The global economic downturn finally caught up with Ericsson in the third-quarter, as the Swedish vendor reported a huge 71 percent drop in net income (to SEK810 million/US$118 million). Sales came in at SEK46.4 billion, a 6 percent slip on revenue of SEK49.2 billion in the year-ago quarter. Both revenue and profit fell short of analyst forecasts by a long way. Ericsson’s network business experienced a sales decline of 8 percent year-on-year, to SEK30.3 billion. “Sales of network equipment declined due to lower demand in the current tougher market environment,” noted CEO Carl-Henric Svanberg (pictured) in a statement. “Despite lower volumes, network margins remain stable.” Its Professional Services unit, which also includes the managed services division (an area of considerable interest for operators worldwide at present), saw sales rise 9 percent year-on-year to SEK12.8 billion.
Shares in Ericsson fell 7.7 percent, to SEK68.30, as a result of the disappointing performance. The results come a week after Nokia announced a EUR908 million writedown at its struggling network equipment joint-venture, Nokia Siemens Networks (NSN). Ericsson’s Svanberg said market conditions remain tough and the credit environment is still tight in some emerging markets. However, he noted there were positive signs in some of the world’s leading economies, including China, India, the US and Japan. Ericsson has consistently declined to give a market outlook. Last week rival NSN said it now sees a decline in the equipment market of around 5 percent in euro terms in 2009 versus its earlier prediction of a 10 percent decline.