Ericsson cut its outlook for sales, operating income and cash flow to below analyst expectations, blaming slow sales across several regions.
JPMorgan Securities analyst Ehud A. Gelblum said sales in “China and/or Australia appear to be a large part of the problem,” since Ericsson said sales in the Asia-Pacific region grew 3 percent year-over-year, but would have been 17 percent higher without those two countries included.
“This suggests significant weakness in one or both of those regions and we believe that revenues for both China and Australia are high margin due to heavy upgrade activity,” Gelblum said. Meanwhile, North America was “slower to pick up than Ericsson had anticipated.”
While he expects problems in the Europe-Middle East-Africa region and North America “at least partially right themselves in 2008,” the analyst said “the Asia-Pacific weakness was unexpected and we await further detail to determine how to forecast 2008 impacts from that change.”
Ericsson shares plunged $10.39, or 25.4 percent, to $30.54 in premarket electronic trading, from their close at $40.93 Monday. That drop in the American Depositary receipts reflected a similar decline in shares traded in Europe.