Profit warning and poor forecast from Ericsson

Slowdown in US and Europe means more gloom for the mobile sector

Swedish telecoms equipment maker Ericsson joined rival Motorola in issuing a profit warning Monday, as it announced it was expecting to make a loss for the first quarter of this year.

Ericsson warned investors that it was expecting a pre-tax loss of between 4bn Swedish kroner (£277m) and 5bn Swedish kroner for the first three months of 2001, and that year-on-year sales would fall compared to 2000. This contradicted a statement from the company in December when it had claimed that, with the exception of its mobile handsets division, all units would see an increase in sales in Q1 2001.

It blamed Monday's announcement on increased uncertainty within the IT sector. "Customers, in the US in particular, are postponing their capital expenditure. Also in Western Europe, operators in markets with already high penetration are delaying their investments," the company said in a statement.

Ericsson now expects to make "considerably" less money from mobile phone sales in the first quarter of this year than it did in the same period last year. Ericsson's handset sales division made a loss of over £1bn last year, forcing the company to announce in January that it was putting its mobile phone manufacturing division up for sale.

Last month, Motorola announced that disappointing handset sales, caused in part by an economic downturn in America, could mean that the company would record a loss in Q1 2001.

Market leader Nokia declined to comment last week on rumours that it was about to issue a profit warning of its own.

Government figures released last week showed that the manufacturing output from mobile phone makers was down around 5 percent in January compared to December, indicating a post-Christmas slump in the market.

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