Ericsson loses financial chief after profits plummet
25 October 2007
Ericsson loses financial chief after profits plummet
Ericsson's chief financial officer, Karl-Henrik Sundstrom, fell on his sword on Thursday, as the Swedish kit maker reported a 36 per cent drop in income for the third quarter.
The company sent shockwaves through the market last week after it cut its third quarter forecasts, following a shortfall in mobile network sales and upgrades.
Net income fell from SEK6.2bn in the third quarter of last year to SEK4bn, while revenues climbed 6 per cent to SEK43.5bn.
"The sharp decline in profit this quarter is mainly due to weaker sales of mobile network upgrades and expansions combined with continued high sales of new network buildouts," said Carl-Henric Svanberg, president and CEO of Ericsson.
Svanberg said that sales of lower margin network buildouts represent an increasing part of the networks business, which is negatively affecting group gross margin. Significant resources have also been redeployed from other parts of Ericsson to support the integration of US kit maker Redback, which Ericsson acquired last year.
Other units fared better. Sales in Professional Services grew by 26 per cent year on year, while sales growth for the Multimedia equipment division was 31 per cent year on year. Although joint venture Sony Ericsson also recorded a drop in profit earlier this month.
Hans Vestberg will replace Sundstrom as CFO, effective as of today. Vestberg is presently head of business unit Global Services and executive VP. He will remain in the position as head of Global Services until a successor has been appointed.
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