- Nokia shares down 9.6%, lowest since April 2021
- Ericsson shares down 8.7%
- Nokia Q2 sales 5.7 billion euros vs expected 6 billion
- Ericsson Q2 operating profit down 62%
Nokia's shares were down 9.6% in morning trade to their
lowest since April 2021, while Ericsson shares were down 8.7%.
Fears of an impending recession have forced telecoms
businesses to cut budgets and hold off on device upgrades and digitalisation
plans, slowing plans at firms such as Nokia and Ericsson to expand 5G networks
and broadband connections.
Consumers holding back on spending has also forced a number
of major telecoms firms to cut costs and lay off employees. In May, Vodafone
announced plans to cut 11,000 jobs globally, while BT said it would reduce
headcount by 55,000 by 2030.
"The companies thought that demand would pick up in the
second half of the year, particularly in North America, but it now looks
increasingly clear that it will be pushed to 2024," Kimmo Stenvall,
analyst at OP Markets, told Reuters.
In February, Ericsson announced plans to cut 8,500 employees
globally in order to reduce costs. On Friday the firm said the impact of such
cost-cutting activity would be "increasingly visible" in coming
quarters.
Nokia reported second-quarter sales of 5.7 billion euros
($6.4 billion), short of the 6 billion expected by analysts polled by
Refinitiv.
Nokia said it now expects 2023 sales of 23.2-24.6 billion
euros ($26.1-$27.6 billion), lowering a previous forecast of 24.6-26.2 billion
euros.
Weakness in Nokia's network infrastructure and mobile
networks businesses also prompted the company to narrow its comparable
operating margin range outlook to 11.5-13% from 11.5-14%.
Ericsson reported a 62% fall in second-quarter adjusted
operating profit, slightly above market expectations.
The decline was driven by a slowdown in spending among
operator clients, particularly in North America, though the company said this
was partially offset by growth in India.
The Swedish telecom equipment maker's operating profits,
excluding restructuring charges, fell to 2.8 billion Swedish crowns ($271
million) from 7.4 billion a year earlier.
Citing increasing demand for 5G, Ericsson CEO Börje Ekholm
predicted the market would undergo a "gradual recovery" in late 2023,
and improve in 2024.
Net sales rose 3% to 64.4 billion crowns and topped the 63.9
billion expected by analysts, Refinitiv Eikon data showed.
Ericsson's reported gross margin for the second quarter fell
to 37.4% from 38.6% the previous quarter.
Richard Webb, analyst at CSS Insight, said the company's
quarterly earnings were "Okay, but not stellar".
"It's a little lukewarm," said Webb, noting that
Ericsson’s business strategy may take until the end of the year to show
results.
"In a couple of quarters, we'll be in a better position
to judge how their strategy is working. I remain cautiously optimistic." -Reuters
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