By LOUISE NORDSTROM, Associated Press Writer Louise Nordstrom, Associated Press
Writer 4 mins ago
STOCKHOLM, Sweden Wireless equipment maker LM Ericsson on Wednesday reported
profits dropped 31 percent in the fourth quarter, citing restructuring charges
and weaker handset sales, and said it would slash 5,000 jobs.
Still, Ericsson said its core infrastructure business was not yet feeling the
effects of the global economic downturn, and its better-than-expected report
sent shares up more than 10 percent to 62 kronor in Stockholm.
Net profit in the quarter fell to 3.9 billion kronor ($465 million) from 5.6
billion a year earlier.
Ericsson said the results included about 3 billion kronor in restructuring
charges and "a dramatic drop" in the contribution from its handset unit, Sony
Ericsson. The joint venture with Japan's Sony last week said it had swung to a
fourth-quarter loss of euro187 million ($243 million).
Sales received a boost from a weaker krona, rising 23 percent to 67 billion
kronor, from 54.5 billion kronor a year earlier. SEB Enskilda analyst Mats
Nystrom said the strong sales were the biggest surprise in what he called a
"really good quarter" for Ericsson.
The world's leading maker of mobile broadband infrastructure said it released
the fourth-quarter report a week ahead of schedule because it exceeded market
expectations.
Chief Executive Carl-Henric Svanberg said the economic recession spreading
around the world had not yet hit the network industry. Telecom operators, who
build their networks with equipment from Ericsson and its competitors, still
have healthy finances, he said.
"It remains, however, difficult to more precisely predict to what extent
consumer telecom spending will be affected and how operators will act,"
Svanberg added. "To date, our infrastructure business is hardly impacted at
all, but it would be unreasonable to think that this would be the case also
throughout 2009."
Nortel Networks Corp., once one of Ericsson's biggest competitors, last week
filed for bankruptcy protection in Canada and the U.S., becoming the first
major technology company to take that step in the economic downturn.
Ericsson said it needs to widen its savings program to stay competitive. That
would mean cutting 5,000 jobs, or more than 6 percent of its 79,000-strong work
force, Ericsson said.
The Stockholm-based company said it expected restructuring charges of 6
billion-7 billion kronor, yielding annual savings of around 10 billion kronor
by the second half of the year.
In a webcast news conference with analysts and journalists, Svanberg said
"we're doing this of course because of the uncertainty in the market."
Ericsson said full-year profits fell 48 percent to 11.3 billion kronor in 2008,
from 21.8 billion kronor in the previous year. Sales grew 11 percent to 209
billion kronor.