Svanberg's honeymoon

18 July 2003

CarlHenric Svanberg has slashed costs and delivered an early breakeven. The markets have fallen in love with him. The Swedish telecom equipment maker s shares now discount a chunky profit margin. Is Svanberg up to the task?

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Ericsson shares rose by a fifth in early trade on Friday after the Swedish telecoms equipment maker said it almost broke even at the operating level in the second quarter.

The group lost SKr182m at the operating level, or only 0.7% of sales, excluding restructuring charges. On the same basis, the key mobile systems division reported an operating profit of 2% of sales.

Ericsson's gross margin – the money left over from revenue after subtracting the cost of goods sold – rose by one percentage point over the quarter to 35% of sales. That brings it within the target Ericsson set last year to be achieved in 2004.

The group, which has been slashing costs in a big restructuring, exited the quarter with an annual runrate in operating expenses of SKr42bn. That's down from SKr47bn in the first quarter. Ericsson's end2004 target level is SKr33bn.

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