Ericsson Plunges to Loss
October 21 2016 - 2:33AM
Dow Jones News
By Matthias Verbergt
STOCKHOLM-- Ericsson AB fell to a third-quarter loss, the
Swedish company said Friday, amid a slowing telecom-equipment
market and fierce Asian competition.
Ericsson's net loss for the period ending Sept. 30 was 233
million Swedish kronor ($26.2 million), compared with a net profit
of 3.08 billion kronor in the same period last year.
Ericsson issued a profit warning last week, saying third-quarter
sales fell 14% to 51.1 billion kronor, from 59.2 billion kronor
last year, with operating profit down 93% to 300 million kronor
from 5.1 billion kronor, partly on restructuring charges of 1.3
billion kronor.
The news sent Ericsson's shares down 20%.
Ericsson said the decline in revenue was mainly driven by its
sales of network equipment, which were down 19%.
Spending by mobile-service providers on latest-generation, or
4G, networks largely has dried up, with most mobile-broadband
projects having been completed last year. At the same time,
competition has risen, with Huawei Technologies Co. of China
expanding aggressively on Ericsson's traditional European turf.
Ericsson is betting big on the development of the
next-generation of wireless networks, or 5G, but the rollout of 5G
networks is still several years away, analysts say.
In its third-quarter report, Ericsson warned that the current
industry trends point to "a somewhat weaker than normal seasonal
sales growth between the third and fourth quarters."
In addition, the company said it renewed a managed services
contract with one customer in North America, but with a reduced
scope, which will impact sales negatively, adding that the current
sales trend in mobile broadband is expected to prevail in the short
term.
Write to Matthias Verbergt at Matthias.Verbergt@wsj.com
(END) Dow Jones Newswires
October 21, 2016 02:18 ET (06:18 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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