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Ericsson's Decent Earnings Overshadowed by Uncertain Outlook

Ericsson

(ERICY)

reported decent earnings results this morning, but cut its sales and margins forecasts for full-year 2000, citing losses in its handset division.

Shares of Ericsson dropped sharply on the Stockholm exchange this morning. The stock also lost significant ground in preopen trading in the U.S.

The world's biggest maker of mobile networks and the third-largest provider of mobile phones reported a nine-month pretax profit of $2.39 billion, ahead of expectations for $2.26 billion. The company said its sales growth would be around 25% for this year, instead of the stronger-than-25% rate that was previously expected. The company blamed sluggish growth in its handset division and cited competition and component shortages for the weaker-than-expected growth.

Ericsson, in response, expects to move production in some plants from Sweden and the U.S. to lower-cost plants in Asia, Eastern Europe and Latin America.

The company cut its 2000 profit margins forecast to a range of 6% to 7% from earlier forecasts for 10% growth.

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