SHARES in Ericsson slumped today after the Swedish telecommunications equipment manufacturer failed to meet profit expectations and warned of tough times ahead.

The company’s shares were down more than 5% in midday trading after it reported the 39% drop in net profit last year to 6.2 billion kronor (RM7.89 billion). 

The analyst consensus compiled by Bloomberg was for net profit to come in at 7.6 billion kronor.

The performance was impacted by the company having set aside US$220 million (RM942.68 million) to cover potential US fines over suspected bribes to the Islamic State group in Iraq, a case that has weighed over the Swedish telecoms group for months.

“The near-term outlook… remains uncertain,” chief executive Borje Ekholm said, citing “broad macroeconomic headwinds”. 

He said Ericsson had already begun to sense at the end of last year that network operators wanted to reduce assets and that it expects this to continue at least through the first half of the year.

While Ericsson hopes to win market share, this will not fully offset the headwinds, Ekholm said.

Faced with the uncertain economic situation, Ericsson announced an €830 million (RM3.85 billion) cost savings plan, the effects of which should soon be felt.

Ericsson is locked in a battle with Finland’s Nokia and China’s Huawei for 5G network equipment. 

The company’s sales rose by 3% when currency effects were stripped out and comparable units used.

By value, they jumped 17% to 232.3 billion kronor. – AFP, January 20, 2023.