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Ericsson Stock Plunges After Earnings Fall Short

Jan. 27, 2016
Shares slid 6.3% after the results failed to meet analysts' forecasts against a backdrop of emerging markets' weakness.

STOCKHOLM, Sweden—Swedish telecoms giant Ericsson on Wednesday saw higher licensing revenues and lower expenses underpin a strong rise in fourth-quarter net profit, but its stock plunged after the showing fell short of analysts' expectations.

In November, Ericsson cut its forecast for global market growth in the sector over the next few years, expecting annual worldwide growth in telecom equipment to average an annual one to three percent between 2014 and 2018, down on its two to four percent forecast for 2013-2017.

Fourth-quarter net profit was up 67% to 7.06 billion kronor ($830 million), equivalent to more than half net annual profits, which rose 17% to 13.67 billion kronor as annual sales advanced eight percent to 246.9 billion kronor.

Sales in the final quarter of 2015 came in at 73.6 billion kronor ($8.7 billion).

But while the company proposed a 9% rise in dividends, the news could not shore up its showing on the market as its shares slid 6.3% after the results failed to meet analysts' forecasts against a backdrop of emerging markets weakness.

While noting the market remains "challenging," chief executive Hans Vestberg saw activity holding up overall, notably in China after what he termed a weak third quarter as more markets upgrade to 4G connectivity, with 5G looming ever closer.

But he conceded "a need for further improvements" to retain overall competitiveness.

Ericsson added that its operating margin after restructuring costs rose 2.9 points in 2015 to 10.9% and that a rise in revenue from intellectual property licenses and a fall in network operation cost had been a major factor in boosting profitability.

Copyright Agence France-Presse, 2016

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