Ericsson Q4 Lags Forecasts, Challenges Ahead

World No.1 mobile network gear maker Ericsson missed fourth-quarter profit forecasts, hit by lower demand from the United States and Russia, and said weak margins and cautiousness from its operator clients would continue in the short term.

Earnings before interest and tax, excluding the company's loss-making joint ventures, but including restructuring charges, were 4.1 billion Swedish crowns ($605 million) versus a mean forecast of 7.4 billion in a Reuters poll.

Sales, at 63.7 billion crowns, were also well below the forecast of 67.2 billion, mainly due to the key networks unit, hit by a slowdown in spending in the United States and Russia.

And the company's gross margin disappointed, even though Ericsson had flagged it would be weak due to a shift in business mix to less profitable projects in Europe.

"Short-term, we expect operators to continue to be cautious with spending, reflecting factors such as macro economic and political uncertainty," Ericsson said on Wednesday.

"We will continue to execute on our strategy which means that the business mix, with more coverage and network modernization projects than capacity projects, will prevail short-term."

Telecoms operators invested heavily through most of 2011 to upgrade networks to cope with surging data traffic from smartphones and tablets, but a slowdown had been expected, particularly in the United States.

Some smaller equipment vendors, such as Juniper Networks Inc and Acme Packet Inc, have issued profit warnings in recent weeks, blaming slower spending at big U.S. carriers like Verizon Communications Inc and AT&T . ($1 = 6.7810 Swedish crowns) (Reporting by Simon Johnson, Editing by Mark Potter)