Ericsson’s earnings for the third quarter 2016 “will be significantly lower than company expectations,” it warned today in a pre-earnings announcement. Wall Street responded with an 18 percent decline in Ericsson’s stock price this morning.
The company continues to blame its hard times on weaker demand for mobile broadband, especially in markets with tepid macro-economic environments. And it’s not offering any end in sight. It said it expects the current downward trend to continue in the short term.
Ericsson said today its third quarter sales declined by 14 percent year over year to 51.1 billion Swedish kroner ($5.6 billion). Gross margin declined in the quarter to 28 percent from 34 percent in the same quarter 2015. Operating income saw the most drastic drop, down 93 percent compared to the third quarter of 2015.
The sales decline was mainly driven by markets with weak economic environments such as Brazil, Russia, and the Middle East, impacting both coverage and capacity sales in those markets. In addition, capacity sales in Europe were lower following completion of mobile broadband projects in 2015.
Jan Frykhammar, Ericsson’s interim CEO said in the statement: “Our result is significantly lower than we expected, with a particularly weak end of the quarter. The negative industry trends have further accelerated affecting primarily Segment Networks.”
Bad news has bedeviled the company lately.
Last week it announced it was cutting about 3,000 jobs in Sweden as part of a cost and efficiency program that it first revealed in 2014. But today, Frykhammar said, “Continued progress in our cost reduction programs did not offset the lower sales and gross margin.”
In July, Ericsson ousted its former President and CEO Hans Vestberg, and has yet to find a permanent replacement.