Ericsson’s shares plunges more than 25 percent after 3Q profit warning

Shares in Sweden's LM Ericsson plunged more than 25 percent Tuesday after the wireless networks maker warned that third-quarter sales, operating income and cash flow would be lower-than-expected.

Photo: Ericsson’s shares plunges more than 25 percent after 3Q profit warning

Ericsson said sales would come in at 43.5 billion kronor (EUR4.78 billion; US$6.8 billion), and operating income would reach 5.6 billion kronor (EUR615 million; US$875 million) while it said it would report a 1.6 billion loss (EUR175 million; US$248.96 million) in cash flow.

The figures were below its own, as well as the markets estimates, it said, and blamed it on mainly lower-than-hoped sales in mobile network upgrades and expansions.

Ericsson's Chief Executive said this had resulted in an unfavorable business mix, also hurting the company's margins.

"All other businesses performed as expected. The effect of market dynamics is always a matter of judgment. This quarter we have underestimated the effects," Svanberg said.

Shares fell more than 25 percent to 19.74 (EUR2.17; US$3.09) kronor each in Stockholm.