operating income of about 8.3 trillion won ($7.8 billion) for the final three months of the year, down from 10.2 trillion won in the third quarter. In the fourth quarter of 2012, the company had  8.84 trillion won in operating income.

Revenue is expected to total about 59 trillion won, roughly even with the third quarter.

While Samsung controls more than one-third of the global smartphone market, it faces renewed competition from Apple, which recently added leading network operators like China Mobile and NTT DoCoMo of Japan to its roster of iPhone vendors.

Samsung also faces increased competition from low-cost manufacturers in China, some of which hope to challenge Samsung and Apple in developed markets.

Analysts say Samsung’s costs in the fourth quarter were lifted by a special bonus to some employees to mark the 20th anniversary of what the company calls its new management initiative. In 1993, the Samsung group patriarch, Lee Kun-hee, began a drive to raise the quality of the company’s products, telling managers to “change everything except your wife and children.”

Samsung will issue a detailed earnings report on Jan. 24.

No wonder Samsung Electronics is so busy looking for a new hit gadget. Its signature product, the smartphone, is facing unanticipated challenges.

Samsung, the world’s largest maker of smartphones, said Tuesday that its operating profit in the fourth quarter had declined from the third quarter of  2013, and also compared with the fourth  quarter of 2012. 

As usual, the company, based in  Suwon, South Korea, released only a bare-bones forecast in advance of a full quarterly earnings report later in the month. It provided no reasons for the expected decline. But analysts said softness in smartphones, which account for more than half of Samsung’s earnings, was probably a big reason.

Samsung still has a roughly one-third share of global smartphone sales, but it faces new challenges to its dominance. At the low end, a number of Chinese companies are offering phones with similar features at a lower price. More worrying for investors are new signs of vulnerability in premium-price phones, which account for the vast majority of the profit in the business. 

For several years, Samsung and Apple have been battling for leadership in high-end phones. Now Apple is making new gains. In November, it sold 65 percent of the smartphones priced at $400 or more worldwide, up from 35 percent a year earlier, according to Counterpoint Technology Market Research.  And that was before Apple added China  Mobile, the world’s largest network operator, as an iPhone partner, with sales set to begin this month.

In the same period, Samsung’s share of the premium market fell to 21 percent from 40 percent, according to Counterpoint.

‘‘One by one, players in the premium  price band have been squeezed out, and now it looks like Samsung may be  squeezed out as well,’’ said Tom Kang, an analyst at Counterpoint.

A year ago, Samsung had two strong entrants in this category, the Galaxy S3  smartphone and the Note 2, a so-called  phablet, or cross between a phone and a  tablet computer. But the current flagship smartphone, the Galaxy S4, has been a relative disappointment, leaving a new phablet, the Note 3, to carry the load.

Cisco Expects a Decline in Revenue of Up to 10%

The network equipment maker’s chief executive, John T. Chambers, issued the warning as the company reported lower-than-expected revenue for its first fiscal quarter. Mr. Chambers attributed the warning to sluggish demand in emerging markets, as well as the chilling effect of the recent government shutdown on business confidence.

Mr. Chambers said companies in emerging markets like China had become hesitant to buy Cisco products because of political repercussions from reports about the United States spying on foreign governments.

He said Cisco was also seeing a slowdown in decision-making by companies because of economic uncertainty. Mr. Chambers additionally cited a big decline in revenue from television set-top box sales as the company pulled away from less-profitable contracts in that market.

He said Cisco’s orders fell sharply toward the end of the company’s first quarter because of big declines in many of its most important emerging market countries.

“The last two weeks of the last quarter was really tough,” Mr. Chambers told analysts on a conference call.

Shares of Cisco fell 10.3 percent, to $21.52, in after-hours trading after the company released its disappointing financial results targets.

Cisco said revenue grew only 2 percent, to $12.09 billion, in its fiscal first quarter, which ended Oct. 26, from $11.88 billion in the period a year earlier, below analysts’ average estimate of $12.34 billion, according to Thomson Reuters.

