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Friday, 19 July, 2002, 16:12 GMT 17:12 UK
More gloom hits troubled Ericsson
Ericsson 3G phone
Ericsson's position in the mobile league table is under threat
Swedish telecoms equipment maker Ericsson has announced its seventh straight quarter of losses, but repeated hopes of a return to profit with the help of 5,000 more job cuts and extra cost-savings.


Sales and order books look rather disappointing and handsets and infrastructure are definitely underperforming

Thomas Langer, WestLB Panmure
Ericsson, the world's biggest producer of mobile networks and a major player in handsets, lost 3.5bn kronor (241m; $380m) during the April to June period, as sales of mobile systems slumped.

The company now plans to raise $3.2bn from shareholders in a rights issue, priced at a heavy 74% discount to its opening share price on Friday.

The rights issue news, combined with the company's continuing dismal results, was enough to cause an immediate plunge of almost one-quarter in Ericsson's shares, which hit an eight-year low at one point.

"The outlook seems to be worse than expected," said Karri Rinta, analyst at Evli Bank.

"The terms of the rights offering seem pretty harmful for Ericsson shareholders,"

The stock closed down 7.9% at 11.90 euros, and dragged shares in rival phone makers lower with it.

Shares in Finnish rival Nokia closed down 4.7% at 13.06 euros, while shares in Germany's Siemens ended 5.3% lower at 55.50 euros.

Tough times

The company compounded the gloom by forecasting that sales of mobile systems would drop by 15% this year, worse than its previous prediction of a 10% drop.

Ericsson headquarters
Ericsson is slashing 42,000 jobs, and more may go

Ericsson's relative success in the mobile networks market has helped mask its plunging share of the market for mobile handsets, where it has slipped behind Nokia, Motorola, Samsung and Siemens, despite linking up with Japan's Sony.

But both markets are now shrinking, and mobile manufacturers have to keep stressing that the next generation of mobile technology - still some distance away - could revive their fortunes.

In the meantime, Ericsson announced yet another round of cost-savings, worth 10bn kronor (0.686bn; $1.08bn) over and above the billions so far slashed.

The firm admitted that 5,000 more jobs would have to go, on top of the 42,000 losses already announced before the end of next year.

Fading hopes

This, Ericsson hopes, should be enough to get the firm back into the black by next year.

Kurt Hellstrom
Mr Hellstrom remains sanguine

"With intensified cost reductions, a stronger balance sheet and a premier customer base, we are confident that we have the right strategy to restore profitability and reinforce our leadership in this long-term growth industry," said Kurt Hellstrom, president and chief executive.

Investors are still not convinced.

Ericsson's shares have lost three-quarters of their value this year, underperforming the DJ Stoxx tech index by more than 50%.

"Sales and order books look rather disappointing and handsets and infrastructure are definitely underperforming," said Thomas Langer, analyst at WestLB Panmure.

See also:

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