Ericsson’s profits drop 56% in Q2

Fri, 07/24/2009 - 8:15am
Karl Ritter, The Associated Press

STOCKHOLM (AP) – Swedish wireless equipment maker LM Ericsson AB's second-quarter profits plunged 56 percent, partly because of restructuring charges and losses in its mobile phone unit, Sony Ericsson, the company said Friday.

The world's leading supplier of broadband networks said net profit in the April-June period was 831 million kronor ($111 million), down from 1.9 billion kronor in the same three months last year.

Sales grew 7 percent to 52.1 billion kronor from 48.5 billion kronor in the second quarter of 2008.

Those results were lower than analysts had forecast in an SME Direkt poll cited by financial newspaper Dagens Industri. Ericsson shares fell 6 percent in early trading in Stockholm to 72.60 kronor ($9.66).

Sony Ericsson, a joint venture with Japan's Sony Corp., last week posted a loss of euro213 million ($299 million) in the second quarter. Chip maker ST Ericsson, another joint venture, also weighed on the parent company's results with a loss of $213 million.

Stockholm-based Ericsson, which had earlier seen limited effects of the global recession, said the downturn was now becoming more visible in the mobile network market.

"At the same time, the consumer demand for new services and broadband capabilities are quickly accelerating and rollout of new technologies is ongoing in the world's leading economies," Ericsson CEO Carl-Henric Svanberg said.

In a Webcast news conference following the report, Svanberg confirmed that Ericsson would bid for the mobile network assets of Nortel Networks Corp. at an auction Friday. Finnish rival Nokia Corp. and private equity firm MPAM Wireless have also submitted bids.

Ericsson said restructuring charges amounted to 3.6 billion kronor in the quarter. Its goal to generate 10 billion kronor in savings from the second half of 2010 remains.

With 77,000 employees worldwide, Ericsson is one of Sweden's biggest companies and has long been a key global supplier of fixed and mobile phone networks. It is increasingly focusing on providing services, like managing the networks of operators.

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