The company had forecast growth of 3 percent to 5 percent in the quarter.

Mr. Chambers told analysts that while the partial federal government shutdown directly cut a smaller-than-expected $50 million off Cisco’s revenue, it also reduced demand from nongovernment customers.

He said the shutdown “exasperated the lack of confidence among business leaders we had highlighted over the past few quarters.”

Cisco said its net income dropped to $2 billion, or 37 cents a share, from $2.09 billion, or 39 cents a share. Excluding one-time items, the company earned 53 cents a share, compared with Wall Street expectations of 51 cents a share.

Cisco also said its board had authorized up to $15 billion in additional repurchases of its common stock.

Vodafone Reports Rare Full-Year Decline in Revenue

Revenue at Vodafone was down 4.2 percent to £44.4 billion, or $67.6 billion, for 2012, while core earnings fell 3.1 percent to £13.3 billion.

The company, based in London, said it would keep a £2.1 billion dividend payment from its American unit, Verizon Wireless, rather than returning it to shareholders. Vodafone is at the center of intense speculation as to whether it will sell its 45 percent stake in Verizon Wireless, in a deal that has been estimated at $120 billion.

‘'We have faced headwinds from a combination of continued tough economic conditions, particularly in Southern Europe and an adverse European regulatory environment,'’ Vodafone’s chief executive, Vittorio Colao, said in a statement.

Mr. Colao declined to comment on whether he would consider a sale of the Verizon Wireless stake, merely saying that he had nothing new to report.

Verizon Communications, the American company that holds the other 55 percent of Verizon Wireless, has made little secret of its wish to buy out its British partner. It has ramped up the pressure in recent months, saying that it believed it could buy the asset in a tax-efficient way.

The full-year results highlighted a problem for Mr. Colao, with Verizon Wireless growing at a rapid rate compared with assets in the core European markets that have now struggled for several years.

The steepest revenue declines came from Southern Europe, where operators are cutting prices to win business from struggling consumers. In Italy, service revenue fell 12.8 percent, while in Spain it was down 11.5 percent.

The group also took a £1.8 billion charge on its business in Italy, bringing the total write-downs for Spain and Italy for the year to £7.7 billion.

Having completed a three-year dividend program that guaranteed 7 percent growth per year, Vodafone said it now aimed at least to maintain the ordinary dividend per share at current levels.

Full-year margins on core earnings were down 0.5 percentage points to 29.9 percent, from 33.1 percent just three years ago.

‘'The situation in Southern Europe remains one of disappointment,'’ said Richard Hunter, the head of equities at Hargreaves Lansdown Stockbrokers. ‘'The question of the Verizon stake remains at the top of the agenda for investors, although Vodafone’s decision hitherto to stay put continues to reap measurable rewards, quite apart from the value of its stake appreciating by the year.'’

Media Decoder Blog: Barnes & Noble's Strategy Is Questioned as Holiday Nook Sales Decline

Brendan McDermid/Reuters A Barnes & Noble store in New York City. Overall sales in the nine-week holiday season for the retailer fell 10.9 percent.

8:21 a.m. | Updated For Barnes & Noble, the digital future is not what it used to be.

After a year spent signaling its commitment to build its business through its Nook division, Barnes & Noble on Thursday announced disappointing holiday sales figures, with steep declines that underscored the challenge it faces in transforming from its traditional retail format.

Retail sales from the company’s bookstores and its Web site, BN.com, decreased 10.9 percent from the comparable nine-week holiday period a year earlier, to $1.2 billion, the company reported. More worrisome for the long-term future of the company, sales in the Nook unit that includes e-readers, tablets, digital content and accessories decreased 12.6 percent over the same period, to $311 million.

“They are not selling the devices, they are not selling books and traffic is down,” said Mike Shatzkin, the founder and chief executive of Idea Logical, a consultant to publishers. “I’m looking for an optimistic sign and not seeing one. It is concerning.”

