Ericsson share price plunges as it issues a revenue warning on the back of disappointing second quarter results

Lucy White
Ericsson's chief executive Börje Ekholm was "not satisfied" with the results (Source: Getty)

Swedish telecommunications group Ericsson has seen its share price tank in morning trading, as it released a disappointing set of second quarter results.

The Stockholm-listed company reported that sales decreased by eight per cent year on year, or 13 per cent when adjusted for comparable units and currency. Operating income meanwhile dropped in the second quarter of 2017 to negative SEK 1.2bn (£111.22m), from SEK 2.8bn in the same period a year previously.

Ericsson also warned there would be a further “estimated negative impact” on operating income of SEK 3bn to SEK 5bn over the next 12 months, due to “further market and customer project adjustments”.

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“We are not satisfied with our underlying performance, with continued declining sales and increasing losses in the quarter,” said chief executive Börje Ekholm.

“Due to technology and portfolio shifts we will reduce the capitalisation of product platform, software release development expenses and hardware costs.”

The company added that planned cost reduction activities would be accelerated, with the aim of achieving an annual run rate reduction of at least SEK 10bn by mid-2018.

“Actions will be taken primarily in service delivery and common costs and do not include research and development (R&D),” said Ekholm.

Although operating income fell across all of Ericsson's segments, the business was positive about its networks branch.

During the quarter, it announced a contract to provide 5G radio technology to Vodafone, and said it had increased R&D in the area to “safeguard a future leading portfolio”.

Although there were “significant losses” in the IT and cloud business, Ericsson maintained this was of strategic importance as future customers, preparing for 5G, would digitalise their operations.

The company's media sector, on the other hand, improved as a result of increased sales, improved business mix and reduced costs, but Ericsson said it was continuing to explore “strategic opportunities” for the business.

At the time of writing, Ericsson's shares were down more than 10 per cent at SEK 54.25.

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