Ericsson Profits Drop 71%

Ericsson posted a sharp decline in profits for the third quarter as the world's largest networking equipment maker was hit with sluggish sales and declining results from its joint venture with Sony.

The company posted earnings of about $118.2 million for the third quarter, a 71% drop from last year, and its sales slipped 5.6% compared to the same period last year. The global economic recession has taken its toll on companies that produce wireless networking gear, as Nortel Networks has collapsed and is selling off its assets, and Nokia took a $1.4 billion write-down of its networking venture with Siemens due to a grim business outlook.

Ericsson is also facing increased pressure from companies like Huawei and ZTE, which are looking to nab market share by offering lower-cost equipment. Ericsson CEO Carl-Henric Svanberg said the tougher market environments were bound to impact the company eventually, but it was able to keep network margins stable and its professional services division showed strong development.

"Over time, with the traffic increases that are in the networks, the markets will recover," Svanberg said.

The company's joint venture with Sony also had a negative impact on the bottom line, as Ericsson posted a loss of about $145 million on Sony Ericsson. The handset maker has posted five consecutive quarterly losses because it specializes in mid-market phones, and this sector has been hard hit with the current economic climate.

Sony Ericsson has not been able to compete well against devices like the iPhone or BlackBerry, but it is planning to introduce a portfolio of devices that could get it back to profitability in 2010.

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