Wireless equipment maker LM Ericsson yesterday said profits dropped 31 percent in the fourth quarter, citing restructuring charges and weaker handset sales.
The company said net profit fell to 3.9 billion kronor (US$465 million) from 5.6 billion kronor a year earlier, adding that it would slash 5,000 jobs.
It reported “a dramatic drop” in the contribution from its handset unit, Sony Ericsson. The joint venture with Japan’s Sony last week said it had swung to a fourth-quarter loss of 187 million euros.
For the full year, it posted a profit of 11.3 billion kronor, nearly half the 21.8 billion kronor reported for 2007.
Boosted by a weakening krona, Ericsson’s sales in the fourth quarter rose 23 percent to 67 billion kronor, from 54.5 billion kronor a year earlier.
The share soared nearly 11 percent to 62 kronor in the Stockholm stock market’s opening.
The world’s leading maker of mobile broadband infrastructure said it released the fourth-quarter results a week ahead of schedule because it believed it exceeded market expectations.
In a statement, chief executive Carl-Henric Svanberg described his company’s performance last year as “solid,” pointing out the sales and the operating margins, excluding Sony Ericsson. He warned, however, that the financial downturn makes it “difficult to more precisely predict to what extent consumer telecom spending would be affected and how operators would act.”
The company said it needed to widen its savings program as the global financial crisis continues to pressure the industry. That would mean cutting 5,000 jobs, or more than 6 percent of its 79,000-strong work force, Ericsson said.
The Stockholm-based company said it expected restructuring charges of 6 billion to 7 billion kronor, yielding annual savings of around 10 billion kronor by the second half of the year.
In a Webcast news conference with analysts and journalists, Svanberg said: “We’re doing this of course because of the uncertainty in the market.”
For this year, he said the company would focus on staying close to its customers to understand their behavior and needs, adding that the company was also preparing for tougher times to be able to defend its margins and extend its leadership.