Ericsson: There may be trouble ahead
November 21, 2007
Ericsson’s new chief finance officer had something of a baptism of fire at the company’s investors’ conference in New York on Tuesday. The newly installed Hans Vestberg had the tough job of revealing yet more doom and gloom for the Swedish kit maker.
The crux of the message was that fourth quarter revenues would likely come in at the lower end of expectations of between SKr53bn and SKr60bn. Profit margins are expected to be in the mid teens.
Vestberg replaced Karl-Henrik Sundstrom, who quit last month as the Swedish firm reported a 36 per cent drop in income for the third quarter.
A shortfall in network expansions and upgrades hit the company’s third quarter margins, while new network build outs are set to weigh on margins for the next several quarters, the company said.
On Tuesday, president and CEO, Carl-Henric Svanberg, revealed some “recent developments” and “further issues” in the networks space, including a tightening of the market in Europe and the US coupled with political unrest in certain emerging markets and the consistently weak dollar, which translated, means, “We are likely to end up in the lower end of the range,” in terms of sales and income.
During the presentation, the financial performance slide said it all. The plot looked like an inverted smile – a sad face – with the downturned corners in the 2004 and 2007 zones and a very wobbly line joining the two.
“Early expectation for 2008 is that the current market conditions will prevail,” said Svanberg, adding, “There are slightly more worrying signs than encouraging signs.”
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