Ericsson's Growth Hits the Slowdown Wall

Ericsson (ERICY Quote) lived up to analysts' fears Friday over growth projections and missed revenue estimates in a miserable first quarter ended March 31. The mobile-equipment maker turned in a loss of 3 cents a share on revenue of $5.4 billion.

According to Multex.com, analysts had been expecting a 5 cent loss on $5.8 billion in revenue, after Ericsson warned on March 12 it would not meet its projected 15% growth in sales for a break-even quarter, but would instead fall into the red.

Due to what CEO Kurt Hellstrom called, "the most abrupt downturn we have ever seen in our industry," Ericsson's leading network-equipment segment stumbled. Network bookings and sales slowed to 8% and 9% growth, respectively. After years of 20% company growth, Hellstrom is bracing for network equipment growth of only 5% to 15% for the year as North American TDMA (time division multiple access) sales dry up. The company will lay off thousands of workers and cut consultants as part of a plan to bring costs down.

Ericsson again reduced its industry predictions for wireless handset sales in 2001 by 20 million to a range of 430 million to 480 million, following last month's 50-million unit downward revision. Ericsson is currently maneuvering to alleviate the drain of its handset business, in which orders and sales declined in the first quarter a monstrous 51% and 52%, respectively. Ericsson's unit shipments dropped off from 10.5 million to 6.2 million in the quarter, putting its share of the handset market at less than 10%. ...