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*Expects Q1 core earnings to be lower than last year*Expects to see effect of cost savings from Q2*Cost savings to include headcount reduction -CFO*Gross margin fell to 41.4% from 43.2%*Shares hit 2018 lowsSTOCKHOLM, Jan 20 (Reuters) - Ericsson on | |
Friday reported lower than expected fourth-quarter core earnings | |
as sales of 5G equipment slowed in high-margin markets such as | |
the United States, sending the Swedish company's shares to their | |
lowest since 2018.Ericsson is the latest tech company to show the impact of | |
customers tightening belts amid concerns about a global economic | |
slowdown. Others have been cutting staff, including Microsoft | |
and Google parent Alphabet which have | |
announced thousands of job cuts this week.Ericsson has already announced plans to cut costs by 9 | |
billion crowns by the end of 2023.Chief Financial Officer Carl Mellander told Reuters that | |
would involve reducing consultants, real estate and also | |
employee headcount."It's different from geography to geography, some are | |
starting now, and we'll take it unit by unit, considering the | |
labor laws of different countries," Mellander said, referring | |
to the cuts.He declined to say if the job cuts would be similar to 2017 | |
when Ericsson laid off thousands of employees and focused on | |
research to return the company to profitability.Ericsson's shares were down as much as 8% early on Friday | |
and were down 5.7% by 1206 GMT. They have fallen by about 40% | |
since February last year following a U.S. investigation into | |
potential payments by the company in Iraq.Last week, the company said it would book a 2.3 billion | |
Swedish crown ($220 million) provision for an expected fine from | |
U.S. authorities for breach of a settlement reached in 2019.U.S. IMPACTEricsson's net sales rose in the fourth quarter, but | |
margins, net income and core earnings fell.Its gross margin for the fourth quarter of 2022 fell to | |
41.4% from 43.2%.Ericsson said it expected a fall in margin in its Networks | |
business to persist through the first half of 2023 but the | |
effect of cost savings to emerge in the second quarter.JPMorgan analysts said given the fall in margins and higher | |
investments, they would expect 2023 earnings to decline by a | |
double digit percentage.Inge Heydorn, partner and fund manager at investment firm GP | |
Bullhound, said: "The fourth quarter shows once again that the | |
U.S. has a big impact on Ericsson's margins."With U.S. customers such as Verizon tightening their | |
purse strings, Ericsson is hoping newer markets such as India | |
can provide some growth.Its South East Asia, Oceania and India market was the only | |
one to grow in the quarter, rising 21%, accounting for 13% of | |
the company's business.The company's fourth-quarter adjusted operating earnings, | |
excluding restructuring charges, fell to 9.3 billion Swedish | |
crowns from 12.8 billion a year earlier.That was short of the 11.22 billion expected by analysts, | |
Refinitiv Eikon data showed.Net sales rose 21% to 86 billion crowns, beating estimates | |
of 84.2 billion.A settlement of a patent deal with Apple last month | |
resulted in revenue of 6 billion crowns, but Ericsson also took | |
4 billion crowns in charges, including a provision for a | |
potential fine from U.S. regulators and divestments.Ericsson said it expects significant patent revenue growth | |
over the coming 18-24 months.($1 = 10.3095 Swedish crowns)(Reporting by Supantha Mukherjee in Stockholm, editing by Terje | |
Solsvik and Jane Merriman) |