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Ericsson cuts 2017 market forecast as Q2 earnings lag consensus

  • Mobile telecom equipment maker Ericsson reported a heavier than expected second-quarter loss
  • The company has slashed jobs and accelerated cost cuts while shares have lost roughly a third of their value in the past two years
Borje E. Ekholm, CEO Ericsson.
Brad Quick | CNBC
Borje E. Ekholm, CEO Ericsson.

Mobile telecom equipment maker Ericsson reported a heavier than expected second-quarter loss on Tuesday and lowered its mobile infrastructure market forecast, dealing a fresh blow to the Swedish firm as it tries to restore profitability.

The company has slashed jobs and accelerated cost cuts while shares have lost roughly a third of their value in the past two years, with some investors fearing plans rolled out by new CEO Borje Ekholm will not be enough to generate growth.

Ericsson is facing mounting competition from China's Huawei and Finland's Nokia as well as weak emerging markets and falling spending more broadly by telecoms operators with demand for next-generation 5G technology still years away.

The firm, which stunned investors earlier this year by announcing $1.7 billion in provisions, writedowns and restructuring costs, said it now sees the mobile infrastructure market falling by a high single-digit percentage this year, compared to its earlier guidance of a 2-6 percent decline.

"In light of the current market outlook, we will accelerate our actions to ensure that we can meet our target of doubling the 2016 operating margin beyond 2018," Ekholm, who took charge in January, said in a statement.

The firm said it was targeting cost cutting to achieve an annual run rate reduction of at least 10 billion crowns by mid-2018.

Operating loss in the second quarter was 1.2 billion Swedish crowns ($145.3 million), compared with a 2.8 billion profit a year earlier and a mean forecast for a 244 million crown loss seen in a Reuters poll of analysts.

Sales at Ericsson, one of the top global mobile networks equipment makers, were 49.9 billion crowns, below a consensus forecast of 50.5 billion, while the gross margin came in at 27.9 percent versus the 28.4 percent seen by analysts.

"Ericsson doesn't deliver, they lose versus the market and the market is weak," said Inge Heydorn, fund manager at Sentat Asset Management, which has no position in Ericsson shares.