Julio Cortez/Associated Press Nooks at a Barnes & Noble distribution center. The e-reader unit’s holiday sales fell 12.6 percent.

The results, covering a period that ended Dec. 29, are a sobering development for the nation’s largest bookstore chain. The declines occurred during what is supposed to be peak buying season. And the Nook unit’s sagging fortunes came despite a 13 percent increase in sales of digital content, suggesting that it is the tepid demand for Nook devices that is dragging down the unit’s performance.

Barnes & Noble has invested heavily in developing a tablet that can compete with offerings from media giants like Google, Apple and Amazon.com. Last April, in announcing a $300 million investment in Nook by Microsoft, the chief executive of Barnes & Noble’s chief executive, William J. Lynch, said the company wanted “to solidify our position as a leader in the exploding market for digital content in the consumer and education segments.”

A few months after that, the bookseller began breaking out the financial results of the Nook division, In October it completed its strategic partnership with Microsoft by creating Nook Media, a subsidiary and a signal that it was ready to ride its digital business into the future.

But while Barnes & Noble’s most recent Nooks have won critical praise, they have failed to gain significant traction with consumers.

Other companies do not break out sales of their digital tablets, but Amazon has been saying sales of its Kindle Fire were strong. Analysts say Apple’s iPads also appear to be doing well.

“The problem is not whether or not the Nook is good,” said James L. McQuivey, a media analyst for Forrester Research. “What matters is whether you are locked into a Kindle library or an iTunes library or a Nook library. In the end, who holds the content that you value?”

For an increasing number of consumers, he said, the answer is not Barnes & Noble.

Though the company’s stock was down only slightly — falling 2 percent to $14.22 — the reaction in the financial world was unsparing. Analysts stopped short of saying that this was a do-or-die moment for the Nook Media division, but they acknowledged that options for a strong digital future were narrowing.

In a note to clients, S&P Capital IQ said, “We think this portends greater market share losses for the Nook over the medium term” and downgraded its recommendation on Barnes & Noble stock from hold to sell. Barclays said in a note that the Nook’s precipitous decline was “quite concerning” and “below even our modest expectations.”

The declining retail numbers were also troubling when viewed in the context of a rise in sales among independent booksellers. The American Booksellers Association, which has not yet released official holiday sales, estimated Thursday that its members’ sales would be up about 8 percent over last year.

Barnes & Noble executives were not available Thursday to discuss the sales numbers. But a statement from Mr. Lynch indicated that the company was searching for a solution.

“Nook device sales got off to a good start over the Black Friday period, but then fell short of expectations for the balance of holiday,” Mr. Lynch said. “We are examining the root cause of the December shortfall in sales, and will adjust our strategies accordingly going forward.”

The most intriguing, and troublesome, question is whether the company can stay in the digital device business at all over the long run. Nook has been expensive to develop and market and the company does not have the hefty financial resources of its competitors.

Other options are strategic partnerships. Microsoft’s investment last spring was seen at the time as a way to promote Nook through a powerful partner. But sales of the Windows 8 operating system have been disappointing and the Nook has been featured as little more than an app among hundreds on the Windows 8 platform.

“It is going to prove to be a missed opportunity,” said Mr. McQuivey of Forrester.

Last month, Barnes & Noble announced that Pearson, the British education and publishing conglomerate, was taking a 5 percent stake in Nook for $89.5 million. Analysts said that cash investment was welcome and the partnership with Pearson, a major publisher of educational textbooks, might herald a strategy to move toward dominating an education niche market. Still, that would be a significantly smaller business.

Raw Data: Deciphering the Decline in Spanish Mobile Accounts

BERLIN — It would take the unimaginable — a major power outage, a natural disaster or a sudden, permanent loss of income — for many people to abandon their mobile phones.

