L.M. Ericsson of Sweden, a leading producer of mobile phones and other telecommunications equipment, said its profit will be 15% to 20% below analysts' estimates for the fourth quarter because of weak demand for its fixed-line switches and mobile phones.
The company may slash 10,000 jobs in January, in addition to the 20,000 it's in the process of cutting, to improve profitability, Chief Executive Sven-Christer Nilsson said. Ericsson employs more than 100,000 people.
The announcement marks the third time this year Ericsson has fallen short of expectations. The company's American depositary receipts fell $4.75 to close at $24.13 on the New York Stock Exchange.
Nilsson also said Ericsson won't reach its goal of boosting sales 20% next year. It had hoped to increase its 18% share of the world's mobile phone market and attract more clients by having just one division sell products for both fixed-line and cellular phones.
While Ericsson struggles, Finnish rival Nokia Oy has prospered. Bolstered by a range of new, sleek phones, Nokia expects to meet its sales growth target of 25% to 35%. It's already dethroned Motorola Inc. as the world's leading maker of cell phones.
"Nokia is better at marketing and design--all you have to do is look at their phones," said Johan Carlstroem, an analyst at Fischer Partners in Stockholm, who recommends buying Nokia shares and selling Ericsson.
Ericsson has said it will introduce new phones at the beginning of next year to battle Nokia. After that, it said, it plans to release a new generation of phones every year.