ERIC Ericsson

By Stu Woo 

Telecommunications-equipment giant Ericsson AB reported another quarter of falling sales and widening losses as it struggles to compete with new Chinese players, but investors saw signs that a monthslong turnaround effort was starting to bear fruit.

Ericsson on Friday reported a 6% fall in third-quarter revenue to 47.8 billion Swedish kronor ($5.9 billion) and a wider net loss 4.3 billion kronor, compared with a 200 million kronor in the same period last year. It was Ericsson's fourth straight quarter of losses -- and the company warned its fourth-quarter performance could be worse than expected.

"The general market conditions continue to be tough," Chief Executive Borje Ekholm said.

But investors sent Ericsson stock up more than 4% after the company said gross margins in its core network business improved to 31% from 28% in the third quarter compared with a year ago, after adjusting for one-time costs related to restructuring.

Third-quarter sales for Ericsson's network business declined 1% compared with a year earlier, less than the 6% Citi analyst Amit Harchandani projected. "The strength came from where you would like it to be seen, which is in the network products business," Mr. Harchandani said. "It's not a spectacular set of results, but given what we have seen from Ericsson recently... it was very reassuring."

Telecommunications-equipment companies are facing an industry-wide lull. Their primary customers are mobile carriers, which have largely purchased all the gear they need for the current generation of wireless networks, called 4G. The carriers aren't expected to need equipment for the next generation, 5G, until 2019 at the earliest. Both Ericsson and Finnish rival Nokia Corp. issued earnings warnings this year, citing the weak market.

In addition, Ericsson faces increased competition. Nokia in 2016 broadened the range of telecommunications equipment it sells by acquiring Alcatel-Lucent, while wireless-carrier executives have said that China's Huawei Technologies Co. offers comparable gear at lower prices.

Huawei led the $161 billion-a-year telecom-equipment industry in 2016, with 20.5% of the market's revenue, according to Gartner Inc. Ericsson was second with 14.7%, while Nokia was third with 14.4%

Mr. Ekholm, appointed as chief executive last October, has rolled out a costly restructuring and turnaround plan. It involves streamlining Ericsson's management team and focusing on its core business of selling telecommunications equipment and services. It is also considering selling its other businesses, such as one that helps pay-TV broadcasters transmit video.

Mr. Ekholm said Friday that Ericsson remained committed to its strategy.

Write to Stu Woo at Stu.Woo@wsj.com

(END) Dow Jones Newswires

October 20, 2017 09:18 ET (13:18 GMT)

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