Shares in Ericsson plunged more than 17% in Stockholm after a third-quarter profit warning extended a litany of woes at the telecom equipment company.
Ericsson shares were recently down 51.25 Swedish kronor, while European networking gear peer Nokia (NOK - Get Report) fell 7% in sympathy in Helsinki, after the Swedish company said third-quarter earnings would come in well below expectations.
The company missed second-quarter earnings estimates and has posted declining quarterly earnings for most of the past two years when stripping out currency benefits. On Wednesday it blamed weaker demand for mobile broadband products, among other "negative trends," for its predicament.
These have "have further accelerated" from the first half, said Ericsson, which noted that third-quarter revenue had slipped by 14% year-on-year to 51.1 billion Swedish kronor ($5.8 billion), driven by a 19% decline in its segment networks business.
Ericsson earlier this month announced it would cut 3,000 jobs and another 900 consultants as it stepped up an April restructuring program initiated by the-then CEO Hans Vestberg. Vestberg was ousted in July after seven years at the helm after shareholders including Investor and Industrivaerden pushed for change.
"Continued progress in our cost reduction programs did not offset the lower sales and gross margin," said president and CEO Jan Frykhammar in a statement. "More in-depth analysis remains to be done but current trends are expected to continue short-term. We will continue to drive the ongoing cost program and implement further reductions in cost of sales to meet the lower sales volumes."
Ericsson said its third-quarter gross margin shrunk to 28% from 34%, while it made an operating profit of Skr300 million, down from Skr5.1 billion a year earlier, after restructuring charges of Skr1.3 billion.
The company is targeting Skr9 billion in cost cuts in 2017 and said in July it will seek extra savings to cut run-rate operating expenses to Skr53 billion in the second half of next year, compared with Skr63 billion in 2014.
Other telecom equipment suppliers , including Nokia, Ericsson partner Cisco (CSCO - Get Report) and Juniper Networks (JNPR - Get Report) , have also faced challenges in expanding their revenue from sales to wireless services operators.
TheStreet's Eric Jhonsa recently suggested the Swedish group might seek a major acquisition to reduce its dependence on mobile infrastructure products and services.
In addition to its financial and operational pressures, Ericsson faces corruption investigations in jurisdictions including the U.S. and Greece.
Ericsson will publish full third-quarter results on Oct. 21, with Nokia t follow on Oct. 27.
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