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October 23, 2009

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Ericsson's Q3 profit 71.5% below 2008

WIRELESS equipment maker LM Ericsson AB's profits dropped 71.5 percent in the third quarter as the global financial crisis hit demand for network equipment, the Swedish company said yesterday.

The world's leading supplier of broadband networks said net profit in the July-September period was 810 million kronor (US$117.6 million), down from 2.84 billion kronor in the same three months last year. Sales fell by 5.6 percent to 46.4 billion kronor, from 49.2 billion kronor in the third quarter of 2008.

Ericsson, which has previously seen only limited effects of the global recession, said the network market is now being hurt by the crisis. The downturn in investments has coincided with a drop in GSM sales, as telecommunication operators shift from voice telephony to mobile broadband, Ericsson said.

"Sales of network equipment declined due to lower demand in the current tougher market environment," outgoing Ericsson Chief Executive Carl-Henric Svanberg said. "The economic climate affects the global mobile infrastructure market and the credit environment is still tight in several emerging markets."

But he said economies such as those of China, India, the United States and Japan show good development and the long-term outlook for the industry remains solid.

Greger Johansson, an analyst at research firm Redeye, said the overall result was much worse than expected.

"It is primarily sales that are lower than expected," Johansson said.

"This shows the downturn in the economy is now affecting Ericsson as well, mainly in Europe, Africa and maybe Latin America."



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