InterDigital Inc (IDCC)

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Ericsson sales slump to continue



RELATED SYMBOLS: (ERICD)

Feb 04, 2003 (Datamonitor via COMTEX) -- Ericsson is clinging to the belief
that the worst of the worst of the market decline may be behind it but still
faces a further slump in sales this year. While sticking to his belief that the
market for wireless systems this year will be flat to down 10%, chief executive
Kurt Hellstrom said that "it looks right now it's more toward the lower end of
that range,"

"I have to underline that we do not yet see any visible kind of an industry
recovery," said Hellstrom. Like the other players in the market, Ericsson is
relying on cost-cutting to bring down its break even point and aims to return to
profit "at some point" in 2003. Hellstrom believes it will now be able to make
money on sales of SEK 120bn ($13.9bn).

In the fourth quarter to December 31, the net loss was SEK 8.3bn ($966.4m), up
from a loss of SEK 3.5bn ($407.5m) on revenue 37.3% down at SEK 36.7bn ($4.3bn).
For the year the loss was SEK 19bn ($2.2bn), down from a loss of SEK 21.3bn
($2.5bn) on revenue that fell 30.8% to SEK 145.8bn ($16.9bn).

While orders for the year dropped by 36% to SEK 128.4bn ($14.9bn), by the fourth
quarter the decline had slowed to a 23% decline to SEK 30.7bn ($3.6bn).

But the outlook ahead is daunting. Ericsson reckons that the mobile systems
market fell around 20% to $42bn in 2003 and sees a further 10% fall in 2003. It
believes it will maintain its share of the mobile systems market with an
increase in 3G sales partly offsetting lower sales of TDMA and PDC products.

While Ericsson believes that the historical correlation between operator capital
expenditure (CAPEX) and revenue growth will eventually resume, it predicts the
current level of lower CAPEX spending as a percentage of operator revenues will
most likely remain.

To provide a new source of revenue, Ericsson sees a large and growing
opportunity to provide services to network operators. Even when network rollout
services are excluded, it reckons that the available market in 2003 for
professional services will be worth more than $30bn with a compound growth rate
of more than 10%.

Last week Ericsson and its partner Sony Corp agreed to invest a total of 300m
euros ($324.6m) in their under-performing handset joint venture. The venture
lost $69.8m in the fourth quarter, down from $162.8m a year earlier and shipment
rose 42% to 7.1 million units as it increased its product portfolio.

Source: Computerwire


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SUBJECT CODE: LM Ericsson Telephone Co.

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