Ericsson announced preliminary Q3 results reporting falls in both operating income and sales, with stand-in CEO Jan Frykhammar admitting the result was significantly lower than expected.
The leaderless equipment giant said operating income in the quarter to end-September fell by 93 per cent to SEK 300 million ($34 million), while sales slumped 14 per cent to SEK 51 billion. The full report is due on 21 October, as previously communicated.
“Our result is significantly lower than we expected, with a particularly weak end of the quarter, and deviates from what we previously have communicated regarding market development,” said Frykhammar.
The main culprit was the networks business where negative trends present in Q2 accelerated in the following quarter, he explained on a call with analysts.
Network sales fell by 14 per cent in Q2 but lurched down by 19 per cent in Q3, a worsening of the situation that Frykhammar said merited “immediate disclosure”.
The sales decline was mainly from markets where operators are impacted by poor macro-economic conditions such as Brazil, Russia and the Middle East. Both coverage and capacity sales are struggling in those markets. In addition, capacity sales in Europe were lower following completion of mobile broadband projects in 2015.
Still seeking a permanent replacement for CEO Hans Vestberg who stepped down in July, the company recently announced thousands of job cuts.
Questioned by analysts whether additional restructuring is now necessary, Frykhammar responded that the cost of sales must be adjusted accordingly. “That’s clear given the volume reduction. We can provide more detail later on but that’s a given.”
But he denied there were underlying structural issues behind Ericsson’s problems. “What is impacting us is operators’ businesses. Those countries are important to us and we have a strong position in Russia, Middle East and Brazil. This means we are impacted when operators reduce their capex. But I don’t see any other structural questions around that,” he said.