Ericsson sees more trouble ahead

Hellstrom hopes for profits in 2003

STOCKHOLM, Sweden (CNN) -- Ericsson posted on Friday its seventh consecutive quarterly loss and said sales of equipment to power mobile phone communications would continue to decline.

Its stock lost more than a fifth of its value after announcing details of a deeply discounted share sale to prop up its balance sheet. Ericsson also said it would save an additional 10 billion crowns ($1 billion) a year and cut another 5,000 jobs to help return to profitability.

The world's biggest producer of mobile phone networks made a second-quarter loss of 3.5 billion crowns ($379 million), or 0.34 crowns a share. That compares to a loss of 14.1 billion crowns, or 1.81 crowns a share, in the same period a year ago.

Analysts polled by Reuters had expected a loss for the three months to June 30 of 4 billion crowns.

Ericsson said it now expected sales of mobile systems to fall by more than 15 percent -- down from more than 10 percent forecast in April. Rival Motorola (MOT) expects sales of wireless infrastructure to drop 18 percent this year, while Nokia (NOK) sees the networks market down 10 percent.

MORE STORIES • Ericsson posts hefty loss  • Nokia warns of slower growth  • Ericsson to slash 20,000 jobs

It also predicted global sales of mobile phones would be "flat to down slightly" compared to last year's 390 million units, down from its previous industry sales estimate of 400 to 420 million this year.

Ericsson, which has slashed 42,000 jobs and joined forces with Japan's Sony to make mobile phones, made its first annual loss in 2001 and has said it would not return to the black until sometime in 2003.

Mobile phone makers and telecom equipment makers have been hit hard by stagnating sales of mobile phones. At the same time, telecom operators have slashed spending on wireless equipment as they manage their balance sheets after spending heavily on expansion and high-speed mobile phone licences.

"We continue to plan our expansion to return to profit at some point in 2003. In light of our lowered market expectations for this year, we have intensified the cost reductions that we started last year and are substantially ahead of schedule," Chief Executive Kurt Hellstrom said in a statement.

"We will continue reducing our costs until we can break even at sales levels around 120 billion crowns."

But the company's first-half sales fell 28 percent to 75.5 billion crowns. Ericsson's orders for mobile systems, which rose 11 percent quarter-on-quarter in the first three months of the year, tumbled 19.3 percent in the April-June period.

Second-quarter sales rose 4 percent from the previous quarter to 38.5 billion crowns, but analysts were expecting a figure of 40 billion crowns.

Its stock, which has lost two-thirds of its value this year, plunged 20 percent to 11.50 crowns in Stockholm on Friday.

To see it through the current period of weak demand, Ericsson plans to raise $3.2 billion through the sale of new stocks to shareholders. The new shares were priced on Friday at 3.8 crowns each, a discount of 74 percent.

Ericsson plans to repay 8 billion crowns of short-term debt and 14 billion crowns of long-term loans over the next six quarters.

"The subscription price is pretty low. Sales and order books look rather disappointing and handsets and infrastructure are definitely underperforming. The share price will probably collapse today,'' Thomas Langer, analyst at WestLB Panmure, told Reuters before the Stockholm market opened for trade on Friday.