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Ericsson posts hefty loss
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January 25, 2002: 5:07 a.m. ET
Swedish telecoms equipment maker says it expects to turn profit in 2002
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LONDON (CNN) - Ericsson, the world's biggest maker of mobile networks, on Friday posted a hefty fourth-quarter loss but said it would turn a profit this year.
The Swedish company made a loss of 3.5 billion Swedish crowns ($330 million), or 0.44 crowns a share, compared with a profit of 2.3 billion crown, or 0.28 crowns a share, a year earlier. Sales fell 15 percent to 58.5 billion crowns.
Ericsson, like Nokia and Motorola, is suffering as telecom operators slash spending and cut debt amid a global economic slowdown. In a move to stem losses, Ericsson shed a fifth of its workforce and formed a handset joint venture with Japan's Sony.
The company hopes the massive transformation it has made to its business over the last 12 months will help it to reach its 5 percent profitability target at the operating level, even though sales may fall by 10 percent.
"I hope it's the light we see in the tunnel now," chief executive Kurt Hellstrom told CNN. "We feel more confident about this year."
During the fourth-quarter, orders fell 39 percent and Ericsson warned the first six months of this year would be difficult, sending its stock diving 4.4 percent to 47.50 crowns in early Stockholm trading on Friday.
Sales in the first quarter are expected to fall about 40 billion crowns, down more than 31 percent from the fourth quarter, Ericsson said. It also expects a pretax loss similar to the 4.9 billion crowns in the first quarter of 2001.
Ericsson's pretax loss in the last quarter of 2001 was 5.1 billion crowns, down from 5.8 billion in the third quarter. But excluding a 1.7 billion crown risk provision for Latin America, the loss was 3.4 billion, better than market expectations of 4.4 billion.
Analysts polled by Reuters had forecast Ericsson would post a pretax loss in the fourth-quarter of 4.4 billion crowns. Ericsson said it had a loss of 21.1 billion crowns for all of 2001.
Ericsson's sales forecast is less upbeat than that of Nokia, which on Thursday forecast it would increase sales 15 percent this year after a weaker first quarter.
"Although the market will be particularly challenging in the beginning of 2002 we maintain our objective of over five percent operating margin for the full year," Hellstrom said.
Nokia, the biggest producer of mobile phones, said net income fell 63 percent to  450 million ($395 million) but still maintained its position as the world's only profitable mobile phone manufacturer.
The Finnish company said after a weak first quarter, during which it expected sales to fall by 6 to 10 percent year-on-year, the second quarter would see a 10 percent sales rise and the second half of the year would be even better. 
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