|
The
company disclosed in February that an internal investigation had
found it may have made payments to the Islamic State militant
group in Iraq - misconduct it said "started at least back in
2011".
Shares in Ericsson tumbled 7% in early Thursday trade, bringing
the stock's losses since news of the scandal broke to around
30%.
The U.S. Department of Justice could take a range of actions, it
said. These "may likely include additional monetary payments,"
Chief Executive Borje Ekholm said in a statement, adding that
the company could not reliably estimate the size of the fine.
Ericsson reported an 11% drop in adjusted operating earnings for
the first quarter to 4.7 billion Swedish crowns ($500 million).
It was hurt by a $95 million provision for its indefinite
suspension of business in Russia over the invasion of Ukraine.
Ongoing patent litigation with Apple Inc and a delay in the
renewal of a 1 billion crown annual software contract to the
current quarter also weighed on the results.
But revenue rose 11% to 55.1 billion crowns on higher demand for
5G telecom equipment, beating estimates of 53.36 billion crowns.
A fine would come on top of a $1 billion fine paid to the DOJ in
2019 to settle bribery cases in several countries. At the time,
Ericsson also agreed to supervision by the regulators for three
years.
"A fine is, in our view, the best Ericsson can hope for, as much
worse scenarios have been discussed in the market recently,"
said Mads Rosendal, analyst at Danske Bank Credit Research.
Market speculation about possible penalties has ranged from
sanctions on the company to a ban on selling in the United
States to legal action being taken against top Ericsson
executives.
In a public rebuke for the scandal, last week shareholders
representing more than 10% of Ericsson shares voted against
discharging board members of liability for the previous year.
That means Ekholm and other board members could be held
personally liable for their actions.
Ericsson has also been spending heavily to boost inventory for
critical parts in the face of a global chip shortage.
"We do see that certain vital components need extra attention...
we have decided to invest in buffer inventory for some of those
vital components," Chief Financial Officer Carl Mellander said.
($1=9.4483 Swedish crowns)
(Reporting by Supantha Mukherjee in Stockholm, Editing by Helena
Soderpalm and Edwina Gibbs)
[© 2022 Thomson Reuters. All rights
reserved.]
This material may not be published,
broadcast, rewritten or redistributed.
Thompson Reuters is solely responsible for this content.
|
|
