Newspaper article International Herald Tribune

Profit Tumbles at Ericsson as Joint Ventures Disappoint

Newspaper article International Herald Tribune

Profit Tumbles at Ericsson as Joint Ventures Disappoint

Article excerpt

The market leader in wireless networking equipment pointed to losses at two joint ventures and the aborted merger of AT&T Mobility and T-Mobile USA.

Ericsson, the market leader in wireless networking equipment, said Wednesday that its profit plummeted 66 percent in the fourth quarter of last year amid losses at its Sony Ericsson and Swiss mobile phone chip ventures.

The company, based in Stockholm, also said that its sales slowed in the United States, partly because of the aborted merger of AT&T with T-Mobile USA.

Net profit at Ericsson fell to 1.5 billion Swedish kronor, or $220 million at the current exchange rate, from 4.4 billion kronor a year earlier. Revenue rose 1 percent, to 63.7 billion kronor.

Revenue at Ericsson's business of managing telephone networks for operators rose 18 percent, helping to offset a 9 percent decline in its biggest business, selling network equipment.

Hans Vestberg, the Ericsson chief executive, said the profit decline reflected restrained spending by operators in the United States, India and Russia. The company also had to absorb a 1.9 billion kronor loss, mostly the result of problems at Sony Ericsson, which makes handsets, and ST-Ericsson, a joint venture with the French chip maker STMicroelectronics.

Sony Ericsson, which Ericsson is selling to Sony, had a loss of EUR 207 million, or $269 million, in the quarter, versus an EUR 8 million profit a year earlier.

ST-Ericsson, which makes hardware and software components for cellphones, lost $231 million, after a $177 million loss a year earlier.

"Our joint ventures had a very bad fourth quarter," Mr. Vestberg said at a conference with financial analysts in Stockholm. "We are seeing operators being cautious in 2012. If that leads to lower sales, we can't say at this point. But it may take longer to make decisions."

Shares of Ericsson fell 14.1 percent Wednesday in Stockholm.

Hakan Wranne, an analyst at Swedbank, said Ericsson's struggling joint ventures, and the U.S. market slowdown, caused the sharper- than-expected decline in profit. …

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