Ericsson's quarterly profits plummet

With the mobile phone market taking a major hit in the wake of the economic crisis, Swedish telecom giant Ericsson reported an almost 60 percent drop in second-quarter net profits, coming in well below market expectations.

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The new figures come the day after the company announced its intention to bid on the wireless unit of Canadian group Nortel, currently under bankruptcy protection from creditors.

Ericsson achieved net profits of 831 million kroner ($110 million), down 57 percent on the same period in 2008 and nearly twice as bad as consensus forecasts.

According to one round-up of analyst predictions, they had been looking at profits of 1.58 billion kronor.

"The effects of the global economic climate on the mobile infrastructure market are now more notable, especially in markets with currencies under pressure and tougher credit environment," said Ericsson president and chief executive Carl-Henric Svanberg in a statement.

Prior to the release of the second-quarter report, Ericsson announced on Thursday it would make a bid for the wireless unit of Canadian group Nortel, currently under bankruptcy protection from creditors.

Ericsson spokesman Frederik Hall told AFP that the auction would take place in New York on Friday.

"We will participate and then we'll see how far we will go," Hall said, declining to disclose the value of the Ericsson offer.

But Canadian daily The Globe and Mail, citing legal sources, said Ericsson on Tuesday had offered $730 million for Nortel's mobile phone equipment division.

Nortel, having been unable to restructure, decided in June to sell its principal units. The Canadian company also announced in June that it wanted to sell its wireless division to Nokia Siemens Networks for $650 million.

But a public auction is required to determine if the assets can fetch a higher price before the bankruptcy court will agree to the sale.

The Globe and Mail has also reported a private US investment firm, MallinPatterson Global Advisers, a major Nortel creditor, had proposed $725 million for the wireless division.

Despite the profit drop, Ericsson's CEO did his best to view the results in a positive light.

"There is a lot of uncertainty in the world and bearing that in mind we had pretty good results," Svanberg told the TT news agency.

But the market was less kind, as Ericsson shares fell by 5.2 percent to 73.50 kronor at the opening of Friday morning trading on the Stockholm stock exchange.