Ericsson crashes to loss after brutal 12 months

Swedish telecoms equipment major plunges into the red from 11 billion Swedish kroner profit amid the company's worst crisis in a decade.

Ericsson's headquarters in Stockholm. The company has plunged to a loss. Bob Strong / Reuters

The mobile telecom equipment maker Ericsson slashed its 2016 dividend by 73 per cent on Thursday as it posted fourth-quarter operating income below market expectations and said its network market remained weak.

The dividend cut is Ericsson’s first since 2008 – a year of financial crisis – and comes after a year which has seen the firm’s shares fall 35 per cent. The 1 Swedish kroner (Dh0.41) dividend was below expectations of 1.7 crowns in a Reuters poll.

Ericsson said sales in North America, its biggest market, had fallen 13 per cent year-on-year, while sales dropped 21 per cent in western and central Europe. Overall sales at Ericsson were down 11 per cent year-on-year.

“In the near term, stability will be key to establishing a strong base for future growth. This means prioritising profitability over growth,” said the chief executive Borje Ekholm.

Last year was brutal for Ericsson with the former chief executive Hans Vestberg ousted, a profit warning which shocked investors and the announcement of sweeping staff cuts.

Veteran board member Mr Ekholm took over this month and most analysts say he faces an uphill task to steer Ericsson through its worst crisis in a decade, grappling with shrinking markets and fierce competition from China’s Huawei and Finland’s Nokia.

The company is wrestling with a drop in spending by telecoms firms, with demand for next-generation, 5G technology still years away, and weak emerging markets.

Operating income was a loss of 300 million Swedish kroner compared to an 11 billion kroner profit in the year-ago quarter and below a mean forecast of a 417m kroner profit in a Reuters poll of analysts.

Sales were 65.2bn kroner, above a forecast of 59.2bn kroner. The gross margin was 26.1 per cent, under the mean forecast of 28.1 per cent.

* Reuters

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