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Ericsson cautious in 2009 forecasts

21 октября 2008

Ericsson is planning for a “flattish” mobile network infrastructure market in 2009 and pointed on Monday to the prospect of increasing sales in developing countries being offset by a decline in the US and Europe.

The world’s largest telecoms equipment maker reported third-quarter results that exceeded the market’s expectations, led by a 13 per cent rise in sales. Ericsson’s shares closed up 16 per cent at SKr58.40.

However, Carl-Henric Svanberg, chief executive, said the results were not a sign of accelerating sales growth, adding it was too early to tell what effect the global financial crisis would have on the industry.

He said it was therefore correct to be “cautious” and assume sales of mobile network infrastructure by all telecoms equipment makers would be “flattish” by value in 2009 compared with 2008.

Mr Svanberg envisaged growth in
2009 in three of Ericsson’s five sales regions: Asia-Pacific, central and eastern Europe, Middle East and Africa and Latin America. He said that implied a decline in North America and western Europe.

He said some European mobile operators might not proceed with upgrades to their networks based on third-generation wireless technology in 2009 because of the financial crisis.

“Operators may be a little bit more cautious,” he said. “And may be for good reason . . . everyone is watching carefully now what will happen with the consumer spend.”

Ericsson’s profit warning in October last year was rooted in how some US and European mobile operators delayed upgrades of their 3G networks.

Such contracts provide Ericsson with a higher profit margin compared with building mobile networks in developing countries.

Ericsson’s third-quarter results underlined how US mobile operators led by AT&T were now buying equipment to improve their 3G networks. Sales in North America rose 44 per cent in the three months to September 30 compared with the same period last year. They rose 43 per cent in Latin America.

Ericsson reported global sales of SKr49.2bn ($6.57bn) in the third quarter, up 13 per cent, and operating income before restructuring charges of SKr5.7bn, up 1 per cent.

The 11.5 per cent operating margin benefited from savings delivered by a cost-cutting programme.

Mr Svanberg said the programme, which was originally due to provide SKr4bn of savings, might generate SKr5bn-SKr6bn by year-end. Net income was SKr2.8bn, down 28 per cent, mainly because of SKr2bn of restructuring charges. About 4,000 jobs are due to be cut.

Richard Windsor, analyst at Nomura, said Ericsson’s guidance was cautious, adding that it underlined how there was no sign of long-hoped-for contracts for 3G networks in China.

Источник: Financial Times

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