Ericsson shares slammed on warning

A warning from the Swedish telecommunications-equipment maker sends the company's shares plunging, confirming worries about a slowdown in that sector.

Margaret Kane Former Staff writer, CNET News
Margaret is a former news editor for CNET News, based in the Boston bureau.
Margaret Kane
2 min read
A warning from Swedish telecommunications-equipment maker Ericsson sent the company's shares plunging and knocked a few competitors, confirming worries about a slowdown in that sector.

Ericsson said it expected a pretax loss of $407 million to $509 million in the first quarter instead of a result that was close to breakeven.

The news sent Ericsson shares plunging $2.09, or more than 25 percent, to $6.28, while competitor Motorola fell 55 cents, or more than 3 percent, to $15 and Nokia dropped $1.35, or 5.9 percent, to $21.45.

Ericsson said sales would be flat or slightly lower instead of rising 15 percent as previously expected and that sales of mobile phones would be "considerably lower than in the first quarter of last year." The profit warning from the world's third-biggest mobile phone maker and leading network-infrastructure supplier was a further sign of trouble in the recently battered technology and telecommunications sector.

"The slower growth is affecting all of our operations. Customers in the United States in particular are postponing capital expenditures. Also, in Western Europe in markets with already high penetration, operators are delaying investment," the company said.

The company said it would give further guidance about the second quarter and the rest of the year when it reports first-quarter earnings next month.

Analysts have been on edge regarding the telecommunications industry after rumors surfaced last week that Nokia, the world's largest cell phone maker, would issue a warning.

The No. 2 company, Motorola, has already warned investors it would miss first-quarter earnings and sales estimates, citing sluggish cell phone and chip sales.

"In January we announced flat sales of mobile phones. Now we see very low replacement demand and high inventory levels," Ericsson CEO Kurt Hellstrom said. "Sales of phones will be considerably lower than first quarter of last year."

Reuters contributed to this reported.