Ericsson reports 42% profit drop

26 October 2012 | Kavit Majithia


Telecoms vendor Ericsson has reported a 42% drop in Q3 core profit and declared intentions to cut further costs.

In response to a global slowdown, the company has declared to cut costs as telecoms equipment vendors experience tough competition and slower spending by operators.

Ericsson has seen margins shrink because of low margin contracts, which have increased the company’s market share, but been detrimental to overall profitability. Ericsson said the effects would continue in the short term.

Sales of the company’s key networks unit fell 17% year-on-year, which showed lower sales in parts of Europe, in addition to declines in older networks in the US and China, with Reuters furthering reporting of slower 3G sales in Russia.

“We will continue to proactively identify and execute additional efficiency gains and cost reductions,” said CEO Hans Vestberg.

It is thought board members are unhappy with low profitability, but analysts cite the slow global economy, in addition to political unrest as reasons for decreased operator spend.

Operators across the board have implemented lower capital spending forecasts for the year, with Sprint Nextel the latest US giant to implement such a strategy, echoing measures by Verizon and AT&T.

Ericsson’s rivals Alcatel-Lucent and Nokia Siemens Networks have also struggled recently, with the French vendor planning to cut over 5,000 jobs worldwide.

In the Chinese vendor market, ZTE reported a $310 million quarterly net loss this week, and Huawei is also been forced to cope with weakening sales.