Ericsson: Shifting Services Strategy Profile

In 2003, Ericsson reported that 17% of total company revenues came from project based services. Check out the headline this week:

     Ericsson: Q2 net profit drops, but service demand rises

     July 27, 2009 — 9:13am ET | By Sean Buckley

The article contains the following paragraph:

In addition to broadband, professional services were a bright spot for Ericsson. The company reported that services accounted for about 38 percent of the company’s total revenues. Buoyed by large contracts from major service providers such as Sprint, Ericsson said professional services revenues totaled $1.89 billion, while “network rollout” services accounted for $790 million. Svanberg stated that the company has dedicated 7,000 employees to “consulting and integration.”

Project based revenues have more than doubled for Ericsson over the past six years. How important was that $1.89 billion in services revenue to Ericsson this past quarter? And remember, this was “heavy” services revenue. A large percentage of those project margin dollars dropped directly to the bottom line.

I highlight this little industry data point because it is 100% in line with the overall industry trends we saw in Q2 that will be reviewed in The Service 50 webcast on Thursday. I have said it before in this forum, but let me say it agan: In a slow economy, service dollars matter.

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