Ericsson swings to $120.4m Q2 loss

Ericsson has revealed plans to accelerate its turnaround strategy after swinging to a 1 billion kronor ($120.4 million) loss in the second quarter.

Net sales for the quarter fell 8% to 49.9 billion kronor, or 13% adjusted for constant currency. Ericsson also reported a 1.2 billion operating loss, of a slim 300 million kronor profit excluding restructuring charges.

Ericsson’s operating margin fell to 10%, with networks operating margin reaching 7%, due to the rough economic environment for the telecoms sector. Ericsson warns it expects a high single digit percentage decline in the RAN equipment market for the full year.

“We are not satisfied with our underlying performance with continued declining sales and increasing losses in the quarter. Execution of our focused business strategy is gaining traction. However, in light of current market conditions, we are accelerating the planned actions to reduce costs,” Ericsson CEO Börje Ekholm said.

“The decline in the networks result in the quarter was mainly caused by lower software sales, driven by two key factors; unusually strong software sales in the second quarter last year and cautious mobile broadband investment levels.”

He said the vendor will continue to explore performance improvements in the segment by pursuing cost reductions and continuing the ramp-up of its Ericsson Radio System product. The company has also started to increase R&D investments in networks to safeguard its market position in the future.

Ericsson is considered a bellwether for the telecoms sector, so the results serve as something of an indication for the health of the equipment market.