Reasons [not] to be cheerful

30 April 2009 By Una Galani Follow @ugalani

The Swedish telecoms equipment maker sounds more positive than its rivals. But there s little reason. Operating cash flow is negative and Sony Ericsson, its lossmaking mobile joint venture, needs cash. Investors are right to be spooked by Ericsson s willingness to stump up.

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Ericsson on April 30 reported weak first quarter results and chief executive CarlHenric Svanberg reiterated the outlook remained difficult to predict.

The Swedish telecoms network maker's sales fell 26% to Skr49.6bn, compared to the previous quarter. Stripping out currency effects implies an underlying decline of 30%. Ericsson attributed the fall to losses at Sony Ericsson, its lossmaking mobile joint venture. Net income fell to SEK4.1bn, down 44% from the previous quarter.

Sony Ericsson reported a 40% sales decline in the last quarter. At the time, it said it expects global handset demand to shrink at least 5% in 2009.

Earlier this month, Nokia said the outlook for network infrastructure and services was bleaker than expected and forecast the market to shrink 10% in 2009, twice its previous forecast.

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