| Ericsson chief executive Kurt Hellstrom at a press conference in Stockholm on Friday. (AFP)
Stockholm, Oct. 18 (Reuters): Swedish telecom equipment maker Telefon AB LM Ericsson cut on Friday its forecast for sales in 2002 of its key product, mobile systems, but said it still aimed to return to profit sometime next year.
The company, hit by falling global demand for telecom equipment, made a bigger than expected loss of 3.9 billion Swedish crowns ($ 417.5 million) in the third quarter. Ericsson is the world’s biggest producer of mobile phone networks.
Ericsson said its mobile systems sales this year could fall more than 20 per cent, lowering a forecast made in July for a drop of in excess of 15 per cent. Market consensus is for a 24 per cent fall.
“We anticipate that the market in 2003 will not decline as much as this year, and will begin to stabilise at a lower level,” Ericsson said in a statement.
Ericsson shares fell 7 per cent on Instinet to 4.6 crowns after the statement.
The company, seeking to shore up its balance sheet, raised $ 3.2 billion in a rights issue in September. It is also cutting staff and selling off non-core businesses.
It said on Friday that in the third quarter it cut 4,500 jobs and reduced its cost base by five billion crowns to 52 billion.
The falling demand from cash-strapped operators was reflected in Ericsson orders, which plunged 46 per cent year-on-year in the quarter to 20.5 billion crowns against a consensus of 29.7 billion and 38.1 billion crowns in the third quarter of 2001.
Sales fell in line with consensus to 33.5 billion from 47 billion last year.
“The orders are a nightmare—we expected them to be bad, but not this bad. The sales are in line with expectations, but there’s not much of a future with these kind of orders,” said Helena Nordman-Knutson, analyst at Ohman brokerage.
Ericsson said the plunge in orders was a result of cancellations of for ultra-fast 3G mobile systems, offering video on handsets, from Germany’s Mobilcom and Quam.
Ericsson reported a pre-tax loss of 3.9 billion crowns for the third quarter against market consensus of a 3.2 billion loss and a 6.4 billion loss in the same period last year.
“The market remains unpredictable. We continue to adjust to the prevailing market conditions and expect a return to profit at some point in 2003,” Ericsson said.
The cost-cutting progra- mme was seen as a rare bright spot.
“Almost everything in the report is worse than expected, especially orders. The only positive aspect is that cost cutting is (going) better than expected,” said Urban Ekelund, analyst at Redeye.
The company reported a cash outflow of 2.7 billion crowns in the quarter.