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LM Ericsson drops more than 25 percent

Shares in LM Ericsson plunged more than 25 percent yesterday after the wireless networks maker warned that third-quarter sales, operating income and cash flow would be lower than expected.

The news sent shares of the Stockholm-based company tumbling to 19.58 kronor, a three-and-a-half year low.

Ericsson said sales would come in at 43.5 billion kronor (US$6.8 billion), and operating income would reach 5.6 billion kronor while it said it would report a 1.6 billion loss in cash flow.

The figures were below its own previous outlook, as well as analysts' estimates, it said, and blamed the drop on lower-than-hoped-for sales in mobile network upgrades and expansions.

Chief executive Carl-Henric Svanberg said that had resulted in an unfavorable business mix and hurt the company's margins.

In its outlook for the fourth quarter, Ericsson said it expected sales of between 53 billion kronor and 60 billion kronor, and operating margins in the mid-teens, including its joint venture Sony Ericsson.

Ericsson said it believed the current conditions would prevail next year.
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