Ericsson (ERICY) President Kurt Hellstrom on earnings - 07/21/00
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CNBC- SQUAWK BOX
ERICSSON (ERICY) PRESIDENT KURT HELLSTROM ON EARNINGS
JULY 21, 2000
SUMMARY: Hellstrom comments on problems in the consumer products business and mobile telephones.
Hellstrom addresses the company's low shares in overseas trading. Hellstrom discusses the mobile Internet.
Mark: We are back. Ericsson reporting a 337% gain in profits for the first half of the year. Shares of the
mobile phone giant fell more than 8% in overseas trading. The company warned third quarter profits would
be hit by problems in its phone handset business and the second quarter numbers included huge capital gain.
The company says it will try store profitability within the next 12 months by buying cheap phones from Asian
suppliers. Shares of Ericsson fell 8 1/2% in European trading. It has 52-week range between 26 and change
and 7. Let's get more on Ericsson's situation, joining us from Stockholm is Kurt Hellstrom president of the
Ericsson. Thank you very much for being with us.
Thank you.
Mark: As I read the numbers here, if it were not for this very large capital gain, you would have come in
below expectations. Largely, because of the problems in the consumer products business. What is going on?
Well, We had promised to double our net income for the second quarter and we came in above that. We came
in about above the sales growth that we had projected or guided the market with about a quarter ago. I think
we had a very strong performance, but it is true that among all of the good news that I presented today
including tremendous growth for the mobile systems. Also including wire line and enterprise solutions. We
have the problem with mobile telephones. We have been working with telephone now for almost a year. I
think we were rather well on track and we had implement add lot of discipline in that organization and a new
management and we started to provide and launch new products as we had expected. Then we were hit by this
accident that happened in March and actually it hindered us from producing lot of telephones. It is going to
have effects also in the third quarter as we have mentioned today. We can't, the supply cannot recover within
just that short time.
Mark: There are no alternative suppliers I take it?
Well, it is part of the game because if you are, this is one of the suppliers I would say that our long-term
relationship, they have been very reliable. They have state-of-the-art technology and if you are in this
state-of-the-art technology that we are in. Mobile telephones are actually in the state-of-the-art technology,
then you are looking for the best possible processes and there are no others who have this process. We are
still getting components, but far from the volumes that we had and are needing. We know that it works and it
is very good solution.
Robert Balentine: Earlier you were talking about wireless and I know recently the company has made an
investment in OZ.com, but with the competing digital technology with GSM in Europe and with CDMA
technology in Japan and of course with AT&T here using the ATDMA format. How do you see they technical
tower coming together? How is Ericsson best positioned to capture that?
(**note the stumbling on this brand new format "ATDMA"
and incorrect transription of the responce, "not a wizard"
to "not with it")
Well I am not really with it on all of these different technology and the designations, but we are now entering
what he was call the mobile Internet. We have number of such start-ups. We have been instrumental in the
AT&T launch of the pocket net service. We have other involvements in GPRS and WAP and we are of course
moving full speed ahead into third-generation. Where we today are part of the seven out of ten current orders
or orders to be concluded. So, I think that we have a very good position. We have been exceeding so far the
objectives that we had going into this new generation.
Mark: Moving back to this issue of the mobile handsets and yes, of course, the fire at the component
manufacturer was just one of those things that happens. Nonetheless it puts you in a very difficult position
because now it really gives Nokia and Motorola a chance to take away market share that will be hard to get
back.
Well, I think that our experience in this industry is that market shares are rather volatile. Much more
volatile than when are you talking about systems business. So, if you enter the market with a very attract
product and you can provide that then can you grab market share very quickly. I am stating that we have not
stopped deliveries. We are still on record levels when it comes to volume and we have ramped up very sharply
this year. We have not been able to meet what we had planned to in the order to become profitable and reach
the target that we had for the year, which was a double-digit margin by the end of the year. Plus going from
some 11, 12% market share into 15%. That is, of course not possible today when we are not able to be
produce a number of phones that we need, but the shortfall is not being bigger than we can keep our market
shares and probably gain a little. We will not be able to get back to the target of 15%.
Mark: Kurt Hellstrom, thank you very much and best of luck. Hope things straighten out. Kurt Hellstrom
president of Ericsson. |
