×

UPDATE 2-Ericsson pushes back margin target, shares fall

* Shifts operating margin target back to after 2020

* Blames currency moves, weaker than expected demand

* Shares fall more than 3 percent (Adds comments, detail, updates share price)

STOCKHOLM, Nov 8 (Reuters) - Mobile network equipment maker Ericsson has pushed back its profit margin target by two years, dampening hopes of a quick recovery in its fortunes despite sweeping cost cuts.

Shares in the Swedish company fell more than 3 percent on Wednesday after it said it did not expect to reach its operating margin target of 12 percent until after 2020.

It blamed a stronger Swedish crown against the U.S. dollar and weaker demand for its equipment as it scrapped a target it reiterated less than three weeks ago - although investors had doubted it would hit the previous deadline of after 2018.

"The reason is forex ... The next is we see the end market weaker than we thought at the time," Chief Executive Borje Ekholm told investors at a capital markets day in New York.

Once the world's biggest maker of mobile network equipment, Ericsson has been hit by competition from China's Huawei and Finland's Nokia as well as falling spending by telecoms operators, with demand for next-generation 5G technology still years away.

The company has said it plans to cut costs by at least 10 billion crowns from the middle of next year, turn around its managed services business and carry out a strategic review of its loss-making media assets.

Ericsson said it was now aiming for an operating margin excluding restructuring costs of at least 10 percent by 2020, with Ekholm saying it preferred to be cautious rather than bank on its turnaround efforts being successful across the board.

But Redeye analyst Greger Johansson said a new gross margin target of 37-39 percent by 2020 was still above market expectations. It compares with 30 percent in the company's third-quarter results.

Those results, published in October, marked Ericsson's fourth consecutive money-losing quarter.

Ericsson also said on Wednesday it was targeting sales of 190-200 billion crowns ($22.6-$23.8 billion) by 2020.

"Our job and commitment is to rebuild Ericsson to be successful long-term," Ekholm said. "Near term we will prioritize profitability over growth."

Ericsson's shares, which are roughly flat so far this year and down by nearly 40 percent in the past two years, closed 3.3 percent lower at 52.75 crowns.

($1 = 8.3962 Swedish crowns) (Reporting by Olof Swahnberg and Helena Soderpalm; Editing by Edmund Blair and Mark Potter)