Shares in Ericsson have dropped over 8 per cent in early trading after the group issued another damaging warning on the back of weak second quarter results when sales fell 8 per cent and its operating loss widened to Skr1.2bn ($150m).
The Swedish company said that the radio access network equipment market is now expected to decline this year by a “high single-digit percentage” compared to its previous estimate of a fall between 2 per cent and 6 per cent.
It also said that it sees an increased risk of further market and customer project “adjustments” that could hit operating profit by between Skr3bn and Skr5bn, 30 per cent of which would hit its cashflow.
Ericsson said it would accelerate its cost cutting plan immediately as a result with at least Skr10bn in annual savings to be achieved by mid-2018.
The latest warning is a blow to the company which appointed Börje Ekholm as chief executive at the beginning of the year and has been targeted by activist shareholder Cevian Capital.
Mr Ekholm has moved to rein in the company by exiting some markets, including a planned sale of its media arm based in West London, and reviewing its contracts with a view to doubling its margins. Some 42 contracts that had a value of Skr7bn last year are under review.
Mr Ekholm said:
In light of current market environment and company performance, we are accelerating actions to reduce costs.
Our focused business strategy is designed to take us back to technology and market leadership and improve company performance, also in a tough market.