Ericsson Swings To Quarterly Loss -- WSJ

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 [e-mail]

(END) Dow Jones Newswires

October 22, 2016 02:48 ET (06:48 GMT)

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