That is what appears to be happening in Spain in the midst of its economic crisis. But in the country’s telecom sector, as in a Salvador Dalí painting, there may be more than meets the eye.

The Spanish regulator, Comisión del Mercado de las Telecomunicaciones, said last week that 486,183 mobile phone accounts were deactivated by Spanish operators in October alone, the ninth straight month of contraction that has seen two million prepaid accounts, or 9.4 percent of the current total, taken off networks since February.

The biggest reason for the industry’s difficulties is the most obvious: Spain’s economic slowdown, highlighted by its 26.2 percent unemployment rate in October, including a jobless rate of nearly 50 percent among cellphone-conscious young consumers.

Rosalind Craven, who analyzes West European mobile operators at International Data Corp. in London, said the nine months of contracting figures reported by Telefónica’s Movistar and Vodafone Spain, the two largest mobile operators, reflected the economic challenges facing consumers.

“Because it has been going on for so long, this indicates that the reason is indeed the country’s economic distress,” she said. “People in Spain have less money and are looking to save where they can.”

From January through October, Movistar, the market leader, has deactivated 2.3 million mobile accounts. Vodafone Spain, the No.2, shut off 1.3 million accounts, according to the telecommunications commission. Conversely, Orange Spain, the No.3, has gained 124,420 customers and Yoigo, owned by TeliaSonera of Sweden, has added 412,580. Virtual operators, which are low-cost resellers, have added 1.1 million customers.

But three other developments unrelated to Spain’s slowing economy may be exaggerating signs of a telecom sector meltdown.

The first was the decision by Movistar and Vodafone this year to stop subsidizing new handsets. The cost-cutting move caused many customers to switch to Orange, Yoigo and virtual operators like Simyo, which continued to provide subsidies. Both Movistar and Vodafone have since partially reinstated subsidies.

The other influence was a decision by Telefónica and Vodafone to focus on their most lucrative clients — contract customers who pay on average about €25, or $33, each month, more than double what prepaid customers pay. Telefónica, for example, has signed up one million customers since October to a new plan called Movistar Fusión, a package of mobile, fixed and Internet flat-rate service starting at €49.99 a month.

A third, less obvious reason, may be the counting methods used by the operators, which during economic downturns have been known to purge inactive accounts more aggressively from subscriber lists. Such cullings bolster the average monthly revenue per user, the main bellwether used by investors to value operators.

Representatives for Telefónica and Vodafone declined to say if they were aggressively purging their lists. Ms. Craven, the I.D.C. analyst, said operators in Greece conducted a mass purge in 2009 as that country’s economic crisis began to worsen.

Operators generally declare accounts to be inactive when they are unused for three or six months. In good economic times, bigger customer rolls help operators claim greater market share. In bad times, the bigger lists dilute scarce earnings.

Spaniards do not appear to be abandoning their “móviles.” Cellphone penetration in Spain was 116 percent in October, and many people carry more than one SIM card. The inactive accounts being shut down, said Agustín Diaz-Pinés, an analyst at the Organization for Economic Cooperation and Development in Paris, are likely to be extra SIM accounts.

“Undoubtedly the economic downturn plays a role here, but I don’t think many people are dropping their mobile subscriptions,” he said. “They may rather be canceling duplications, for example, the prepaid line you never use.”

Sprint Posts a Big Loss on Decline in Subscribers

As a result, the company’s loss more than doubled from the third quarter of 2011, although it was smaller than most analysts expected.

This was the first time Sprint Nextel lost overall subscribers in two and a half years, as customers gave up on the moribund Nextel network and the company failed to sign up enough of them on the Sprint network.

It was also the first time Sprint Nextel reported quarterly results since it agreed this month to sell a 70 percent stake to the Japanese telecommunications company SoftBank for $20.1 billion. The deal has not closed yet, but Sprint has already borrowed money from SoftBank.

Sprint lost 423,000 subscribers in the July to September period, as trends across its product lineup were weak.

