Ericsson Swings To Quarterly Loss -- WSJ
October 22 2016 - 3:03AM
Dow Jones News
By Matthias Verbergt
STOCKHOLM -- Ericsson AB suffered a third-quarter loss amid a
slowing telecom-equipment market and fierce Asian competition, the
Swedish company said Friday.
Ericsson's net loss for the period ended 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 was hit by a slowdown in spending by mobile service
providers on latest-generation, or 4G, networks largely, as many
mobile-broadband projects were completed last year. At the same
time, competition has intensified, with Huawei Technologies Co. of
China expanding aggressively world-wide.
Ericsson's hardship was on display over the past quarter in the
U.S., where one of the company's biggest services contracts to date
was renewed for a total of $900 million, less than a fifth of its
original $5 billion value, the company said. The contract was
signed with U.S. telecom carrier Sprint Corp., people familiar with
the matter said.
Last week, Ericsson had issued a profit warning, saying
third-quarter sales fell 14% to 51.1 billion kronor, from 59.2
billion kronor last year. That news had sent Ericsson's shares down
20%. The company's sales of network equipment, its core business,
were down by almost a fifth.
"The challenges we have at the moment are linked to the market
situation, " said Jan Frykhammar, Ericsson's acting chief
executive. "The customers we have are reducing their
investments."
Ericsson in recent years has lost business to China's Huawei and
ZTE Corp., with its global market share in mobile-infrastructure
equipment declining from 40.4% in 2011 to 28.1% last year,
according to industry tracker IHS. But Mr. Frykhammar said he is
confident Ericsson's share in 2016 won't be significantly different
from last year's.
Ericsson is betting big on the development of the
next-generation of wireless networks, or 5G, but big-scale rollout
of 5G networks won't happen before 2020, analysts say.
Mr. Frykhammar warned that the reduction of the U.S. contract
will also affect Ericsson's fourth-quarter earnings, and that the
current downward sales trend in mobile broadband is expected to
prevail in the next two to three quarters.
Earlier this month, Ericsson announced it would slash 3,000 jobs
in its home country, as part of a restructuring program aimed at
saving 10 billion kronor in annual operating expenses by the second
half of 2017, compared with 2014.
Over the last quarter, Ericsson reduced its global head count by
almost 3,000 to about 114,000. Mr. Frykhammar said more job cuts
are on their way in countries including the U.S., the U.K., Finland
and Spain.
Meanwhile, Ericsson is still looking for a new permanent CEO,
after the ousting of Hans Vestberg in July. "It's a good process
that is being run now, the board is looking at external and
internal candidates," Mr. Frykhammar said, reiterating he won't
take up the role permanently.
Around noon in Stockholm, Ericsson shares were trading 4.5%
lower.
Write to Matthias Verbergt at Matthias.Verbergt@wsj.com
(END) Dow Jones Newswires
October 22, 2016 02:48 ET (06:48 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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