Ericsson 4Q Net Profit Plunges 42%, Targets Cost Cuts

STOCKHOLM -(Dow Jones)- Ericsson Friday said net profit plunged 42% to SEK5.64 billion ($886.7 million) in the three months ended Dec. 31 from SEK9.73 billion in 2006, meeting analyst expectations of SEK5.60 billion, and said it sees a "flattish" mobile infrastructure market in 2008.

The Sweden-based company also said it targets some SEK4 billion in annual savings to take full effect in 2009, while one-time charges will be SEK4 billion to be booked as changes are made. Also in attempt to trim costs and regain profitability, some 1,000 workers would be cut in Sweden.

WestLB analyst Thomas Langer said the restructuring plan isn't "major news" but shows the company is willing to work for improvement. He said the company's flat outlook for mobile doesn't come as a surprise. Langer reiterated his buy rating, saying shares might rise thanks to a tailwind from Wall Street Thursday.

"The continued rapid build out of mobile communications in emerging markets and our significant market share gains have resulted in a higher proportion of new network builds with initial lower margins," said Ericsson Chief Executive Carl-Henric Svanberg Friday.

Svanberg said Ericsson's ambition is to continue to gain market share, adding he see a positive longer-term outlook. Ericsson stunned the market in October, claiming weak development in sales of the higher-margin network upgrades and expansions combined with a larger proportion of lower-margin network rollout deals hit the company's margins.

Sales during the period ending Dec. 31 were SEK54.46 billion, on target with the company's November guidance of sales at the lower end of a SEK53 billion to SEK63 billion range. Analysts expected sales of SEK53.62 billion.

Its operating margin was 14%, on par with its "mid-teen" guidance, but well down from last year's market-leading 22.5% in the fourth quarter 2006. Cash flow during the quarter was SEK12 billion compared with SEK11 billion in 2006, and SEK19.2 billion for the full year, compared with SEK18.5 billion for 2006.

Ericsson shares closed Thursday at SEK14.30.

-By Adam Ewing, Dow Jones Newswires; +46 8 545 130 95; adam.ewing@dowjones.com

(END) Dow Jones Newswires

Posted to the site on 1st February 2008