(Bloomberg) — Ericsson AB shares fell to the lowest in six years after it said market weakness will persist into the fourth quarter and beyond, as the company struggles to counter reduced investment in fifth-generation mobile infrastructure from US and European operators.
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“We expect the underlying uncertainty impacting our Mobile Networks business to persist into 2024,” the Swedish 5G-equipment maker said in a statement on its third quarter results on Tuesday.
Ericsson pre-announced the quarter’s earnings last week, reporting a 32 billion kronor ($2.9 billion) impairment of the enterprise-focused Vonage unit that it bought last year. The company on Tuesday forecast earnings before interest, taxes and amortization margin in the current quarter of around 10% and delayed its goal of reaching its target of 15% to 18% indefinitely.
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Shares fell as much as 9.5% to 48.82 kronor in Stockholm, the lowest since Oct. 19, 2017.
Ericsson previously forecast the mobile networks market would recover toward the end of the year and said that it was focused on boosting EBITA the low end of its target next year. It now says it aims to reach that level “as soon as possible.”
“We have decided not to guide for 2024 because the timing of this recovery, although we are convinced, confident that it will come,” Chief Financial Officer Carl Mellander said in a phone interview.
The company has struggled to adjust as operators in the US and the European Union look to reduce capital expenditures and adjust their inventories. After the second quarter, both Ericsson and Finnish competitor Nokia warned of weaker sales in North America.
Fourth quarter guidance is below expectations and the delay of the medium term margin target suggests downside risk, according to Barclays analysts Simon Coles and Rohan Bahl.
“Ericsson says it is now planning for current market conditions to prevail into 2024 which we take to mean that the US recovery is not manifesting as quickly as previously hoped,” Coles and Bahl said in a note.
–With assistance from Jonas Ekblom.
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