Ericsson net sinks 71% on weak demand

Natalie Apostolou
23 Oct 2009
Daily News

Ericsson has succumbed to the pressures of the global financial crisis posting lower than expected quarterly results for the third quarter.

The wireless infrastructure leader’s sales fell 4%, or 12% when adjusted for currency, underlining carriers’ weak appetite for network investment.

Ericsson reported operating earnings of €539.1 million ($810 million), excluding restructuring charges and its loss-making handset and chip joint ventures. Net profit dropped 71% to €78.7 million for the three months to September.

“As commented on in previous reports, the economic climate affects the global mobile infrastructure market and the credit environment is still tight in several emerging markets. However, other markets, including the world's leading economies such as China, India, US and Japan show good development,” exiting CEO Carl-Henric Svanberg said in a statement.

The disappointing results include charges of €262 million related to the cost-cutting program it announced in January. The company said the plan would lead to restructuring charges of €580–680 million and annual cost reductions of nearly €1 billion by the second half of 2010.

“Our cost reduction activities are running ahead of plan with further opportunities for efficiency improvements and savings,” Svanberg added.

Ericsson also booked a loss of €98 million on Sony Ericsson, its handset joint venture with Sony, which last week posted a wider third-quarter net loss of €164 million.

“Sales of network equipment declined due to lower demand in the current tougher market environment,” Svanberg said. Also showing signs of sales decline were the professional services unit and multimedia units.

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