Excluding recaptured Nextel customers, it lost contract-signing subscribers from the Sprint network for the first time in years. Customers on contract-based plans are the most lucrative, and keeping them has been a linchpin of the turnaround plan of Daniel R. Hesse, the company’s chief executive.

For noncontract plans, Sprint, based in Overland Park, Kan., added just 19,000 customers, the smallest number in more than three years.

Sprint’s report comes after a strong performance by Verizon Wireless, the country’s largest carrier, which added 1.8 million subscribers, and a more lackluster report from No. 2 AT&T, which added 228,000.

Sprint reported a loss of $767 million, or 26 cents a share, for the quarter, compared with a loss of $301 million, or 10 cents a share, in the period a year earlier. Revenue rose 5 percent, to $8.76 billion. Analysts polled by FactSet expected a loss of 43 cents a share on $8.81 billion in revenue.

Video Games: Video Game Retail Sales Decline Despite New Hits

More than 200 million Wii, Xbox 360 and PlayStation 3 systems were sold worldwide. Sales of portable gaming machines surged as well. Upward of 12 million subscribers were paying $15 a month to play the online game World of Warcraft, and competitors were plotting to develop worthy rivals. The motion-sensing Kinect system from Microsoft generated considerable buzz, with its promise of freeing players from having to push buttons and wave wands.

And yet the gaming world has found itself teetering at the edge of a financial cliff. In the first eight months of this year retail sales of video games plummeted 20 percent in the United States. That followed a lackluster performance in 2011, when sales fell 8 percent. An analysis on the Web site Gamasutra this year said it was possible that 2012 would be the worst year for retail video game software and hardware sales since 2005.

The struggling economy has certainly been a factor in the decline, especially considering that young men — long a core audience for games — were hit so hard during the recession. Another development will sound familiar to anyone who once had a groovy record collection: the democratizing, disrupting effect of less expensive digital downloads has changed the business model. Nearly everywhere, it seems, people have been sharing Words With Friends, slinging Angry Birds at pigs or springing their creatures through a precarious Doodle universe. All those games, made for smartphones, sure are popular, and the financial picture improves when their sales are included, but they can be had for pennies and seemingly become disposable almost as fast as they are released.

The video-game industry barely survived the brutal recession of the early 1980s: 29 years ago this fall Atari buried millions of unsold video games — believed to be mostly copies of Pac-Man and E.T. The Extra-Terrestrial — in a New Mexico landfill. Are video games facing another devastating crash? Have developers been putting out inferior work, or is something beyond their control going on? What should they do to adapt? The company credited with saving the industry last time was Nintendo, which finally plans to introduce its new Wii U, the successor to the 2006 Wii, next month. Can Nintendo lead the way again?

To try to get a handle on some of these issues, two video-game critics — Chris Suellentrop, deputy editor of Yahoo News, and Stephen Totilo, editor in chief of the gaming site Kotaku.com — recently discussed the challenges facing the industry.

STEPHEN TOTILO This has been a year of underachievement for many of gaming’s top achievers. How very 2012 it was for a game like Draw Something to capture the world’s attention in February; attract about 14 million players a day in April; seduce the FarmVille company Zynga to buy the game’s maker, Omgpop, for $180 million; and by the end of the month have its daily player base fall to 10 million daily. How very 2012 it was for the vaunted hit-maker Blizzard to release a game, Diablo III, that was 11 years in the making and then have to repeatedly apologize for its shortcomings. The Kinect might be selling Xboxes, but it isn’t helping sell that many games, because there are hardly any Kinect games that anyone talks about and very few that sell. It’s just a watered-down repeat of the Wii phenomenon.

This has been the year of sinking game company stocks, stagnating console sales, creative miscues from some of the medium’s best creators and a lack of many blockbuster games — from big companies. Note those last three words. It has been a very bad year for corporate video games. You know, gaming’s elite.

