Ericsson lowers Q1 guidance

Ericsson has added to the troubles of an already flailing stock market by lowering its guidance for its first fiscal quarter 2001.

The company expects sales for the quarter to be flat or somewhat lower compared to the first quarter of 2000, rather than originally projected increase of 15%. Income before tax is expected to be between negative $405 million and negative $506 million.

Ericsson President and CEO Kurt Hellstrom said the economic slowdown, particularly in the U.S., is the cause of the expected shortfall.

“We have seen over the last few weeks lower sales in almost all our operations. In mobile systems, we have increased sales but slower than anticipated,” he said. “We see customers, particularly in the U.S., postponing their capital expenditure…In mobile phones, we announced in January flat sales. We now see very low replacement demand, reduced operator subsidies and high inventory levels. Sales for phones, as far as we can see it now, will be considerably lower than in the first quarter last year.”

In response to the shortfall, Ericsson has implemented a hiring freeze in its largest division, mobile systems. The company is also restructuring its consumer products division and is considering further moves to lower costs and increase operating efficiencies.

The company’s stock had fallen almost 25%, to $6.3125, in late afternoon trading.