Ericsson profits plunge 70% in Q2

Ericsson reported a 70% plunge in second-quarter profits, mainly blaming recent acquisitions and high development and restructuring costs, an Associated Press report said.

Ericsson shares slumped 11% to close at 66.80 kronor ( €7.1, US$11.22) in Stockholm, the report added.

The world's No. 1 wireless equipment maker reported a net profit of 1.9 billion kronor ( €202.7 million, US$320 million), down sharply from 6.4 billion kronor ( €684 million, US$1.08 billion) in the same quarter last year.

Sales in the three-month period ended June 30 rose 2% to 48.5 billion kronor (€5.1 billion, US$8.1 billion), up a tad from 47.6 billion kronor (€5 billion, US$7.9 billion) in the corresponding period in 2007.

The Stockholm-based company reiterated its outlook for the year, saying it expects a 'flattish mobile infrastructure market in 2008,' the Associated Press repor said.

Development costs weighed heavily on the result, rising 24% in the quarter from the same three months a year earlier.

Some 1.8 billion kronor ($302 million) in restructuring costs were recognized in the period as part of the company's plan to cut expenses by 4 billion kronor ( €425 million, US$672 million) a year.

The plan will lead to thousands of layoffs worldwide.

Gross margin, or the profit received between the cost of a product and the selling price, also shrank, to 35.7% from 43%.

Ericsson was also hit by weaker earnings in its Sony joint venture, Sony Ericsson, which failed to contribute much to profits in the quarter. Last week, the co-owned company reported a 97% drop in second-quarter earnings as tougher market conditions hurt its sales, the report further said.