CHRIS SUELLENTROP Yes, it’s been a bad year for games that require the purchase of a physical disc with cover art and liner notes — I mean, an instruction booklet — an oddly retro aspect of the medium. And to take the baton you’re offering, yes, 2012 has been a remarkable year for downloadable titles, many of them created by independent developers working outside the traditional studio system. I wouldn’t call three of the year’s best games — the downloadable Journey, Fez and Papo & Yo — representative of gaming’s peasant class. Still, I don’t envision the next title from thatgamecompany, the developer behind the artful, downloadable PlayStation games Flower and Journey, making up for the industry’s 30 percent revenue decline.

Besides, do you really think that the quality of individual titles is the cause of this collapse? The nation is facing nothing less than a fiction crisis. Four of the five best-selling books last year on Amazon were works of nonfiction, and the fiction title, “Mill River Recluse,” was a Kindle download. The theatrical box office recently saw its worst weekend in 10 years. Narrative television — the quality of shows like “Breaking Bad” and “Mad Men” notwithstanding — is in decline. The most-watched shows are sports and reality spectacles. Anyone who has engaged in the make-believe required for most video games to work their magic knows that games are fiction too. Why would games be immune?

TOTILO Because video games aren’t all narrative fiction. Apologies to fans of the interactive storytelling pioneers of BioWare, the studio behind Mass Effect, and to those still searching for Bowser’s motivation for repeatedly kidnapping Princess Peach, but few people play video games for the story. Or for the acting. Or for many of the other cinematic aspects that can’t mask a bad game.

On the subway I ride daily the only video-game-related decline is the tilting down of heads so people can see the narrative-free games on their cellphones. These people could, of course, be reading books or watching movies. Many of them are not. They have an appetite for the interactivity of a game. They want to poke at a system and have it, or an opposing gamer, respond. They want to play.

Chris Suellentrop, the deputy editor of Yahoo News, and Stephen Totilo, the editor in chief of the gaming Web site Kotaku.com, write about video games for The New York Times.

Electronic Arts Posts Decline in Profit

The company also announced a $500 million share buyback.

An Electronic Arts rival, Take-Two, reported a net loss on Tuesday.

Electronic Arts, which has been trying to expand its mobile and online games business, also said Tuesday that its net digital revenue jumped 55 percent.

For the three months ended June 30, the company posted overall revenue of $491 million, compared with $524 million a year ago. Net income dropped to $201 million, or 63 cents a share, compared with $221 million, or 66 cents a share a year ago.

Excluding one-time items, the company recorded a loss of 41 cents a share, beating by a penny an average forecast for a 42-cent loss, according to Thomson Reuters.

For fiscal 2013, Electronic Arts, which battles Activision Blizzard and other publishers for a slice of a decelerating video games market, reaffirmed its outlook for diluted earnings of $1.05 to $1.20 a share.

Publishers are struggling to sustain revenue growth as gamers migrate steadily to casual and social games online or on mobile devices. On Tuesday, Electronic Arts said it would offer a free-to-play option for its Star Wars: The Old Republic game, hoping to stop gamer losses.

“We saw a lot of good traction there so we decided in the fall we would provide an opportunity for consumers to play the game free-to-play with some restrictions with an experience through micro-based transactions,” said Ken Barker, the chief financial officer.

The company has struggled to get the multiplayer role-playing game based on George Lucas’s science-fiction movie off the ground since its introduction last December.

Company executives told analysts in the earnings conference call that Star Wars: The Old Republic, had less than one million active subscribers, down from 1.3 million a quarter ago.

Take-Two Interactive Software posted a net loss and 32 percent drop in revenue in its fiscal first quarter, because of weak sales of Max Payne 3 and Spec Ops: The Line.

Take-Two, which publishes the hit Grand Theft Auto franchise, said net revenue came to $226.1 million in the quarter ended June 30, compared with $334.4 million a year earlier. That was below the $254.2 million average estimate of analysts, according to Thomson Reuters.

