Cost-cutting Ericsson stems losses in Q3

Ericsson, the world's largest supplier of mobile-phone networks, narrowed its third-quarter net income loss through its cost-cutting efforts and believes the industry as a whole is now headed towards recovery with business development replacing financial restructuring measures.

The Stockholm, Sweden, manufacturer expects the mobile systems market in 2004 to stabilize at 2003 levels, reiterating its forecast of a decline of over 10 percent in dollar terms on 2002, Ericsson said in a statement Thursday.

The company's net loss for the third quarter was 3.9 billion kronor (US$507 million as of Sept. 30, the end of the period being reported), or 0.25 krona per share, compared with a loss of 5 billion kronor, or 0.41 krona per share, in the same period the year before, Ericsson said.

Revenue fell 16 percent to 28 billion kronor from 33.5 billion in the year-earlier period.

Before taxes and omitting restructuring charges, the company turned a profit of 1 billion kronor, a marked improvement over its year-ago loss of 3.6 billion kronor, Ericsson said. The company said its return to profitability was an important milestone but that Ericsson would continue to focus on cost-cutting measures and increasing the speed with which it responds to customers' changing demands.

Ericsson took restructuring charges of 5.4 billion kronor in the quarter and 12.4 billion kroner for the year to date. It reiterated that its total restructuring costs for 2003 are expected to be 16.3 billion kronor.

Job cuts have continued within the company. Ericsson now has 53,401 employees, 26 percent less than the same period last year when it employed 71,723 people.

Both orders and sales were essentially flat when compared to the second quarter, Ericsson said. Sales in Asia Pacific and Latin America increased sequentially with major contributions from China, Japan and Mexico, though those increases were offset by lower sales in Europe.

Ericsson said it has won a "number of key contracts" within the 3G (third-generation) and EDGE (Enhanced Data Rates for GSM Evolution) markets as well as with MMS (Multimedia Messaging Service) services.

The company is also seeing growth in the number of WCDMA (Wideband Code Division Multiple Access) subscriptions, reporting 1.7 million subscriptions by the end of the third quarter.

Ericsson's outlook on the handset business was upbeat as it sees consumers responding positively to "applications with rich consumer experience" such as sending and receiving pictures, downloading music and accessing e-mail. The company pointed to Sony Ericsson Mobile Communications AB, the 50-50 joint venture with Sony Corp., which earlier in the month reported improved operating results in the quarter.

On Oct. 15, Sony Ericsson reported net income of Euro 62 million (US$72 million as of Sept. 30, the last day of the period being reported), up from a net loss of Euro 93 million in the third quarter 2002.

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