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Surprise weak start to year for Ericsson

Swedish mobile giant Ericsson has reported unexpectedly weak results for the first quarter of the year and seen shares plummet as a result.

Surprise weak start to year for Ericsson
Ericsson's CEO Hans Vestberg pictured last month. Photo: TT
Ericsson, which is the world's leading maker of telecoms equipment, announced a lower than anticipated net profit of 1.32 billion kronor ($151 million) between January and and the end of March 2015.
 
This compares with a net profit of 2.12 billion kronor in the same period a year ago and a 2.23 billion kronor forecast in an analyst poll by Reuters.
 
Ericsson shares fell 8.1 percent on Thursday morning following the release of the figures.
 
The company said that higher operating costs and less spending by US network operators were key factors.
 
"Business in North America continued to be slow in the quarter as operators remained focused on cash flow optimization in order to finance major acquisitions and spectrum auctions," Ericsson said in a press release on its website.
 
"Consumer demand and mobile data traffic growth continued to be strong in North America, creating further need for quality and capacity investments. However, with current visibility, we anticipate the fast pace of 4G deployments in Mainland China to continue and the North American mobile broadband business to remain slow in the short term," it added.
 
The firm's CEO Hans Vestberg told the TT news agency that there was "nothing we think is strange" about the results, adding that he was pleased with the company's growth in Asia, after experiencing its "best first quarter" in India and strong results in the Chinese market.
 
Telecoms analyst Bengt Nordström told TT: "This result is actually a pretty good reflection of the situation in the telecommunications industry. It is an industry that is not growing."
 
Ericsson said net sales in the first quarter of the year rose 13 percent to 53.52 billion kronor. This was up from 47.51 billion kronor in the same period a year ago.
 
Last month the company said it was cutting 2,200 jobs in Sweden, with staff at the company's offices in Stockholm, Katrineholm, Borås, Kumla, Göteborg, Linköping and Karlskrona all affected by the move.
 
The layoffs are part of a money saving bid to save the firm almost 9 billion kronor ($1 billion) worldwide by 2017.

SWEDEN AND UKRAINE

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.

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