Ericsson boss downbeat on phone upgrades

 

Demand for telecoms equipment may not improve next year, the chief executive of loss-making Swedish telecoms equipment maker Ericsson, Mr Kurt Hellstrom, has said.

"We don't think the market has become worse, but the downturn has been prolonged. We have to face the possibility that next year doesn't turn upwards," Mr Hellstrom told the Financial Times.

Ericsson, the world's biggest producer of mobile networks, made its first annual loss in 2001 and has said it would not return to the black until sometime in 2003.

Mr Hellstrom, who is also the chairman of the Sony Ericsson mobile joint venture, said a sluggish replacement market was likely to keep global mobile phone sales at little more than 400 million units this year against 390 million last year.

The forecast is in the lower end of Ericsson's April estimate of between 400 and 420 million. It said then that sales this year would be driven mainly by replacement of old handsets.

Sony Ericsson's market share has fallen to 6.4 per cent in the first quarter, according to research by Gartner Dataquest, taking fifth place after market leader Nokia, Motorola, Samsung and Siemens.

"The phones today are so attractive and so small that you don't feel the urge to upgrade all the time," Mr Hellstrom was quoted as saying.

Mr Hellstrom's remarks come a day before shareholders of the company will vote at an extraordinary shareholders' meeting to approve a $3.1-billion rights issue to help the company through the industry's downturn.

To cut costs, Ericsson has announced 42,000 job reductions, or 40 per cent of the workforce over three years, is slimming down its product portfolio and has joined forces with Japan's Sony Corp in mobile handset production.