Ericsson shares plunge after Q3 results warning

Acting Ericsson CEO Jan Frykhammar

Ericsson is continuing to feel the pain from weakening demand for its mobile broadband gear.

The Swedish telecoms equipment maker said Wednesday that its third quarter results would be "significantly lower" than it had hoped, when they are officially published on Oct.21.

Ericsson said there had been a 14 per cent year-on-year drop in sales in the quarter to SEK51.1 billion (€5.25 billion/$5.7 billion) for which it blamed negative industry trends.

The markets reacted swiftly to the warning, knocking more than 16 per cent off Ericsson's shares on intra-day trading at the time of writing.

The big problem is apparently markets such as Brazil, Russia and the Middle East, which have a "weak macro-economic environment". That situation is dampening operator demand for boosting both coverage and capacity, Ericsson explained.

On top of that, Ericsson -- in common with much of the industry -- is finding that European operators have completed the 4G mobile broadband projects that they want to execute for now, reducing capacity sales there too.

Ericsson's acting CEO, Jan Frykhammar, pointed out that this situation was not likely to improve soon.

"Continued progress in our cost reduction programs did not offset the lower sales and gross margin. More in-depth analysis remains to be done but current trends are expected to continue short-term," he said in a statement.

Ericsson is not only suffering from the industry's general post-4G, pre-5G malaise. It is also under great pressure from rivals such as China's Huawei and Finland's Nokia, which recently bought Alcatel-Lucent.

A massive 26 per cent year-on-year drop in Ericsson's sales for the previous quarter proved to be the final straw for the leadership of former CEO Hans Vestberg.

Vestberg was ousted less than a week after those results were posted. Frykhammar, the company's CFO, stepped in on a temporary basis until Ericsson can find a new CEO. Ericsson announced a week ago that it intends to cut its domestic workforce by a fifth.

For more:
- see this Ericsson announcement

Related articles:
Ericsson claims 5G first with new radio equipment
Ericsson ousts Vestberg after 26% drop in net sales
Ericsson starts search for new CEO as Vestberg steps down