Shares in Ericsson, the Swedish telecoms equipment maker, dropped sharply today after the company issued a gloomy outlook as it reported weaker than expected fourth-quarter profits.
The world’s biggest producer of mobile networks said group sales would decline by more than 30% in the first quarter from 36,7-billion kronor in the last three months of 2002. Ericsson also reiterated that demand for wireless telephone networks would be flat to down 10 % this year against 2002, but said that the lower end of the range was more likely.
Ericsson competitors Nokia and Motorola had given similar forecasts of wireless market decline.
”I repeat our view of the market this year to be flat to down 10%, though it looks right now it’s more towards the lower end of that range,” Kurt Hellstrom, Ericsson’s chief executive, said.
Since the start of 2002, Ericsson shares have lost more than 80%. But they have more than doubled since October on hopes that the firm was back on track.
Ericsson reported a pre-tax loss of 2,2-billion kronor for the fourth quarter against expectations of 1,5-billion kronor, although the loss was smaller than the third-quarter loss of 3,9-billion kronor and a loss of 5,1-billion kronor a year earlier.
”It seems a little worse than expected. They have a long way to go,” said Henrik Werge, fund manager at Aktie-Ansvar AB.
Like other telecoms equipment producers, Ericsson has been hit by slumping demand for its products from telecoms operators, as many slash spending to service large debts amid a slowing world economy.
Ericsson has slashed its workforce, now below 60 000 from 107 000 at the start of 2001, in an attempt to break even on annual sales of 120-billion kronor.
”I have to underline that we do not yet see any visible kind of an industry recovery,” Hellstrom said. ”While we believe that the worst … is behind us, the market remains unpredictable.”
Shares in the company were down more than 10% at 6,5 kronor in morning trade. – Guardian Unlimited Â