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ERICSSON to halt mobile phone production!

Shocking!


Ericsson pulls phone plug
Swedish mobile phone maker to quit handset production; cuts sales forecast
January 26, 2001: 9:33 a.m. ET


LONDON (CNNfn) - Ericsson, the world's leading maker of cellular networks, said it will quit mobile phone production and cut its sales growth forecast for 2001.

The third biggest handset maker made the announcement as it reported fourth quarter profit below expectations, dragged down by a 10.3 billion crowns ($1.1 billion) loss in its mobile phone unit.

The Stockholm-based company cut its forecast for sales growth in 2001 to between 15 and 20 percent, from an earlier estimate of over 20 percent, and said it would only break even in the first quarter.
Ericsson's handset unit "has been losing market share to Siemens, the fourth-largest handset maker, and Nokia," Jeremy Batstone, an analyst at Natwest Stockbrokers, told CNNfn. "Its performance has been diabolical."

The company said fourth-quarter net profit plunged 64 percent to 2.2 billion crowns, or 0.28 crowns per share, from 6.3 billion, or 0.78 crowns, in the same period in 1999.

Ericsson posted an operating loss of 1.5 billion crowns, compared with a gain of 8.7 billion crown in fourth quarter 1999. The loss excluded a one time 15.4 billion gain from the sale of its Juniper Networks and an 8 billion crown charge for pulling the plug on its phone making business. Analysts expectations varied widely from a much smaller loss to a profit of 1 billion crowns.

Ericsson said it will outsource handset production to Singapore-based electronic company Flextronics International, which will take over its plants in Brazil, Malaysia, Sweden, the U.K. and the U.S.

Ericsson shares sank 13 percent to 103 crowns in Stockholm afternoon trade.

Ericsson's woes rattled investors who are worried about how telecom equipment makers will manage huge costs and debts after pouring funds into high speed network development.

Analysts said they were disappointed Ericsson had not gone far enough in distancing itself from phone production because it will still control marketing, technology and design of handsets.

Ericsson chief executive Kurt Hellstrom told CNN the outsourcing was a good move and remained upbeat about the company's prospects, despite an uncertain economic outlook and more cautious market.

"A boom doesn't last forever and it doesn't go the other way for very long either," Hellstrom said.

"Next year we're likely to see continued deceleration in mobile systems revenue growth and a further decline in operating profitability due to increased spending associated with 3G. That's going to be a difficult environment for the stock," Jeffrey Schlesinger, analyst at UBS Warburg told CNNfn.com. 3G, or third generation, is a high speed network.



Comments

  • OH MY GOSH!!! That IS shocking!!! :eek:
  • Ice BurnIce Burn PEx Influencer ⭐⭐⭐
    Wag naman sana! I only use Ericsson phones and nothing else! How sad if this were to happen. I was waiting for their WCDMA phone coming out in 2002 pa naman. :(
  • It doesn't sound like the end of Ericsson-branded handsets. Note the sentence:

    Ericsson said it will outsource handset production to Singapore-based electronic company Flextronics International, which will take over its plants in Brazil, Malaysia, Sweden, the U.K. and the U.S.

    I take this to mean that Ericsson phones will continue to be sold, but the factories which make them won't be owned by Ericsson.



  • well...yeah...it's sad that this happened...you see my name?

    i'll never get a nokia phone ever. the thing with nokia is that everybody uses it and they think they're cool 'coz they have one but in fact, everybody has it and it's not cool at all. don't you just get annoyed when you hear the nokia sound for a message and everybody looks at their phone only to find out it wasn't theirs? heheheheehhe...

    if i've no more mobile phones from ericsson to choose from, i'll be going siemens. smart and unique, like ericsson.

    wheee!!! =)
  • CaRaMBaCaRaMBa Administrator PEx Moderator
    Hmmmmm what Lupus said makes sense. Seems that they will outsource.

    Anyway, Ericsson, I'm one of those people who use Nokia phones. I've been using my 6110 for almost two years already. Before that, I used a Bosch, and before that, a Motorola. I didn't buy my 6110 because I want to be "cool" or to be "in". I bought it because it looks nice, it works well, and it's affordable for me. I haven't replaced it because for me, there hasn't been a new phone that's worth it. For me, celphones are a necessity, not a luxury.

    Ericsson phones, for me, are too expensive, and well, they don't look nice, IMHO.
  • KuyaDannyKuyaDanny Moderator PEx Moderator
    And if there is any question about product or manufacturing quality, I'd like to point out that Flextronics already makes handsets for both Motorola and Siemens, which, BTW, has been the real pain in Ericsson's butt in the handset market these past two years.
  • NOOOOOOOOOOOOO! :mad:

    this is definitely bad news. no new models to look forward to. i guess i'm stuck with my ga628 and gf768 forever!
  • KuyaDannyKuyaDanny Moderator PEx Moderator
    But there will still be new models. Ericsson will stop making the phones themselves, but they will continue designing, developing, and selling phones, with the Ericsson brand name, but made in Flextronics factories.
  • There's an interesting article in today's issue of The Asian Wall Street Journal about a parts shortage crisis which precipitated into Ericsson's decision to stop handset production.

    Apparently, in March 2000, a fire broke out in an Albuquerque NM semiconductor fab plant operated by Philips, NV. This plant supplies RF chips used in cellphone handsets sold by, among others, Scandinavian telecom rivals Nokia and Ericsson. Because of the fire, a few weeks' worth of the RF chips became unavailable, threatening to cut into the handset sales (up to four million units at Nokia) of these two companies at a time when worldwide demand was booming.

    The article is a story of the two companies' vastly different reactions to the crisis. Ericsson was laid back, slow to react, and mostly in a state of denial. Because of previous cost-cutting efforts, they did not have any backup suppliers to count on, leaving the company vulnerable to parts shortages.

    Nokia, on the other hand, was more paranoid, and dispatched teams of managers around the world to work on the problem. Immediately, orders to backup suppliers were increased, and Nokia practically manhandled Philips executives to make sure all available semiconductor capacity was rerouted to meet Nokia's requirements (you can do that if you're a big enough customer). The result was that Nokia was able to meet its sales forecasts, and Ericsson was not.

    Other Nokia vs Ericsson trivia:

    Employees: Nokia 60,000; Ericsson 100,000
    Total Sales, year 2000: Nokia $27.7 billion; Ericsson $28.5 billion
    Sales of Network Equipment, year 2000: Nokia $7.0 billion; Ericsson $20.3 billion
    Sales of handsets, year 2000: Nokia 128 million units (about $19.3 billion); Ericsson 43.3 million (about $8.0 billion)
    Saunas at head office: Nokia 6; Ericsson 2
  • Paano yan? I just gave an Ericsson to my Dad as a gift! Paano ang after-sales service niyan?
  • KuyaDannyKuyaDanny Moderator PEx Moderator
    After sales service will be provided by Ericsson and their authorized distributors. This whole deal changes only the manufacturing of handsets.

  • Plase read the article well. Outsource simply means that Ericsson will have someone else take over the production of the Erriccson units. The same way that Nike does not make any of their goods themselves. They do not have a manufacturing side to their business. Nike simply outsources/subcontracts the production to factories in the Phils.,etc. No, this does not mean that Ericcson phones won't be available anymore.
  • Apparently, Motorola is taking this route too.
  • KuyaDannyKuyaDanny Moderator PEx Moderator
    Ericsson chairman Kurt Hellstroem told the German newspaper Frankfurter Allgemeine Zeitung that it expects to save US$1.37 billion by the end of next year through the outsourcing of handset production to Flextronics.
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