Ericsson to Report Loss, Outlook Could Be Cut
Mon Apr 15,10:24 AM ET
STOCKHOLM (Reuters) - Swedish telecoms equipment maker Ericsson will show next Monday a first quarter loss and falling sales, while few new orders in a stagnant market will possibly force it to adjust its outlook, analysts said.Telefonaktiebolaget LM Ericsson, the world's biggest producer of mobile networks and with Sony Corp the third biggest handset supplier, will report as the last of the sector's heavyweights after U.S.-based Motorola on Tuesday and Finland's Nokia on Thursday.
Many analysts expect forecasts from both Motorola and Nokia to be cautious, with possible downward revisions for sales or earnings, and Ericsson is unlikely to be different.
"We would expect management to adopt a tone of increased caution on the outlook, reflecting nervousness about a market which as yet shows no sign of bottoming," JP Morgan analyst Jamie Wood said.
Analysts said a bearish outlook for the telecoms equipment market reflected deeper than expected spending cuts by European and Asian --especially Chinese -- operators, and likely delays in the rollout of 3G telephony, which offers multimedia on handsets.
The investment freeze comes as operators curb spending amid a global economic slowdown compounded by large debts of European operators, incurred to pay for 3G licenses.
Ericsson said in January its sales would drop 19 percent year-on-year to 40 billion crowns in the first three months and that its pre-tax loss would be around last year's 4.9 billion.
It also said in March that although there were no signs of a market rebound, business would improve in the second half of the year and that it still aimed for a five percent operating margin for the full year even if its sales of wireless infrastructure are flat to down 10 percent with the market.
POSSIBLE FORECAST REVISION
"We expect Ericsson to comment on this guidance and most likely... reduce it," said Inge Heydorn, analyst at Alfred Berg in Stockholm.
The average from a Reuters poll of 21 analysts showed on Monday the market expects Ericsson to meet its first quarter sales and pre-tax loss targets, but sees the full year operating margin at 1.35 percent rather than five.
"The question is not if Ericsson will review its operating margin target, the question is when," one analyst said.
The pre-tax result forecast for the full year was a negative 90 million crowns, with a wide range from a negative Ericsson, which made its first annual loss last year, wants to return to the black this year thanks to an efficiency plan it implemented in 2001, which aims to save it 38 billion crowns annually.
The efficiency plan included 22,000 job cuts, or one fifth of the workforce. Although Ericsson said it foresaw no new large redundancy schemes, it said it would keep adjusting its costs to the market, which could involve some jobs losses.
More savings are likely to get the support of new Chairman Michael Treschow, former head of white appliances maker Electrolux, who has a reputation for tight cost control.
"The most compelling reasons for... a share rally would be the presentation of an accelerated restructuring story from Michael Treschow... or from positive news flow regarding 3G networks builds or further asset sales," JP Morgan's Wood said |
