Mergers Can't Keep Telecom From Free Fall

As multiple companies post losses, problems spread across sector
By Jason Farago,  Newser Staff
Posted Oct 23, 2007 11:50 AM CDT
Ericsson's Chief Executive Carl-Henric Svanberg during the third-quarter result presentation in Stockholm, Tuesday Oct. 16, 2007. Shares in LM Ericsson plunged more than 25 percent Tuesday after the wireless...   (Associated Press)
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(Newser) – This quarter was supposed to see the start of a fightback for the beleaguered telecommunications industry. But the bad news keeps coming: Ericsson has warned investors to prepare for a sharp drop in profits, Nokia is still losing money and firing thousands of workers, and Alcatel-Lucent is already seeking a new business plan after its recent merger.

For the telecom industry, says BusinessWeek, the problems go deep, and solutions aren't forthcoming. A recent string of consolidations was supposed to stave off losses in a sector where customers are spending less and competition with China is driving down profits. But bad news continues piling up, and analysts think the malaise is far bigger than they'd thought: "This is not a company, but a market problem here," one said.