Ericsson may experience the lowest profit drop in three years. It is estimated by 15 analysts that, in the second quarter the net income of the world’s largest maker of wireless networks fell 56 percent to 2.82 billion kronor ($472 million).
On July 18 Ericsson spokesman said that the company’s handset venture with Sony, Sony Ericsson Mobile Communications Ltd, almost had a zero profit, due to a waning demand on phones. Net income fell to 6 million euros from 220 million euros a year earlier and sales dropped 9.4 percent to 2.82 billion euros, the venture said.
In February Ericsson said the demand of telecom networks in Italian and other areas would be “flattish” this year. Jan Dworsky, an analyst at Handelsbanken Capital Markets in Stockholm said that “the global network market will be flat going forward, with limited growth next year, and competitive pressures will weigh on profit margins this year and next.”
It is said the company aims to cut annual costs by 300 million euros. Facing the challenging situation, last year, Carl-Henric Svanberg, CEO of the telecom giant, cut revenue forecasts twice. And it is announced to cut 1,000 staffs in Sweden and probably 3,000 more abroad.
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Ericsson has signed GSM expansion framework agreements with Chinese mobile operators, China Mobile and China Unicom, aiming at expanding its Global System for Mobile Communications (GSM) networks. The deals are worth about USD 1.3 billion and USD 140 million respectively.
Ericsson will be one of the main providers of core and radio network equipment as well as related technical support and services for China Mobile so as to expand GSM/GPRS coverage and capacity in 19 regions across China. Moreover, both companies have already signed the “Green Action Program”, intending to reduce energy consumption in mobile networks and carbon-dioxide emissions.
For China Unicom, Ericsson will act as the main supplier, helping expand GSM networks in 10 regions across China. What’s more, Ericsson will also offer multimedia solutions for WAP services to provide attractive multimedia services and applications.
Carl-Henric Svanberg, president and CEO of Ericsson, said they would continuously support China’s rapidly expanding telecom industry with their “global expertise and proven competence”, while the new framework agreements would further strengthen Ericsson’s position as the leading mobile communications supplier in the Chinese market.
According media report, the projects are expected to be completed in 2008.
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