Ericsson Slips on Expected Loss

Ericsson (Nasdaq: ERICY) Americandepositary receipts were down US$1.47 at $6.91 in morning trading Monday,after the Swedish maker of mobile telephones said it expects a loss for thefirst quarter ending in March.

Ericsson had already warned that lower phone sales and higher expenses mighthurt results in the quarter. However, “the current economic slowdown, inparticular in the U.S., has increased the uncertainty about the growth ratein the entire information technology sector,” the company said.

Ericsson said it expects a loss before taxes for the quarter of 4 to 5billion Swedish kronor (approximately US$415 million), instead of the breakeven results previouslypredicted.

Sales will be “flat or somewhat lower” than year-earlierquarters, instead of growing about 15 percent as previously thought, thecompany said.

“The slower growth is affecting all of our operations,” Ericsson said.”Customers in the U.S. in particular are postponing their capitalexpenditures. Also in Western Europe, in markets with already highpenetration, operators are delaying investments.”

Sales of mobile phones, the company said, will be “considerably lower” thanin last year’s first quarter, as “the normal seasonality with lowfirst-quarter sales is accentuated by low replacement demand, reduced operator subsidies, highinventory levels in the distribution chain and continued price pressure dueto excess vendor capacity.”

Ericsson said it will “rapidly review” ways to cut costs. The company is already restructuring its operations and has a hiring freeze in place inits largest division.

Ericsson said it plans to report results on April 20th.

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