Shares in Ericsson fell nearly 7 per cent yesterday after the world’s biggest maker of wireless network equipment revealed a bigger than expected drop in third-quarter earnings.
Net profits were down
72 per cent from last year as mobile operators cut back on capital expenditure.
Carl-Henric Svanberg, chief executive, said there were signs of improvement in many of Ericsson’s
biggest markets but there would be a time lag before the company felt the benefits.
“What we are seeing right now is the new projects that were planned nine months or a year ago when the financial crisis was much tougher,” he said. “Now everyone understands we are moving to safer territory but it takes time for operators to plan.”
Hans Vestberg, chief financial officer, said Ericsson’s market share had held steady during the third quarter. Nokia, in contrast, acknowledged that NSN was losing ground to rivals.
Both groups are facing mounting competition from Chinese upstarts such as Huawei as well as more traditional foes such as Alcatel-Lucent.
Mr Vestberg, who is replacing Mr Svanberg as chief executive in January, said the transition to third generation phone services in China was gathering pace but 3G-related business was not yet fully offsetting the decline in 2G revenues.
Emerging markets in eastern Europe, Africa and Latin America were another source of weakness as debt-laden operators struggle to secure credit for new infrastructure.
Ericsson has faced additional pressure from problems at Sony-Ericsson and ST Ericsson, its struggling mobile phone and semiconductor joint-ventures.
But Mr Vestberg pointed to a slowdown in losses at both units during the third quarter as evidence that the worst was over after management changes.
Third-quarter revenues fell 6 per cent from last year to SKr46.4bn, while net profits were SKr810m, down from SKr2.84bn. The stock fell 6.8 per cent to SKr68.9.