Interim report | Ericsson estimates that the market will recover more slowly than expected

Swedish network equipment manufacturer Ericsson estimates in its interim report published on Tuesday that market uncertainty will continue next year.

Because of this, the company announced that it would increase its savings target from 11 billion kroner to 12 billion kroner, or more than one billion euros. The demand for network devices has decreased more than expected, especially in North America.

Due to the high cost of financing, telecom operators have postponed their investments, for which they often obtain large amounts of loans.

Ericsson turnover decreased by ten percent in July–August to 64.5 billion kroner (5.5 billion euros) and operating profit excluding non-recurring items decreased by 46 percent to 3.9 billion kroner (332 million euros).

In the current quarter, i.e. October–December, Ericsson estimates that its profitability will improve, but due to the increased uncertainty, it did not give any estimate for next year.

On Tuesday afternoon, the company’s shares fell more than eight percent to 49.4 kroner on the Stockholm Stock Exchange.

Of uncertainty despite CEO Börje Ekholm states in the interim report that he is confident that the business will recover over time.

The US-based investment bank Jeffries estimates that the demand in the market will gradually increase, which, combined with cost cutting, will improve the company’s profitability in the coming quarters.

Ericsson’s goal is that, over a long period of time, the result before financial items, taxes and depreciation of intangible assets will be 15–18 percent of turnover. In July–August, it is six percent of turnover.