Ericsson's profit tumbles 71% in Q3

Ericsson's net profit in the third quarter fell 71 percent. A constellation of factors--declining sales, losses at Sony Ericsson, intense competition and restructuring--contributed to the Swedish vendor's weak performance.

The company had a net profit of $118 million, down from $413 million in the year-ago quarter. Ericsson CEO Carl-Henric Svanberg, who is leaving the company at year-end, said that Ericsson picked up market share in the quarter. However, sales were down to $6.75 billion, off 6 percent from $7.15 billion in the third quarter last year. Both the profit and sales figures fell short of analyst's expectations.

"We said (nine months ago) that it's unreasonable to think we won't get affected," Svanberg said, according to Reuters. He added that the drop in sales was due to cutbacks operators had made earlier. "Now of course I think everybody understands that we are on our way into safer territory, but ... it takes a while before operators start planning projects and start getting projects on board again for us."

Ericsson's earnings also were hit by $392.6 million in restructuring charges, as well as a $145.4 million loss from its Sony Ericsson joint venture. Ericsson is nearing the end of a $1.45 billion cost-cutting program, which will be extended, according to CFO Hans Vestberg. Vestberg is taking over the reins of the company from Svanberg.

Ericsson said its network margins were stable, and that its services margins remained stable, despite start-up costs associated with recent contracts, including a managed services contract with Sprint Nextel. Ericsson took over the day-to-day operations of Sprint's networks in late September.

For more:
- see FierceWireless' Q3 earnings page
- see this release
- see this Reuters article
- see this WSJ article (sub. req.)

Related Articles:
Report: Ericsson division to cut purchasing expenses by 50%
Ericsson takes over Sprint's day-to-day operations
Dell'Oro: Ericsson outpaces rivals
Ericsson posts lower profit, sees weak economy continuing

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