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Ericsson hurt by Profit Warning |
carkitter
Joined: Apr 29, 2005
Posts: > 500
From: Auckland, NZ
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Ericsson hurt by profit warning
Shares in Ericsson have tumbled more than 25% after the Swedish firm issued a shock profit warning.
The world's biggest mobile network maker said third-quarter sales, operating income and cash flow would fall way short of expectations.
The news sent its shares to a three-and-a-half-year low. More...
Heard about this on the radio. 
This should not affect  though
I gotta go back to work so can't post anymore detail.
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max_wedge
Joined: Aug 29, 2004
Posts: > 500
From: Australia
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It shouldn't affect SE at this stage as SE are in profit and Ericsson have 50/50 split with Sony (so Sony as equal partner won't let Ericsson milk SE resources). If anything SE share dividends will partially assist Ericsson ride out this low profit period.
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S4k1s
Joined: Mar 09, 2005
Posts: > 500
From: Sweden
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Ericsson is still making huge profit in the third-quarter.
Just not quite as huge as expected.
The profit for the third-quarter will be around 6 billion SEK (around 911 million USD) |
carkitter
Joined: Apr 29, 2005
Posts: > 500
From: Auckland, NZ
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On 2007-10-17 03:44:29, S4k1s wrote:
Ericsson is still making huge profit in the third-quarter.
Just not quite as huge as expected.
The profit for the third-quarter will be around 6 billion SEK (around 911 million USD)
That's true, but profits were forcast to be 8.9bn SEK. With an actual figure down 36% (5.6bn SEK) it's being seen as a significant shift in the market for cellular networks. I heard comments on the radio saying that several European network providers had put off upgrades or pooled resources with other network providers leaving a much smaller market for Ericsson to tap into. One financial expert interviewed said he thought that the problems were structural within Ericsson! If that's the case, this could be the beginning of much upheaval and restructuring  hence the drop in share price. One thing is for sure, Ericsson said everything was A OK just one month ago... watch this space!
Edit: In February this year Ericsson lowered growth forecasts.
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[ This Message was edited by: carkitter on 2007-10-17 08:26 ] |
JK
Joined: Feb 24, 2005
Posts: > 500
From: S. Africa - JOZI
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STOCKHOLM — Ericsson, the world’s biggest maker of wireless networks, dropped 29% to a three-year low in Stockholm trading yesterday after the company said third-quarter profit and sales trailed its forecasts.
Net income fell 36% to 4-billion kronor ($620m) from 6,2-billion kronor a year earlier. Revenue rose 6% to 43,5-billion kronor. Analysts had predicted profit of 6,14-billion kronor.
CEO Carl-Henric Svanberg said lower demand for network upgrades in North America and Europe had hurt margins and fourth-quarter revenue may decline. Svanberg, who told investors on September 11 that industry growth was “strong”, said yesterday he was “humble, concerned and disappointed”.
“A profit warning of this magnitude is very, very rare,” said Peter Braendle, who helps manage the equivalent of $53bn, including Ericsson shares, at Swisscanto Asset Management in Zurich. “The CEO’s credibility is really challenged now.”
Ericsson’s announcement follows one from Alcatel-Lucent, the biggest maker of telecommunications equipment, which last month cut its sales forecast for this year on fewer-than-expected orders in North America.
Siemens, which runs a telecommunications equipment venture with Nokia Oyj, has also said it is not satisfied with the performance of the business.
Analysts had predicted sales of 45,3-billion kronor, the average of 22 estimates.
The 4-billion kronor profit would be the company’s lowest since the first quarter of 2004.
Ericsson is due to report earnings on Thursday next week.
Ericsson shares tumbled 7,62 kronor, or 29%, to 18,76 kronor in early trade.
The stock earlier touched 18,64 kronor, the lowest since August 2004. Before yesterday, Ericsson had declined 4,6% this year.
Yesterday’s decline in the stock was the biggest in at least 17 years, wiping out $17,5bn in market value.
Svanberg also said the company would probably post fourth-quarter sales of between 53- billion kronor and 60-billion kronor and operating margin in the mid-teens.
The company had revenue of 53,7-billion kronor and operating margin, or operating profit as a percentage of sales, of 22,7% in last year’s fourth quarter.
“This is really bad,” said Greger Johansson, an analyst at Redey, who has a “buy” rating on the stock, which he might revise. “It’s also much, much worse than expected in the fourth quarter.”
Ericsson’s growth has come from sales of new networks in China and India.
The company has maintained margins with orders to upgrade existing networks in Europe and North America, regions that failed to generate expected revenue in the third quarter.
Svanberg said orders to upgrade AT&T’s wireless network were not materialising as expected. Ericsson’s orders in the third quarter were tilted towards emerging markets including Bhutan, Bangladesh, Uruguay, Indonesia and Mexico.
The company also won orders with Deutsche Telekom for a high-speed network, and with Sweden’s TeliaSonera.
On September 11, the company’s shares jumped 5,4% after Svanberg said increasing data traffic would drive industry growth. Yesterday, he said cited an “unexpected” shortfall in sales of mobile network upgrades.
“We have to criticise ourselves and be more aware of the dynamics in the industry,” Svanberg said .
“We have reason to be a bit more humble.”
Thomas Langer, an analyst at WestLB in Dusseldorf, cut his rating on Ericsson shares to “reduce” from “buy”. “We now believe that management has a credibility issue,” he said.
“We see this as a major disappointment,” he said.
Kulbinder Garcha, an analyst at Credit Suisse in London, cut the stock to “neutral” from “outperform”. “Our concern would be that with large contracts, especially in India, to ramp in the fourth quarter, any recovery in margins is not likely until late next year,” he said.
The company’s mobile venture with Sony last week reported its first drop in profit in two years on sales of cheaper handsets.
Credit-default swap contracts based on the debt of Ericsson rose 7 basis points to 41,5 basis points, according to Deutsche Bank.
A basis point on a credit-default swap contract protecting € 10m of debt from default for five years is equivalent to € 1000 a year. A rise indicates worsening perceptions of credit quality.
Shares of companies that own Ericsson stock also fell. Investor, the Wallenberg family’s holding company, lost 7,5 kronor, or 4,3%, to 168 kronor .
Svanberg, who became CEO in April 2003, has been credited with accelerated cost cuts initiated by predecessor Kurt Hellstroem to pull the company from near bankruptcy and revive earnings.
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batesie
Joined: Feb 13, 2004
Posts: > 500
From: London, UK
PM |
they should definatly move back to handsets to make up for the shift in profits...
[addsig] |
JK
Joined: Feb 24, 2005
Posts: > 500
From: S. Africa - JOZI
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Well they sponsoring our A1 gp team, I hope it doesnt affect that! 
Btw anyone thinks the the Nokio and Siemens merge have anthing to do with this fall?
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S4k1s
Joined: Mar 09, 2005
Posts: > 500
From: Sweden
PM |
Well, Ericsson got 47% of the market and growing, and is the only company in the market that is not having heavy losses atm. So it's not that catastrofic as people make it out to be. 
I'm not saying it's not a big hit though. |
gola
Joined: Jul 17, 2007
Posts: > 500
From: South Africa
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i wonder why i'm not surprised...clearly,if they carry on doing what they are doing,they'll keep on losing profit.so far nothing much has changed...
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Posted: 2007-10-17 02:02
