Ericsson struggles to beat fall in sales and profit

Mobile phone parts firm Ericsson today blamed weak sales and profits on tough market conditions, and warned that no sign of recovery was on the horizon.

The telecom equipment market contracted sharply last year as the global downturn forced phone companies to keep costs down. Ericsson said little had changed in the first three months of the year.

Ericsson's operating profit, excluding joint ventures and restructuring costs, was 4.5 billion kronor (£403 million) in the first quarter against an analysts' forecast of 4.8 billion kronor and 4.7 billion kronor in the period a year ago.

Sales fell 9% year-on-year, the same pace as rival Nokia Siemens Networks, at 45.1 billion kronor (£4 billion). Sales in the key network unit were down 14% year-on-year, hit by market caution and tight component supply conditions.

Most analyst forecasts are for meagre market growth at best in 2010. "I think this is a weak start of the year. Sales are somewhat disappointing and the decline in Networks sales is quite stunning," said Thomas Langer, analyst at West LB. Competition, especially from Chinese vendors, is also likely to remain fierce.

Ericsson chief executive, Hans Vestberg, said: "The market conditions we saw in the second half of 2009 prevailed also in this quarter with mixed operator investment behaviour across regions and markets."

Nokia Siemens Networks said yesterday that it expected no growth in the equipment market this year in euro terms. Cost cuts helped it swing to a small, but unexpected, profit in the first quarter.