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Friday, 21 July, 2000, 21:35 GMT 22:35 UK
Ericsson's mobile worries
The problems are due to component shortages
Ericsson is facing problems with its mobile unit
One of the world's largest telecommunications companies, Ericsson, posted strong half-year profits, but the results were overshadowed by problems in its mobile phone subsidiary.

The company's shares slumped 7% to190 krona ($21.15) in Stockholm and plunged 11% on US markets.

Pre-tax profit was18.6bn crowns ($2.07 bn), much better than market forecasts of 13.4bn crowns.

But the company, which is the world's third largest mobile telephone manufacturer, said its mobile unit posted an operating loss of 1.8bn crowns because of component shortages.

Ericsson said a fire at its main supplier Philips Electronics had resulted in component shortages for its cellphones, leading the company to warn that its third-quarter profit would fall back to the same levels as a year ago.

The component shortage would cut annual earnings by between 4bn and 5bn crowns this year - the fire would attribute for between 3bn and 4bn of that.

But analysts said the poor performance by the company's mobile unit might rather be attributed to Ericsson's inability to produce cheaper and attractive phones like its competitor Nokia.

Mobile to post loss

Ericsson said its mobile unit would post a loss this year, but said it planned to turn the company around by concentrating on just a few production lines and by improving its mobile phone development.

It also plans to bring out cheaper, attractive models to attract more consumers.

The general poor performance of its mobile unit has lead to speculation that the company will sell the subsidiary and concentrate on developing mobile networks.

But the company's president said it had no plans to do that.

"We don't plan to sell mobile phones (division)," Kurt Hellstrom said.

"Mobile phones is really a core business for Ericsson. We wouldn't be as successful (in networks) if we didn't have phones," he said.

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25 Jan 99 | The Company File
Ericsson confirms 11,000 job cuts
09 Dec 99 | Business
The mobile internet race
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