Ericsson Hits Breakeven

Network vendor's restructuring on track after bankruptcy fears

August 15, 2003

2 Min Read
Ericsson Hits Breakeven

The head of network infrastructure vendor LM Ericsson (Nasdaq: ERICY) claims the company has at last reached breakeven following eleven straight quarterly losses that pushed it to the verge of bankruptcy.

“We have promised the market to show earnings in the black some time this year. In principle we are already there,” CEO Carl-Henric Svanberg told Swedish website Ostgota Correspondenten [ed. note: Unstrung gota correspondenten, too!]. “Right now we are around breakeven, and we will be profitable before the end of the year for sure.”

Ericsson spokeswoman My Spangenberg [ed. note: so get your own Spangenberg!] confirms the reports. “The latest quarter results was a good one so the indication is that this is the case,” she tells Unstrung.

Last month the company reported a respectable cut in pretax losses to SEK200 million (US$24.2 million) for the second quarter of 2003, compared with a year ago loss of SEK3.1 billion ($375 million) (see Ericsson Bets on the Black).

The company has cut operating expenses by more than a half over the previous eight quarters, from SEK88 billion ($10.7 billion) in 2001’s first quarter to SEK42 billion ($5.1 billion). Headcount has also been slashed by over 50 percent: 47,000 staff will make up the payroll by next year, down from 105,000 three years ago.

“I don’t think everyone quite understands how near the end was,” reveals Svandberg. “The risk of bankruptcy was very evident. But we have overcome the financial crisis, and that risk no longer exists.”

Analysts have been surprised at the strength of the vendor’s turnaround, and predict the company will hit profitability targets by the end of this year. In a research note this week, Dresdner Kleinwort Wasserstein reiterated its Buy rating on Ericsson, noting that the company is likely to register “significant earnings expansion” in the near term.

— Justin Springham, Senior Editor, Europe, Unstrung

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