Ericsson posts 35% profit drop, hit by charges

Net income fell to 1.72 billion Swedish kronor ($216 million), or 0.54 krona a share, from 2.64 billion kronor, or 0.83 krona a share, earned in the year-earlier quarter.
Ericsson (ERIC:
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ERIC 8.51, -0.94, -9.9%) (SE:ERICB: news , chart , profile ) took a charge of 702 million kronor for job cuts in the latest quarter. The firm is slashing 5,000 positions this year at a cost of 6 billion to 7 billion kronor. Eventually it hopes to save 10 billion kronor a year, starting in the second half of 2010.
The results in the quarter just ended were also hit by the poor performance of Ericsson's two joint ventures. Sony Ericsson, its mobile-phone partnership with Sony Corp. (SNE:
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SNE 25.89, -0.25, -1.0%) , reported a 293 million-euro loss, while ST-Ericsson, the wireless-chip venture it formed with STMicro (IT:STM: news , chart , profile ) in February, posted a 700 million-kronor loss.
Ericsson shares fell as much as 10% in Stockholm morning trading. They were last down 5.3%.

Some investments postponed

Chief Executive Carl-Henric Svanberg sought to reassure investors by stressing the effects of the global recession on the mobile-network market are so far "limited."
He noted, however, that customers in some markets are postponing investment because their local currency has collapsed. He also said some operators are being "more cautious" about long-term investments into fixed networks such as the roll-out of fiber.
Deutsche Telekom (DE:DTE: news , chart , profile ) (DT:
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DT 10.88, -0.11, -1.0%) last week issued a profit warning, citing the deterioration in Western economies, and France Telecom (FR:FTE: news , chart , profile ) (FTE:
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FTE 22.06, +0.06, +0.3%) on Wednesday said it could reduce capital spending if the climate continues to worsen.
Svanberg on Thursday gave no explicit market outlook or sales guidance.
At RBS, analyst Didier Scemama noted that although there was no guidance management had adopted a more conservative tone.
Overall, sales rose 12% to 49.6 billion kronor in the quarter. On a comparable basis and excluding currency effects, they climbed 5%. There was growth in all regions except Western Europe, where revenue slipped 4%.
But some analysts were disappointed by that performance. At Enskilda, Mats Nystrom wrote in a note to clients that the sales figure came in about 5% below his estimate. Operating profit of 2.5 billion kronor also fell short of his 4.1 billion-kronor forecast.
Gross margin, excluding the restructuring charge, fell to 36.3% from 38.6% in the year-earlier period, mainly due to large initial rollout of third-generation networks in China, a higher proportion of services sales and the transfer of Ericsson Mobile Platforms.