Swedish equipment maker posts year-on-year sales decline; says previously announced risk to operating income will be at high end of estimate

Ericsson posted a gloomy set of third quarter financials on Friday, reporting a sales decline and widening losses in the three months to the end of September.

The Swedish equipment maker reported net sales of 47.8 billion kronor (€4.96 billion) in Q3, down by 6% on the year-ago quarter and a decline of 3% when adjusted for currency and comparison purposes.

It swung to an operating loss of SEK4.8 billion from a SEK0.3 billion profit, while its net loss widened to SEK4.3 billion from SEK0.2 billion.

"The general market conditions continue to be tough," said Borje Ekholm, Ericsson chief executive, in a statement accompanying the results.

Ekholm endeavoured to put a positive spin on the numbers, highlighting some "encouraging improvements," noting that the vendor’s networks business showed slight sales growth when adjusted for a "rescoped" managed services contract in North America and for currency effects. He also said that while the vendor is still suffering losses at its IT and cloud unit, it sees increased stability in product roadmaps and projects.

However, the vendor’s prospects look slightly bleaker than they did in Q2, which was also a difficult quarter.

When it presented its Q2 numbers Ericsson warned that further market and customer project adjustments could hit operating income to the tune of SEK3 billion-SEK5 billion over a year.

"With current visibility, we believe we will be in the higher end of the range of the risk estimate," Ekholm said, on Friday.

And its fourth quarter numbers will also likely be a difficult presentation for Ericsson.

The vendor predicts that the sequential sales increase between the third and fourth quarters will be lower than the 24% it normally experiences, "driven by decreased 4G investment levels in mainland China," which will primarily impact on its networks business, it said.