Sweden's Ericsson says Q4 profits dropped

Jan 25, 2012 By LOUISE NORDSTROM , Associated Press

(AP) -- LM Ericsson, the world-leading wireless equipment maker in terms of market share, on Wednesday shocked the market by posting a much worse-than-expected fourth-quarterly result, mainly blaming operators for turning cautious due to the global financial turmoil.

Shares in the company took a severe beating in the opening minutes of the Stockholm stock exchange, tumbling 13 percent to 8.95 kronor ($1.33).

The company, headquartered in Stockholm in Sweden, said profits in the final quarter of 2011 fell by more than two-thirds compared with a year earlier, reaching only 1.15 billion kronor ($170 million) from a previous 4.32 billion kronor. Aside from the woes on the , it also said operator investment spending had slowed down due to a period of high investment in capacity as well as caution linked to political unrest in some countries.

Although sales were more or less flat in the October-December period, rising by 1 percent to 63.67 billion kronor, the tighter budgets for operators led to a severe squeeze of its gross margin, which fell to 30.2 percent from a previous 34.7 percent.

Losses in its joint venture also hurt the results, it said. Ericsson last year sold its share in Sony Ericsson to Sony, but the deal is being finalized in this quarter.

For the full year 2011, however, a 12 percent rise in sales led to a of 12.19 billion kronor, also up 12 percent from the full year in 2010, the company said.

Greger Johansson, an analyst with research firm Redeye said the results fell way below expectations, describing them as "very weak," especially pointing to the disappointing sales figures in Ericsson's core unit, Networks.

"It's pretty much weaker on all areas," he said.

Ericsson CEO Hans Vestberg said that although his company expects operators "to continue to be cautious with spending, reflecting factors such as macro economic and political uncertainty" in the short term, "the industry fundamentals for longer-term positive development remain solid."

"With our global scale and presence, as well as technology and services leadership, we are well positioned to continue to drive and lead the industry development," he said.

Ericsson is the world leader in rolling out and upgrading mobile network infrastructure. Its biggest competitors are China's Huawei and Finnish-German joint venture Nokia Siemens.

Explore further: Samsung denies child labour at Chinese supplier

not rated yet
add to favorites email to friend print save as pdf

Related Stories

Ericsson reports profit leap, shares slump

Jul 21, 2011

Swedish telecom equipment maker Ericsson reported Thursday a 65 percent jump in second quarter net profit on strong sales but this still fell short of expectations and its shares slumped.

Sony Ericsson profits down in 3rd quarter

Oct 14, 2011

Mobile phone maker Sony Ericsson posted a break-even third quarter Friday - blaming the drop in earnings on higher taxes and lower margins - and announced that it is shifting its entire portfolio to smartphones next year.

Sony Ericsson Q4 loss narrows 9 percent

Jan 22, 2010

(AP) -- Mobile phone maker Sony Ericsson on Friday said its loss in the fourth quarter narrowed 9 percent from a year ago to euro167 million ($235 million), as improved margins and lower costs offset a slump in sales.

Mobile phone maker Sony Ericsson posts Q1 profit

Apr 16, 2010

(AP) -- Mobile phone maker Sony Ericsson posted its first quarterly profit in nearly two years Friday, boosted by gains from high-end devices such as smartphones and cost cuts.

Recommended for you

Chinese e-commerce rivals challenge Alibaba (Update)

2 hours ago

China's biggest property developer, Wanda Group, and Internet giants Baidu and Tencent unveiled a new e-commerce venture Friday in a challenge to industry leader Alibaba Group ahead of its U.S. stock offering.

Nigeria launches national identity card scheme

16 hours ago

Nigeria's President Goodluck Jonathan on Thursday launched a national electronic identity card scheme, which backers said would boost access to financial and government services in Africa's most populous nation.

Vivendi, Telefonica in talks over Brazil business (Update)

Aug 28, 2014

French media conglomerate Vivendi said Thursday it would begin exclusive talks with Spanish telecoms company Telefonica for the sale of its Brazilian operator Global Village Telecom, or GVT, after the Spanish company raised ...

User comments : 0