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Swedish kit maker warns of up to SEK5 billion impact on full-year earnings due to weak market conditions.
Ericsson on Tuesday pledged to make further cost reductions and warned that it expects the mobile equipment market to contract more than expected this year.
The gloomy forecast was issued alongside a sorry set of financials that saw the Swedish kit maker swing to a second quarter net loss.
"We are not satisfied with our underlying performance with continued declining sales and increasing losses during the quarter," said Ericsson CEO Börje Ekholm, in a statement. "In light of current market conditions, we are accelerating the planned actions to reduce costs."
Ericsson aims to save at least 10 billion kronor (€1.05 billion) per year by mid-2018. Its previous cost-cutting programme targeted an annual saving of SEK9 billion by mid-2017.
The vendor is struggling amid a global slowdown in spending by mobile operators on large network rollouts. On Tuesday, Ericsson said it expects that slowdown to be even sharper this year than first thought.
Ericsson expects a high single-digit percentage decline in the global radio access network (RAN) equipment market this year, compared to its previous estimate of a contraction of 2%-6%.
The company also warned of an increased risk of further market and customer project adjustments that could hit full-year operating income to the tune of SEK3 billion-SEK5 billion.
"We continue to assess risk exposure in ongoing contracts," Ekholm said.
In terms of Ericsson’s Q2 financial performance, revenue fell 8% year-on-year to SEK49.9 billion. Its Networks division saw revenue fall to SEK36.8 billion from SEK40.2 billion, due mainly to weak sales in Europe, Latin America, the Middle East and Africa. Gross margin narrowed to 27.9% from 32.3% a year ago.
Lower sales and a narrower margin resulted in Ericsson swinging to an operating loss of SEK1.2 billion from a year earlier profit of SEK2.8 billion. Ericsson also swung to a SEK1 billion net loss from a SEK1.6 billion net profit in Q2 2016.
