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 Like-for-like sales at Ericsson, the world's biggest maker of mobile
telecoms network equipment, dropped 9 percent in the third quarter,
with declines in China and Europe.
Ericsson and industry rivals are in the middle of a decade-long
investment cycle but initial build-outs of the latest high-speed 4G
equipment are slowing in major markets such as China, Europe and the
United States.
Ericsson Chief Executive Hans Vestberg said the slowdown in China
was not tied to the broader economic situation there and that it was
normal for the pace of network spending to fluctuate between
quarters.
"I cannot speculate when it will come back, but long-term,
medium-term, I think 4G will continue to grow in China," he told
reporters on a conference call. Reorganizations at Chinese operators
may have contributed to lower spending, he added.
Ericsson shares were down 6.6 percent by 0551 ET and analysts were
unimpressed.
"The Chinese market that has been a significant contributor to
systems sales for several quarters dropped 20 percent year over year
and 1 percent from the second quarter," said Bengt Nordstrom, head
of telecoms consultancy Northstream.
"That indicates the 4G roll out in China has peaked."
Prior to Friday, the stock had dropped 6.4 percent this year,
underperforming the STOXX Europe 600 Technology index , which had
gained 12 percent.
Ericsson shares have also come under pressure after rivals Nokia and
Alcatel Lucent agreed to merge in a 15.6 billion euro deal to create
the world's second-largest mobile gear maker after Ericsson.
SALES SUFFER
Ericsson's like-for-like sales have been flat over the past three
years and are down 7 percent so far this year, raising questions
over its growth prospects.
Late last year, Ericsson cut its growth forecasts for the network
equipment market in coming years and financial analysts question
where the company will find fresh impetus in 2016.
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Like-for-like sales at the group's mainstay networks unit, plunged
15 percent and were down in all regions of the world except for
India and South East Asia.
While revenue had stabilized for Ericsson's mobile broadband
business in North America, which accounts for 21 percent of all
network sales so far this year, it remained lower than at the peak a
year ago.
Operating profit was 5.1 billion Swedish crowns ($604 million)
compared to 3.9 billion in the year-ago quarter and below a mean
forecast of 5.4 billion crowns in a Reuters poll of analysts.
To compensate, Ericsson is investing in areas of faster growth and
aims to boost the share of sales to media, Internet and corporate
clients outside of its classic telecom customer base to 20-25
percent in 2020 from around 10 percent in 2013.
Overall sales at Ericsson were 59.2 billion crowns, below a forecast
of 60.9 billion. The gross margin was 33.9 percent against a mean
forecast of 34.9 percent.
Link to report:
($1 = 8.4446 Swedish crowns)
(Additional reporting by Olof Swahnberg; Editing by Alistair
Scrutton and Keith Weir)
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