(Bloomberg) — Ericsson AB’s shares plummeted the most in 18 months after the Swedish mobile equipment provider reported weak sales in Asia and losses in non-core units.
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The selloff was triggered by losses piling up in its enterprise and media businesses, coupled with a significant drop off in sales following India’s rapid 5G roll-out. Investors may also be taking profits given the stock’s significant rise over the last year.
Adjusted earnings before interest and taxes were 9.8 billion Swedish kronor ($894 million) in the fourth quarter, up 33% from a year earlier, the Stockholm-based company said in a statement on Friday. That compared to an average of 10.3 billion kronor forecast by analysts surveyed by Bloomberg. Adjusted operating margin was 13.4%, compared to an average estimate of 14.03%.
Ericsson shares fell as much as 10%, the biggest intraday drop since July 2023, and were down 9.3% to 88.58 kronor at 12:30 p.m. in Stockholm.
Ericsson and its Nordic competitor Nokia Oyj, which reports results next week, are contending with a weak market for telecom equipment that has lasted for years as many operators delay expensive network upgrades. It has responded with cost-cutting measures and a pivot to markets such as the US and India. The moves have been welcomed by investors, with shares rallying 47% in the last year even after Friday’s selloff.
While revenue rose slightly in Ericsson’s core network business last quarter, earnings were dragged down by its enterprise segment, losses in its media businesses, and a one-time impairment in its Ericsson Ventures unit.
Activist investor Cevian Capital AB, which holds 4.9% of Ericsson’s Class B shares, said over 60 billion kronor in losses at its enterprise business in the past two years was “unacceptable.”
“The pace of improvement work must be increased,” Managing Partner Christer Gardell said in an emailed statement.
Chief Executive Officer Börje Ekholm said he is increasingly confident in the outlook for Ericsson’s core business.
“The overall market continued to be quite challenging,” Ekholm told investors on Friday. “However, today we’re starting to see some very positive indications, and we have further reasons to believe that the overall market is starting to stabilize.”
