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Ericsson cuts sales forecast
STOCKHOLM, Sweden -- Ericsson, the world's biggest maker of mobile phone networks, said on Friday its losses widened in the third quarter as sales tumbled and it was cutting its forecast for the rest of the year. However, the Swedish-based group said it still expected to turn a profit in 2003 as the market stabilises, with the sale of new handsets likely to increase demand for telecoms equipment. Ericsson said its net loss increased to 5.6 billion crowns ($596 million), or 0.41 crowns a share, in the third quarter, compared to a loss of 4.3 billion, or 0.37 crowns a share, a year earlier. Net sales fell 29 percent to 33.5 billion crowns in the third quarter from 47 billion crowns in the same three-month period in 2001. Orders plunged 46 percent to 20.5 billion crowns from 38.1 billion crowns. Pre-tax losses grew to 3.9 billion crowns ($417.5 million) from 6.4 billion crowns a year earlier. Analysts had been expecting a loss of 3.2 billion crowns in the third quarter. "The orders are a nightmare. We expected them to be bad, but not this bad," Helena Nordman-Knutson, an analyst at Ohman Brokerage, told Reuters. "The sales are in line with expectations, but there's not much of a future with these kind of orders." Ericsson said sales in its core business, mobile systems, would continue to be weak in the fourth quarter and that total sales for 2002 would fall by 20 percent, up from the company's previous forecast of a 15 percent decline. "We anticipate that the market in 2003 will not decline as much as this year, and will begin to stabilise at a lower level. A moderate increase in 3G [third generation] sales should partly compensate for the lower demand for mature technologies," the company said. "The market remains unpredictable. We continue to adjust to the prevailing market conditions and expect a return to profit at some point in 2003." Ericsson, which raised $3.2 billion in a share sale to bolster its balance sheet, is struggling to make a profit as global demand for wireless infrastructure declines and handset sales stagnate. The group posted its first annual loss in 2001, prompting it to launch a restructuring program that included about 50,000 job cuts and the sale of many non-core assets. It also joined forces with Japan's Sony Corp., the world's second-largest consumer electronics maker, to make mobile phones. But in August, the group said it would stop making mobile phones through its Sony Ericsson joint venture if the business does not deliver satisfactory results in the next two or three quarters. The 50-50 joint venture was launched in October last year and aimed to be profitable in the first year of its operations. However, Ericsson has said the business would make a loss this year. On Friday, Ericsson said its restructuring efforts had reduced its costs by 5 billion crowns in the third quarter to 52 billion crowns. It said 4,500 employees were eliminated between July and September, bringing the total workforce down to 71,700. Another 11,700 jobs would be cut in 2003, it said. Ericsson's shares were down 6 percent to 4.66 crowns in early Stockholm trading on Friday.
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