Ericsson Plunges to Loss

By Matthias Verbergt 

STOCKHOLM-- Ericsson AB fell to a third-quarter loss, the Swedish company said Friday, amid a slowing telecom-equipment market and fierce Asian competition.

Ericsson's net loss for the period ending 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 issued a profit warning last week, saying third-quarter sales fell 14% to 51.1 billion kronor, from 59.2 billion kronor last year, with operating profit down 93% to 300 million kronor from 5.1 billion kronor, partly on restructuring charges of 1.3 billion kronor.

The news sent Ericsson's shares down 20%.

Ericsson said the decline in revenue was mainly driven by its sales of network equipment, which were down 19%.

Spending by mobile-service providers on latest-generation, or 4G, networks largely has dried up, with most mobile-broadband projects having been completed last year. At the same time, competition has risen, with Huawei Technologies Co. of China expanding aggressively on Ericsson's traditional European turf.

Ericsson is betting big on the development of the next-generation of wireless networks, or 5G, but the rollout of 5G networks is still several years away, analysts say.

In its third-quarter report, Ericsson warned that the current industry trends point to "a somewhat weaker than normal seasonal sales growth between the third and fourth quarters."

In addition, the company said it renewed a managed services contract with one customer in North America, but with a reduced scope, which will impact sales negatively, adding that the current sales trend in mobile broadband is expected to prevail in the short term.

Write to Matthias Verbergt at [e-mail]

(END) Dow Jones Newswires

October 21, 2016 02:18 ET (06:18 GMT)

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