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Ericsson shares fall amid outlook, job cuts
Analysts less-than-enthusiastic with new products
By Janet Haney, CBS MarketWatch
Last Update: 4:23 PM ET Mar 24, 1999 Movers & Shakers
Earnings Surprises
STOCKHOLM, Sweden (CBS.MW) -- Ericsson stock fell Wednesday after the mobile phone maker said it expects a tough first quarter and will trim 11 percent of its staff.
Ericsson's (ERICY) U.S.-listed shares slipped 1 1/2, or 6.6 percent, to 21 1/16.
In a conference call Tuesday, Ericsson said it plans to cut staff by 11,600, about 11 percent of its worldwide work force, over the next two years. See Ericsson conference transcript.
"I must admit that the change and shift in technology is proceeding faster than has ever been experienced in any industry," Chief Executive Officer Sven-Christer Nilsson said during the conference call.
Nilsson said Ericsson is moving toward becoming a "pure knowledge company, from being a mainly manufacturing company."
Morgan Stanley lowered its outlook from "neutral" to "underperform," and also lowered its outlook on first quarter sales growth from 6 percent to 2.1 percent. Morgan Stanley also said it's "underwhelmed" by Ericsson's new products for 1999.
Analysts at CIBC cut their first-quarter estimate from 11 cents to 7 cents a share. The 1999 estimate on Ericsson was cut from 86 cents to 75 cents a share. CIBC said Ericsson blames its revised first-quarter views on pricing pressure in the handset market, as well as restructuring costs.
CIBC Oppenheimer kept its rating on the Stockholm-based company at "hold." CIBC said Ericsson's "introduction of uninspiring new phones" may be cause for investors to re-evaluate the company.
Donaldson, Lufkin & Jenrette maintained its "market perform" rating and said its 12-month target for Ericsson is $25. Its first quarter calculation is 9 cents a share. PaineWebber said it's all "much ado about nothing" and kept its "attractive" rating on the company.
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