Ericsson profits slump 71.5pc in third quarter

22 Oct 2009

Profits at the Swedish telecoms firm Ericsson have slumped by 71.5pc during the third quarter, as the group absorbed heavy restructuring charges, falling handset sales and losses at its Sony Ericsson division.

Ericsson reported net profits of SEK 800 million against the SEK 2.9 billion reported in the same quarter a year previous.

Sales fell by 5.6pc to SEK 46.4 billion during the third quarter, Ericsson said.

The quarter saw the group take a hit of SEK 2.7 billion in a restructuring charge relating to its cost-cutting programme.

Ericsson also lost SEK 1 billion during the quarter as a result of losses at its Sony Ericsson division.

Technology shift ongoing

The group observed that the technology shift from voice telephony to mobile broadband is ongoing. “This shift follows the anticipated decline in GSM sales, accelerated by the current recession, which is not yet offset by the growth in mobile broadband,” the group said.

“Sales of network equipment declined due to lower demand in the current tougher market environment,” said President and CEO of Ericsson Carl-Henric Svanberg.

“Despite lower volumes, network margins remain stable. The strong development in professional services continued.

“Our cost reduction activities are running ahead of plan with further opportunities for efficiency improvements and savings,” he added.

“While the current economic environment affects all parts of society the longer-term fundamentals for our industry remain solid,”Svanberg said.

“Mobile telephony is reaching a penetration beyond all expectations. We expect mobile broadband to show a similar exciting development over the years to come, not least as the vast majority of the world’s population will be able to reach internet only through mobile technology.

“We are well positioned to lead our industry forward,” Svanberg added.

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Photo: President and CEO of Ericsson Carl-Henric Svanberg.