The world's number three for mobile phones, Ericsson, has said it will stop manufacturing handsets because of huge losses in its consumer products arm. The announcement came with the company's fourth-quarter results.
The demand for mobile phones is rapidly slowing as the world+dog now has one and chief exec Kurt Hellstroem has had investors on his back over the losses that the company is incurring because of handset building. Despite some demanding Ericsson pull out of the handset market altogether, Kurt had decided to keep his hand in, if only because knowledge of the workings of handsets is useful for the wider issues of phone networks - where Ericsson gets a good chunk of its money.
The company announced lower growth for 2001 than it previously expected (from 20+ per cent to 15 to 20 per cent), pulling down the share price. It also said profit margins would be lower. Q4 income fell to £160 million and an overall loss of £106 million. Shares fell by 13 per cent.
Kurt reckons that by not making phones and rejigging the consumer division he could save £1 billion a year. Their manufacture will now be outsourced to several companies and 11,000 job cuts are on the way. No one else in the market has stopped building its own phones but with 3G still looking like a distant dream, it may simply be paving the way. The company "still remains committed" to the phone business, you'll be pleased to hear.
Kurt, however is not a happy man. He admitted that the results were poor but put the blame at the door of its suppliers: "The losses are caused by delivery failure from key suppliers and an inadequate product mix in the entry-level market. The delivery failures have led to loss of large sales volumes and serious under-utilisation of production capacity, which has forced us into costly restructuring measures." So there you have it. ®