Ericsson warned that its third quarter 2016 financial results will be below previous expectations.
The company cited “negative industry trends” from the first half of 2016, along with weaker demand for mobile broadband, especially in markets with weak macro-economic environments.
“Our result is significantly lower than we expected, with a particularly weak end of the quarter, and deviates from what we previously have communicated regarding market development. The negative industry trends have further accelerated affecting primarily Segment Networks. Continued progress in our cost reduction programs did not offset the lower sales and gross margin. More in-depth analysis remains to be done but current trends are expected to continue short-term. We will continue to drive the ongoing cost program and implement further reductions in cost of sales to meet the lower sales volumes,” stated Jan Frykhammar, Ericsson President and CEO.
Key points:
- Sales declined by -14% YoY to SEK 51.1 (59.2) b., driven by slower development in Segment Networks where sales declined by -19%.
- Gross margin declined to 28% (34%) following lower volumes in Segment Networks, lower mobile broadband capacity sales, and higher share of services sales.
- Operating income declined to SEK 0.3 (5.1) b., including restructuring charges of SEK 1.3 b.
- Current trends are expected to continue short term.
