The world’s largest maker of telecoms infrastructure reported the largest ever loss in Swedish history, following four consecutive quarters in the red. The Sony joint venture is beginning to revitalize Ericsson’s handset business, but the network equipment market looks set for another weak year. Ericsson’s outlook for 2002 depends heavily on whether 3G takes off.
Ericsson has reported losses for Q4 and for the full year 2001.
Swedish telecoms equipment firm Ericsson has recorded an adjusted Q4 pre-tax loss of $486 million. Although revenues were 25% up on Q3, they were down by 15% compared to Q4 2000. The Sony Ericsson joint venture, formed in September, made a much smaller loss than was widely expected.
Ericsson is involved in 60% of all the 3G/UMTS network infrastructure agreements announced to date, which could give the company a 40% market share. This will leave Ericsson well placed to benefit as the new technologies are rolled out across the world – but its success here will depend on how quickly operators roll their solutions out. Many of the 3G deals are structured so that Ericsson doesn’t get paid until networks go live.
Total global mobile handset sales in 2001 were approximately 390 million, of which Ericsson and its joint venture partner Sony claimed just over 6%. This year, demand will be driven by new technologies, such as color screens and 3G handsets. These new phones will have to offer affordable benefits if they are to encourage consumers to replace their current phones. The venture will also have to match market leader Nokia’s branding expertise.
The global slowdown in the telecom sector made 2001 a difficult year for Ericsson. However, the company’s alliance with Sony and its position in infrastructure leave it in a strong position to capitalize on the opportunities offered by 3G.
The early part of 2002 is certain to remain gloomy. However, the sector could see an upturn if 3G networks launch by the end of the year. The company’s future success depends on keeping its market share in mobile infrastructure despite rivals’ attempts to move in, and on Sony Ericsson’s ability to live up to its promise.