Ericsson Profit Warning Incurs Investor Wrath

The FT has reported that Ericsson’s shareholders are standing behind the company’s management for the time being, in spite of last week’s severe profit warning.

But investors lambasted the company’s inability to spot trouble on the horizon and communicate it to the market.

Ericsson, the world’s largest telecommunications equipment company, stunned the markets on Tuesday last week by warning that operating income would plummet to SKr5.6bn ($873m) in the third quarter, down 36 per cent in same period last year.

The warning was blamed on a shortfall of profitable contracts to expand or upgrade existing mobile phone networks, notably in the US and western Europe.

Carl-Henric Svanberg, Ericsson chief executive, said management only discovered the extent of the problem on Monday last week, partly because upgrade contracts are often secured at short notice.

Michael Treschow, Ericsson chairman, told the Financial Times that the board would “find out what happened and why we didn’t know, and when we have all the facts we will decide what we are going to do”.

He dismissed rumours of differences with Mr Svanberg, and said there was no pressure on the chief executive’s position. “We are confident he is the best person to fix it,” he added.

Investor, the holding company of the Wallenberg family, which owns 5 per cent of Ericsson but controls 20 per cent of the votes at annual meetings, described the profit warning as “serious” and said the failure to spot it was “not good enough”.