Ericsson warns on lower sales; good times for Intel

Tech leaders Ericsson and Intel were a contrast in fortunes.

Ericsson, the world's biggest wireless vendor, warned that third quarter operating income would fall 36% in the third quarter thanks to lower network sales. The company said sales would increase just 6% over last year and expected the market to remain this way into 2008.

Intel, the largest chipmaker, showed its price war with AMD was well and truly over with a record third quarter, including a 15% year-on-year rise in revenue and a 64% gain in operating income.

Ericsson's warning followed dismal recent earnings at rivals Alcatel-Lucent and Nokia Siemens. Its price slumped 29% in trading in Stockholm after release of the guidance.

Ercisson CEO Carl-Henric Svanberg said the company suffered from a poor 'business mix' of more low-margin new rollouts and fewer upgrades.

'It is this shift in business mix that is negatively affecting group margins rather than a change in the underlying margins,' Ericsson said in a statement. Asian sales were also 'flattish' due to lower network revenues in China, although elsewhere in the region total revenues would be up 17%.

The other business units, professional services and multimedia, accounting for 28% of all sales, expect revenue growth of 26% and 31% respectively. Analyst firm Ovum said although Ericsson had missed expected upgrades from AT&T and Hutchison in the quarter, these were contracts deferred rather than lost.

Across the world in Silicon Valley, Intel attributed its result to a combination of good products, growing worldwide demand and improved operational efficiency. The biggest contributor to its revenue spike was the mobility and digital enterprise group.