Ericsson’s quarterly profits plummet

With the mobile phone market taking a major hit in the wake of the economic crisis, Swedish telecom giant Ericsson reported an almost 60 percent drop in second-quarter net profits, coming in well below market expectations.

Ericsson's quarterly profits plummet

The new figures come the day after the company announced its intention to bid on the wireless unit of Canadian group Nortel, currently under bankruptcy protection from creditors.

Ericsson achieved net profits of 831 million kroner ($110 million), down 57 percent on the same period in 2008 and nearly twice as bad as consensus forecasts.

According to one round-up of analyst predictions, they had been looking at profits of 1.58 billion kronor.

“The effects of the global economic climate on the mobile infrastructure market are now more notable, especially in markets with currencies under pressure and tougher credit environment,” said Ericsson president and chief executive Carl-Henric Svanberg in a statement.

Prior to the release of the second-quarter report, Ericsson announced on Thursday it would make a bid for the wireless unit of Canadian group Nortel, currently under bankruptcy protection from creditors.

Ericsson spokesman Frederik Hall told AFP that the auction would take place in New York on Friday.

“We will participate and then we’ll see how far we will go,” Hall said, declining to disclose the value of the Ericsson offer.

But Canadian daily The Globe and Mail, citing legal sources, said Ericsson on Tuesday had offered $730 million for Nortel’s mobile phone equipment division.

Nortel, having been unable to restructure, decided in June to sell its principal units. The Canadian company also announced in June that it wanted to sell its wireless division to Nokia Siemens Networks for $650 million.

But a public auction is required to determine if the assets can fetch a higher price before the bankruptcy court will agree to the sale.

The Globe and Mail has also reported a private US investment firm, MallinPatterson Global Advisers, a major Nortel creditor, had proposed $725 million for the wireless division.

Despite the profit drop, Ericsson’s CEO did his best to view the results in a positive light.

“There is a lot of uncertainty in the world and bearing that in mind we had pretty good results,” Svanberg told the TT news agency.

But the market was less kind, as Ericsson shares fell by 5.2 percent to 73.50 kronor at the opening of Friday morning trading on the Stockholm stock exchange.

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Ericsson suspends all Russia operations indefinitely

Swedish network equipment maker Ericsson said Monday that it was suspending all of its Russian operations over the war in Ukraine for the foreseeable future.

Ericsson suspends all Russia operations indefinitely

The telecom giant already announced in late February that it would stop all deliveries to Russia following Moscow’s February 24 invasion of Ukraine.

“In the light of recent events and of European Union sanctions, the company will now suspend its affected business with customers in Russia indefinitely,” Ericsson said in a statement.

The company added that it was “engaging with customers and partners regarding the indefinite suspension of the affected business.”

“The priority is to focus on the safety and well-being of Ericsson employees in Russia and they will be placed on paid leave,” it said.

READ ALSO: How has Sweden responded to Putin’s war in Ukraine so far?

Hundreds of Western firms ranging from Ikea to Coca-Cola, Goldman Sachs and McDonald’s have stopped operations in the country since the invasion, with French banking group Societe Generale announcing Monday it was selling its stake in Russia’s Rosbank.

Ericsson has around 600 employees in Russia, and is a “major supplier to the largest operator MTS and the fourth largest operator Tele2,” a company spokeswoman told AFP, adding that together with Ukraine, Russia accounts for less than two percent of revenue.

As a result, the equipment maker said it would record a provision for 900 million Swedish kronor ($95 million, 87 million euros) for the first quarter of 2022 for “impairment of assets and other exceptional costs,” though no staff redundancy costs were included.
Ericsson is due to publish its first quarter earnings on April 14.