Ericsson rings up £1.4bn loss

ERICSSON, the world's biggest phone equipment maker, slumped to a full-year loss of 21.1bn Swedish kronor (£1.4bn) and axed the dividend today as it resigned itself to flat sales or worse in the current year.

Sweden's biggest company warned that sales would stagnate in the first quarter and fall by up to 10% for the full year in 2002. However, it still promised to return to the black this year.

The loss marks a terrible reversal for Ericsson, which posted a record 21bn kronor profit in 2000, but has since been hit by the sharp downturn in demand from telecoms operators. It responded last year with a massive restructuring scheme, slashing 22,000 jobs and embarking on $2.6bn (£1.8bn) of asset sales.

Ericsson's forecast for sales this year is markedly more pessimistic than rival Nokia of Finland, which on Thursday predicted an overall 15% rise in sales this year of handsets and network equipment.

Ericsson, headed by Kurt Hellstrom, said its pre-tax losses for the final quarter of 2001 were 5.1bn kronor, down from the 5.8bn kronor deficit recorded in the previous three months, but worse than the 4.4bn kronor pencilled in by analysts.

Additional provisions against operations in Latin America added 1.7bn kronor to the red ink. However, Ericsson said it expected the restructuring to deliver 5% operating profitability this year.

Mika Paloranta of Nordea Securities said: 'Basically the figures seem fairly good to me. The pre-tax loss was less than we expected. Sales were higher and cash flow clearly on the positive side.'

The full-year loss is the first for the company in more than 50 years. All the telecom equipment suppliers are suffering as phone operators slash capital spending plans and consumers slowed their handset buying patterns.

Industry-wide, mobile handset sales fell for the first time last year - by 6% to 380 million. Motorola of the US this week forecast its sales of wireless phone equipment would drop 15% this year, while Siemens of Germany is expected to cut more jobs in its networks division.

Ericsson shares rose as much as 5.6% to 52.6 kronor in the first minutes of trading. But they have still halved in the past year. Siemens has dropped 32% and Motorola 42% over the same period.