STOCKHOLM, Sweden-LM Ericsson released somber second-quarter earnings that highlighted the company’s intense need for cash and further reductions in expenses.
The terms of a $3.25 billion rights offering first announced in April exemplified the seriousness of Ericsson’s cash crunch. The company said it is selling stock to several investment banks and major shareholders at a price of 41 cents per share-approximately 74 percent less than the value of the company’s stock at closing last Thursday.
The announcement sent Ericsson’s stock price down about 20 percent in morning trading.
Ericsson reported sales for the second quarter ended June 29 of $4.18 billion, a 31-percent decrease from the $6.02 billion in sales reported for second-quarter 2001.
The company improved its losses from the same period last year however, revealing a net loss of $379 million, or 4 cents per share, compared with a loss of $1.53 billion, or 20 cents per share, for the second quarter of 2001.
Mobile network infrastructure sales declined 32 percent compared with the second quarter last year. Ericsson said sales in the GSM/W-CDMA track declined 13 percent.
Joint venture Sony Ericsson Mobile Communications’ sales totaled $953.5 million on about 5 million phones for the quarter, but the unit still experienced a loss of $86.7 million due to lower volumes, some product delays and increased marketing costs from the introduction of new products and branding activities, Ericsson said.
“We will continue reducing costs until we can break even at sales levels around SEK 120 billion ($13 billion),” said Kurt Hellstrom, chief executive officer of Ericsson. “By the end of next year, we believe we will have a low enough cost base to return to profit. Our strategy is to focus on the two main systems tracks-GSM/W-CDMA and CDMA/cdma2000-and the promising market for services.”
Hellstrom also revised the company’s infrastructure sales expectations for the year. He said Ericsson now thinks the market will decline by more than 15 percent, rather than 10 percent, as was previously stated.
