Little to cheer in Ericsson Q2

NEWS Ericsson has reported a higher-than-expected loss and lower-than-expected sales for its second quarter and has revealed its upcoming share rights issue is fully underwritten. The equipment maker's Q2 loss was SEK3.5bn (£240m) and sales reached SEK38.5bn (£2.64bn), comparing to analyst forecasts of SEK3.06bn and SEK39bn. Figures for the corresponding period a year ago were affected by one-time costs and the spin off of the company's mobile arm to create the Sony-Ericsson 50-50 joint venture. Despite good sales of some phone models, Ericsson has revised down its revenue forecasts from that sector while at the same time suffering from operators' reluctance to upgrade to new network infrastructure at previous rates. In the face of these persisting gloomy conditions, an Ericsson statement insisted: "We are convinced that global telecommunications, particularly wireless communication, is a long-term growth market." CEO Kurt Hellstrom said the company will return to profit "at some point in 2003". The management has embarked on a far-reaching cost-cutting programme that will see more positions go. Ericsson's headcount will have decreased from around 107,000 at the start of 2001 to 65,000 by the end of 2003. Yesterday's results from rival Nokia showed fair handset sales but a relatively poor outlook. Ericsson's latest figures look like doing little to lift the battered telecoms sector. The company has revealed its rights issue, which during August and September will raise additional funding for restructuring and debt repayment, has been completely underwritten by existing shareholders such as large pension funds and banks. The Ericsson board said it decided to proceed with the offering in this way because of "the current negative sentiment in stock markets in general and the telecom industry in particular".