Taking stock in Stockholm
Ericsson, the world’s largest maker of mobile-phone networks, has admitted to a huge slide in net profits due to the ongoing recession.
The Swedish firm revealed that net profits for the second quarter fell 64% to 1.11 billion kronor (£101 million), missing analysts’ estimates.
Mobile phhone operators – Ericcson’s key clients – are cutting back on network investments as Europe’s debt mountain weighs on economic growth and consumer spending.
In the past year the company’s share price has fallen dramatically but not as much as fellow Scandinavian mobile manufactuer Nokia if only because investors believe Ericsson still has a future due to its dominant position in mobile telecoms infrastructure and large cash reserves.
Last November the company has revealed how modernisation contracts in Europe, which require labour-intensive equipment replacement and are frequently less profitable, could depress margins for several years.
And in March, Ericsson lowered its sales- growth target for the years ahead, projecting compound growth of 2% to 8% through 2014.
