Ericsson's Q3 2016 Profits Decline 94%, Shares Hit 8-Yr Lows

Swedish telecom equipment maker, Ericsson AB, announced that its operating profits for the July-September quarter has fallen by a whopping 94% mostly on account of declining sales and increased competition. The world’s largest telecom equipment company also said that its sales dropped by 19% during Q3, 2016 while its operating profits plummeted to just SEK 300 million ($34 million) from SEK 5.1 billion ($578 million) during the same period last year. The company blamed the decline in its core telecom equipment business to a drop in spending by telecom companies in many regions around the world. Following the announcement, Ericsson’s shares fell around 15% to an eight-year low of SEK 50.70 in early trading on the Stockholm Stock Exchange.

Ericsson, which competes globally with the likes of Huawei Technologies and the recently-merged Nokia-Alcatel, also said that it believes the downward trend is likely to continue through much of the next fiscal year. The company has been in full-fledged crisis management mode of late, having announced a massive job cut in its home country just last week, following reported discontent among its two main shareholders — holding company Industrivarden and the Wallenberg family investment company, Investor. However, the 3,000 job cuts the company announced earlier this month in Sweden may only be just the tip of the iceberg, as the company’s acting chief executive, Mr. Jan Frykhammar, recently revealed that the company is planning even tougher cost cutting measures, including a significant reduction in its global 115,000-strong workforce.

Talking about Mr. Frykhammar, the former Chief Financial Officer and Head of Group Function Finance at Ericsson was elevated to the post of Interim President and CEO of the company last July after the company’s then-CEO, Mr. Hans Vestberg, was ousted because of his perceived inability to turn around the fortunes of the struggling company. With the company’s profitability and its stock prices both in a downward spiral, talks about a possible takeover by American networking equipment giant, Cisco Systems, have again started doing the rounds. However, analysts at UBS have suggested that such a scenario is unlikely, given that the current partnership between the two firms is yet to bring any tangible financial benefit to either of them.

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Kishalaya Kundu

Senior Staff Writer
I've always been a tech buff and have been building my own PCs since as far back as I can remember. My first computer was a home-built desktop running MS-DOS on which I learnt to program in GW-BASIC and my interests apart from technology include automobiles and sports.
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