STOCKHOLM -- Telefon AB L.M. Ericsson slashed expectations for the first quarter, saying it now expects to post a loss amid a sharp downturn in orders for its telephone equipment.
The Swedish group on Monday said it expects sales for the quarter to be flat or somewhat lower compared with the first quarter of 2000, significantly worse than its previous estimate of a 15% net increase.
Ericsson also expects to post a first-quarter pretax loss of four billion kronor to five billion kronor ($410.2 million to $512.8 million), compared to a previous estimate of around break-even.
The news sent shares of Ericsson tumbling 17 kronor, or 21%, to close at 64.50 kronor Monday in Stockholm. Meanwhile, American depositary shares of Ericsson (ERICY) fell $2.09, or 25%, to $6.28 in 4 p.m. EST trading on the Nasdaq Stock Market.
The company said the economic slowdown has increased the uncertainty about the growth rate in the entire information-technology sector. It said U.S. customers in particular are postponing their capital expenditures, while in western Europe, operators are delaying investments.
Ericsson, currently the world's third-largest mobile handset maker, also expects sales of mobile phones to be considerably lower in the first quarter compared with a year earlier.
In addition to its ongoing comprehensive restructuring program in its consumer-products division, which includes mobile phones, and a hiring freeze in its mobile-systems business, the Swedish group said it will rapidly review "further measures to reduce costs and improve capital efficiency."
Ericsson said that in its first quarter report due April 20, it plans to give a revised outlook for the second quarter and the full year in accordance with its guidance policy.
Ericsson is the latest in a string of handset-makers to issue bad news for the current quarter. Paris-based Alcatel SA (ALA) last Friday said it expects its handset business to post a first-quarter loss as a result of declining sales. In February Motorola Inc. (MOT), the No. 2 handset maker, said it will fall short of previously lowered first-quarter sales and earnings forecasts amid weak orders for its wireless phones and equipment, and warned it could post a loss from operations unless conditions improve. And in late January Finland's Nokia Corp. (NOK), the global leader in mobile handsets, lowered its first-quarter sales estimates.
Ericsson recently has made a number of moves to shift its focus from its lagging handset business to its network-infrastructure business, which is growing at a faster clip than the overall market. Earlier this year, Ericsson announced plans to outsource nearly all of its handset manufacturing to Singapore-based Flextronics International Ltd. in an effort to control costs and combat growing losses in its consumer-products division.
But the outsourcing move doesn't resolve the company's handset unit's deeper problems. Ericsson has failed for years to bring to the market the right handset portfolio and has yet to design phones that cater to the latest fashion trends among consumers.
When it comes to infrastructure, Ericsson remains the undisputed market leader. In 2000, Ericsson saw network sales grow to 194.1 billion kronor, up 29% from the previous year; for the fourth quarter, Ericsson saw network sales of 61.4 billion kronor, up 21% from a year earlier.
The Swedish group on Monday said it expects sales for the quarter to be flat or somewhat lower compared with the first quarter of 2000, significantly worse than its previous estimate of a 15% net increase.
Ericsson also expects to post a first-quarter pretax loss of four billion kronor to five billion kronor ($410.2 million to $512.8 million), compared to a previous estimate of around break-even.
The news sent shares of Ericsson tumbling 17 kronor, or 21%, to close at 64.50 kronor Monday in Stockholm. Meanwhile, American depositary shares of Ericsson (ERICY) fell $2.09, or 25%, to $6.28 in 4 p.m. EST trading on the Nasdaq Stock Market.
The company said the economic slowdown has increased the uncertainty about the growth rate in the entire information-technology sector. It said U.S. customers in particular are postponing their capital expenditures, while in western Europe, operators are delaying investments.
Ericsson, currently the world's third-largest mobile handset maker, also expects sales of mobile phones to be considerably lower in the first quarter compared with a year earlier.
In addition to its ongoing comprehensive restructuring program in its consumer-products division, which includes mobile phones, and a hiring freeze in its mobile-systems business, the Swedish group said it will rapidly review "further measures to reduce costs and improve capital efficiency."
Ericsson said that in its first quarter report due April 20, it plans to give a revised outlook for the second quarter and the full year in accordance with its guidance policy.
Ericsson is the latest in a string of handset-makers to issue bad news for the current quarter. Paris-based Alcatel SA (ALA) last Friday said it expects its handset business to post a first-quarter loss as a result of declining sales. In February Motorola Inc. (MOT), the No. 2 handset maker, said it will fall short of previously lowered first-quarter sales and earnings forecasts amid weak orders for its wireless phones and equipment, and warned it could post a loss from operations unless conditions improve. And in late January Finland's Nokia Corp. (NOK), the global leader in mobile handsets, lowered its first-quarter sales estimates.
Ericsson recently has made a number of moves to shift its focus from its lagging handset business to its network-infrastructure business, which is growing at a faster clip than the overall market. Earlier this year, Ericsson announced plans to outsource nearly all of its handset manufacturing to Singapore-based Flextronics International Ltd. in an effort to control costs and combat growing losses in its consumer-products division.
But the outsourcing move doesn't resolve the company's handset unit's deeper problems. Ericsson has failed for years to bring to the market the right handset portfolio and has yet to design phones that cater to the latest fashion trends among consumers.
When it comes to infrastructure, Ericsson remains the undisputed market leader. In 2000, Ericsson saw network sales grow to 194.1 billion kronor, up 29% from the previous year; for the fourth quarter, Ericsson saw network sales of 61.4 billion kronor, up 21% from a year earlier.
