Ericsson shares were down more than 7 percent this morning after the vendor reported adjusted second-quarter network sales were down year-over-year.
In a statement, President and CEO Carl-Henric Svanberg said the effects of the global economic climate on the mobile infrastructure market are now more notable, especially in markets with currencies under pressure and tougher credit environment. At the same time, consumer demand for new services and broadband are accelerating, and operators around the world increasingly are in need of professional services.
Services now represent 38 percent of Ericsson’s sales. Earlier this month, Ericsson announced an outsourcing deal with Sprint Nextel that is valued at $4.5 billion to $5 billion. The contract includes the transfer of about 6,000 employees from Sprint to Ericsson.
Network sales increased in the quarter by 4 percent year-over-year but were down when adjusted for currency exchange rate effects.
Ericsson points to its early decision to cut costs as a good move that is paying off. It started making cuts in 2008 and announced more layoffs this past January. But its two joint ventures are not faring so well.
Last week, Sony Ericsson, its JV with Sony, reported its fourth consecutive quarterly loss. Earlier this week, ST-Ericsson, its JV with STMicroelectronics, reported a second-quarter operating loss of $165 million.
Svanberg, who will leave the company in January for BP, told Reuters today that Ericsson has no plans to exit either of the loss-making joint ventures.
Filed Under: Infrastructure