Ericsson woes continue, Q2 income drops

Continuing on a year of lagging corporate performance, LM Ericsson Telephone Co.on Friday announced a decrease in profits for both the company's second quarter and half-year results.

Second-quarter net income for the three months ended June 30, 1999, came in at 2.3 billion kronor ($497.5 million) , down from 3.4 billion in the second quarter last year. Net sales for the first six months of 1999 increased 12 per cent to 92.4 billion kronor up from 82.3 billion kronor in the same period last year, Ericsson announced on Friday.

During the quarter, income per share decreased 35 per cent to 1.74 kronor and Ericsson cut 1837 staff members.

In the first half, strong growth in sales of mobile systems continued, increasing 40 per cent compared to the first six months of last year. The company's largest sales during the quarter were to network operators and service providers, with a sales growth of 22 per cent. Enterprise sales increased 10 per cent but consumer sales dropped 8 per cent.

North American sales increased 41 per cent in the second quarter, while sales in Europe, Middle East and Africa (EMEA) increased 17 per cent. Sales to the Asia Pacific and Latin American markets were flat however.

Calling the first six months of this year a "difficult period", Ericsson expressed hope for next year, based on a presumption of continued growth in mobile system sales, a positive contribution from newly acquired business units, an improved control over expenses and expected strong results from a new line of mobile phone products.

Ericsson reiterated its goal is to take an important role in wireless-Internet market, combining its position in the wireless market with a move towards IP (Internet protocol) technologies.

The company's decreased profits are a continuation of bad news throughout the year. Ericsson, one of the world's largest cellular phone makers, earlier this month asked Sven-Christer Nilsson to resign because he didn't implement a restructuring plan quickly enough to stem declining revenues.

When Ericsson announced Nilsson's departure, it also increased its January estimate of having to cut 11,000 staff jobs over the next two years to a loss of 14,000 jobs in its restructuring effort.

Ericsson first warned in December that lower-than-expected earnings for 1998 would mean layoffs.

Last quarter, sales rose only 8 per cent compared to the first quarter of the previous year, totalling 41.6 billion kronor ($8.97 billion). Pretax profits also took a nosedive, falling 51 per cent from the same period last year to total 1.3 billion kronor or .49 kronor per share.

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