Ericsson Q1 Phone Sales Drop 52%

STOCKHOLM, SWEDEN — Mobile network producer and No. 3 handset supplier Ericsson reported higher-than-anticipated losses in its mobile phone business during the first quarter.

Phone sales were down 52 percent to $710 million, resulting in a phone-segment operating loss of $560 million for the three months ended March 31.

Phone unit shipments dropped 41 percent in the first quarter, down to 6.2 million units from 10.5 million. Sales to North America, including phones, dropped 16 percent to $704 million.

Commenting on reports of potential consolidation of its mobile handset business with Sony's mobile operation, Ericsson said the two companies planned a 50-50 joint venture beginning Oct. 1 to research, design, develop, market and sell handsets. (See story on p. 8.)

Faced with phone oversupply and slower growth during the first three months of the year, Ericsson announced a reduction of 2,000 phone workers, as well as 10,000 others throughout the company.

Ericsson said the growth of mobile phones is continuing at a slower pace, with growth worldwide expected to be up 5 percent to 15 percent in 2001, down from 20 percent to 25 percent last year.

Long term, Ericsson remains optimistic about phones, pointing to moderate unit growth, or 430 million to 480 million phones in 2001, accompanied by 10 percent to 20 percent industrywide price erosion.

For the second quarter, Ericsson expects lower phone sales, compared with the second quarter of last year.

The current market situation prevents the company from making a full-year forecast.

Overall sales at Ericsson dropped 5 percent to $5.5 billion in the first quarter, compared with $5.8 billion in the same period last year.

The company reported a pretax loss of $480 million, adjusted for a $540 million capital gain.

The loss was less than market expectations, which predicted a $490 million loss in the three months.