The company reported a net loss of $110.8 million, or $1.30 a share, versus a loss of $8.6 million, or 11 cents a share, a year earlier.

Ericsson Earnings Decline 63 Percent in 2d Quarter

BERLIN — Ericsson said Wednesday that its profit fell by 63 percent in the second quarter, as telecommunications carriers trimmed spending on equipment in the United States, Russia and China.

Net income fell to 1.2 billion Swedish kronor, or $172 million, on a 1 percent increase in sales, to 55.3 billion kronor, Ericsson said.

Shares of the company, which is based in Stockholm, fell by 2.6 percent to 57.3 kronor in afternoon trading Wednesday.

Hans Vestberg, the chief executive of Ericsson, told analysts in Stockholm that economic slowdowns in Russia and China had weighed on profits, along with falling demand for older network gear in North America, where operators are activating new, upgraded networks.

The decline was also driven by mounting losses at ST-Ericsson, a venture with Swiss chip maker ST Microelectronics that makes mobile-phone modems and components. The loss at the Geneva-based venture nearly doubled to 1.3 billion kronor from 700 million a year earlier.

Investors are closely monitoring signs of a further global slowdown, which would show up in the results of Ericsson, the biggest maker of telecommunications equipment.

“They are signaling that China may be on the weak side going forward and we already knew that Russia was coming down,” said Hakan Wranne, an analyst at Swedbank in Stockholm. “But the biggest concern is the U.S. market, which will continue to be weak.”

Sales of network equipment in North America, a region that accounted for nearly one quarter of Ericsson’s global sales, fell by 22 percent in the quarter. The decline came as carriers such as Sprint and Verizon Wireless replaced their older gear, which runs on a 1980s technology called Code Division Multiple Access or CDMA, with new networks built on a Internet-based transmission technology called Long Term Evolution, or LTE.

Globally, sales of CDMA equipment fell by 50 percent amid the transition to LTE grids, Ericsson said.

Ericsson partially offset weakness in its main network equipment business by selling outsourcing and software to carriers. Sales of services and software rose 29 percent in the period to 27.6 billion kronor from 21.4 billion, generated half of Ericsson’s quarterly sales.

Despite its falling profits, Ericsson is still faring better than some competitors. Alcatel-Lucent, the French network equipment maker, and ZTE, a Chinese rival, both issued profit warnings this week following poor second-quarter results. The message from Ericsson was more positive, although the company as is its practice gave no profit or sales forecasts.

Mr. Vestberg told financial analysts said that long-term demand for new network equipment was expected to remain strong, driven by rising purchases of smartphones. Through 2017, the number of smartphone subscriptions worldwide is expected to more than quadruple, Mr. Vestberg said, to 3 billion from 700 million at the end of June.

That will stoke demand for new LTE networks and network equipment, he said.

“We continue to stay close to our customers to monitor the impacts of macroeconomic development and political uncertainty in certain regions on their investments,” Mr. Vestberg said. “In customer conversations, it is clear that the fundamental drivers for increased data traffic are unchanged.”

In an interview, Mr. Vestberg said consumer demand for LTE handsets had started slowly, with only 2 million being sold worldwide each month in that last quarter. That compares with 5 to 10 million GSM mobile phones sold each month in India alone. The United States and South Korea are the world’s most advanced LTE markets, he said.

But other countries will soon follow, as new, faster networks come on line and more LTE handsets are sold at more affordable prices.

“The current LTE handset sales are still very low in global terms, but this is a transitional period and we are soon going to see explosive growth,” Mr. Vestberg said.

Mr. Wranne, the Swedbank analyst, said that Ericsson was better positioned because of its market leadership to capitalize on that coming growth. “The top line for Ericsson is really doing O.K. at the moment given the profit warnings from its competitors,” Mr. Wranne said. “The expectations given the current global situation weren’t that high, either.”