Ericsson falls 11.4% on disappointing results

Swedish telecom equipment maker Ericsson was Europe's worst performing blue chip following poor results and the news that it would pull out of mobile phone production. It fell 11.4 per cent to SKr105.

Ericsson reported a sharper than expected fourth-quarter operating loss of SKr1.5 billion and downgraded its outlook for 2001, forecasting sales growth of 15-20 per cent, down from previous estimates of more than 20 per cent. Operating margins would also be lower than expected, at 6-8 per cent. The company said handset production would be outsourced to a range of existing and new partners, including Flextronics in the US and two Taiwanese companies, Arima and GVC. Ericsson supplier Elcoteq fell 55 per cent to €11.50.

Ericsson's results hit other companies with a stake in similar products. The German company Epcos, which makes mobile phone components, fell 5.1 per cent to 92.65. Alcatel, the French maker of telecom equipment fell 3.3 per cent to €61.90. Nokia was off 1 per cent at €40.25.

Other technology sectors were weak as the Nasdaq opened lower and US news from PMC-Sierra and others dampened sentiment.

Software companies had a bad day. On the Neuer Markt, US-based Broadvision fell more than 19 per cent to €13.57 as weaker than expected fourth-quarter earnings and a cautious outlook deterred investors already concerned about its product profile. Dassault Systemes fell 6.2 per cent to €70.80, with further pressure coming from the French government's announcement that it was planning to sell its 16 per cent stake.

Electronics companies were also lower. Siemens was off 3.7 per cent at €152.80 and Philips down 5.8 per cent to €40.04.

IT services company Cap Gemini Ernst & Young rose 6.5 per cent to €198 after hitting targets for operating margin and sales and predicting sales growth this year of 14 per cent.

Some of the big defensive plays swung back into the fast lane as investors took fright at the latest wave of profit warnings from technology companies. Foods giant Nestle rose 4.2 per cent to SFr3,490 and Danone added 2 per cent at €152.50 ahead of next Tuesday's results statement. Supermarkets group Carrefour gained 3.4 per cent to €64 in spite of negative comment from SG Securities. The broker reduced earnings estimates and cut its target price from €87 to €74.