Ericsson profits plunge as operators turn cautious

Associated Press

STOCKHOLM (AP) — Swedish wireless equipment maker LM Ericsson on Friday posted a 43 percent plunge in third-quarter net profits as the global financial slowdown caused operators to become more cautious about investing in the group's network infrastructure business.

For the three months ended Sept. 30, Ericsson reported a net profit of 2.18 billion kronor ($325 million), down sharply from the 3.82 billion kronor recorded in the same quarter a year ago.

Sales in the July-September period dwindled to 54.55 billion kronor from 55.52 billion kronor, and the gross margin contracted to 30.4 percent from 35 percent.

Shares in the Stockholm-headquartered group fell more than 3 percent to 58.50 kronor in early morning trading on the Stockholm stock exchange.

Ericsson blamed the bad results on the weaker global economy, saying customers are shifting away from its more lucrative telecommunications infrastructure unit, instead focusing more on maintenance and support for their existing networks.

"We see a continued macroeconomic slowdown and political unrest in parts of the world, which has led to more cautious operator spending in some parts of the world," Ericsson CEO Hans Vestberg said.

Nonetheless, Vestberg said his company believed the fundamentals for a positive development in the long term "remain solid," as the increasing number of smartphones in the world is expected to garner more business as new devices and applications will require higher network performance.

"This drives demand for our technology, software and services capabilities," he said, noting Ericsson expects the number of smartphones across the globe to grow from today's 1 billion and reach a total of some 3 billion in 2017.

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