Ericsson results disappoint but share price rises
Plus chairman to leave and probe into results leak
Ericsson released disappointing results late last night after a leak to the press but then saw a surprising nine per cent rise in its share price as the market reacted favourably to a positive cash flow and the news that chairman Lars Ramqvist was to step down. The markets have since lost their peculiar enthusiasm and the share price has dropped to two per cent higher.
The mobile manufacturer made a loss of Skr5.8 billion (£384 million) in its third quarter - greater than analysts' expectations - and warned that demand for mobiles may fall 10 per cent next year. That would normally be cause for a share slump, but the company pleased many by reaching its goal of achieving positive cash flow of £80 million and ruling out fears of a new share issue.
It also said that fourth quarter losses would be lower, giving many room for hope. And then of course the news that Lars Ramqvist was to step down as chairman. In a bit of a rerun of what happened at BT, both chairman and CEO (Kurt Hellstrom) have been under heavy pressure for most of this year over poor results - but the CEO has won out.
In August, the board reshuffled and a new COO, Per-Arne Sandstrom, was put in. The word on the street was that Per-Arne had been brought in to take some of the flack away from Hellstrom and if that was the intention, it seems to have worked.
Lars himself used to be CEO of Ericcson (taking over from Sven-Christer Nilsson in July 1999). He's been a part of the management for 22 years and was given a dignified exit: "Lars Ramqvist has advised the nomination committee that he will not be available for re-election as Director of the Board following the Annual General Meeting of Shareholders in March 2002." He'll also be given the title Honorary Chairman when he leaves.
"I have had the great privilege and joy to contribute to developing Ericsson to a world-leading company and the leading supplier of mobile systems," he said. He'll be replaced by the current CEO of Electrolux, Michael Treschow (formerly of Atlas Copco, Bahco).
Hellstrom also said it was ahead with its cost savings plan. "With this momentum, our objective is to achieve over 5 per cent operating margin for the full year 2002," he said.
Ericsson's mobile arm made a loss of £278 million with sales down 42 per cent. This ties in with what other mobile manfacturers have said. Ericsson is hoping to bite into this with the new industry model of licensing out their technology. In the last month it has announced it will merge its mobile business with Sony and has also set up a new 3G company called Ericsson Mobile Platforms.
As for the results leak, the company has launched an investigation to find out who had handed it over to a newswire. A report in the afternoon caused the company to have urgent talks with the Stock Exchange and release its figures early. ®