Shares in the Swedish telecoms vendor Ericsson jumped 9.3 per cent to SEK 294 (GBP 21.82) when the US stock market opened today after the vendor posted better than expected third quarter results.
While its pre-tax profit of SEK 3,649 million (GBP 270.5 million) was down 19 per cent on the same period last year, on turnover which rose 14 per cent to SEK 49,265 million (GBP 3.653 billion), the market's reaction to the latest figures suggests that many believe Ericsson may have turned the corner in its restructuring exercise.
The results showed the vendor was still battling to keep its costs in check. Operating expenses have risen by 21 per cent in the last nine months and represented 33 per cent of sales in the third quarter.
Chairman Lars Ramqvist's report stated that, "although the rate of increase has been reduced some in the third quarter, the level of selling, general and administration expenses is still of great concern to us."
While Ericsson is best known for its industry leading mobile phone designs, the handset market is largely responsible for the company's lacklustre performance of late.
Ericsson's consumer products division reported a loss of SEK 415 million on sales which were down nine per cent to SEK 29,797 million on the same period last year and down six per cent on the preceding quarter.
The company blamed the loss on slower than expected production ramp-up of new products including the A1018, T10 and T18 for the TDMA standard.
"This has affected sales and profitability negatively, even though the customer demand for the new model is very strong," the company said in a statement.
Ericsson does not expect to have the production capacity to meet customer demand until the first quarter of next year, and warned that achieving its objective of double digit operating margins in the fourth quarter would be a "challenge to achieve."
Ericsson's enterprise solutions group also suffered a loss of SEK 289 million on sales of SEK 2052 million for the quarter, mainly due to wireless office development expenses.
Strong performance in the mobile systems group, where sales jumped by 23 per cent to SEK 99,208 million, helped to off-set poor results in the consumer and enterprise solutions divisions, the company claimed.
Late last year, a combination of falling sales and soaring costs forced Ericsson to announce a massive restructuring program aimed at saving 3.5 billion annually.
The company plans to trim its workforce, from 102,000 to 16,000 staff by the end of 2000, through a combination of outsourcing, redundancies and job rotations.
Restructuring charges were SEK 900 million in the latest quarter.
In contrast with Ericsson's operational woes, fellow Nordic vendor Nokia is going from strength to strength. Its third quarter figures, released yesterday, showed net profit up 38 per cent to Euro 638 million on turnover which jumped 49 per cent to Euro 5037 million.
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