Ericsson reported a weaker second-quarter net profit due in part to restructuring charges and losses from its joint ventures. The network equipment maker also warned that the economic slowdown will continue to take a toll on the world's infrastructure market.
The company reported net income of $111 million, down from $254.6 million a year ago. Ericsson booked restructuring charges of $482.5 million in the quarter, and also recorded a loss of $301 million from Sony Ericsson and a $213 million loss from chipmaker ST-Ericsson. Although Ericsson sales in the quarter were up 7 percent to $6.98 billion, company CEO Carl-Henric Svanberg sounded a decidedly gloomy note for the coming quarters.
"The weak economy that we have now will not go away for the next several quarters anyway, so we are living in a tougher environment," Svanberg said at a news conference. "I don't think we can give any better indications of whether it's going to be a little bit better or a little bit worse. It is an uncertain environment."
Not surprisingly, investors responded by sending Ericsson stock down more than 8 percent on the news to around $9.50 per share.
Despite the losses, Svanberg once again reiterated the company's commitment to its joint ventures, and said that efforts were being taken within the companies to improve their performance. He also said Ericsson did not expect any further weakening in the handset market.
In an interview with Dow Jones Newswires, Svanberg shed some light on Ericsson's bid to acquire Nortel Networks' wireless assets. He said the move is designed to secure Ericsson a stronger position in the CDMA market, which he said will give it a growth platform for LTE. The Nortel auction takes place today.
Incoming Ericsson CEO charts steady course
Ericsson CEO Svanberg to leave at year-end
Ericsson's CEO on outsourcing rumors, sustainability and LTE
Ericsson's net profit tumbles 35%, hit by joint ventures
Ericsson: We will fund Sony Ericsson if necessary