Ericsson Reports Q3 Sales Climb, But Loss Mounts

By Jeff Malester On Nov 6 2000 - 8:00am

STOCKHOLM, SWEDEN -Despite a 47 percent hike in its consumer product segment sales-to $1.4 billion in the third quarter, compared to $970 million in the same three months last year-Ericsson said component shortages drove its consumer products segment operating loss up to $410 million, compared to a $62 million loss in the same quarter last year.

Ericsson said it sold 10.8 million phones in the three months, an increase of 52 percent.

Because of augmented losses despite increasing sales, Ericsson-the world's third-largest producer of wireless phones-said it is relocating mobile phone production from U.S. and Swedish facilities to low-cost manufacturing sites in Asia, Eastern Europe and Latin America.

By outsourcing production of entry-level mobile phones to areas such as Taiwan, the company said it will free up development for its mobile Internet infrastructure.

Ericsson expects a loss of about $1.6 billion for the full year in its consumer products segment. This outlook assumes a $1.1 billion loss in the fourth quarter. The company also expects a weakening of the mobile phone replacement market, particularly in Europe, as well as increased price competition.

For the nine months, the consumer products segment increased sales by 43 percent to $4.3 billion, compared to $3 billion in the same three months last year. The segment reported a loss of $593 million for the nine months, compared to $68 million in the same nine months in 1999.

North America again showed a strong sales growth in the third quarter, increasing sales by 36 percent to $840 million, a 36 percent jump compared to the $620 million recorded in the same three months last year.

Overall sales in Ericsson's third quarter increased 37 percent to $6.7 billion, compared to $4.9 billion in third-quarter 1999. The company attributed this gain to continued strong growth in mobile systems.

Operating income for the quarter climbed 50 percent to $550 million, compared to $360 million in the same three months in 1999.

For the nine months, sales jumped 35 percent to $19.2 billion, compared to $14.2 billion for the year-ago period. Operating income soared 205 percent to $2.4 billion, compared to $790 million in the same period last year.