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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
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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.

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 networks maker warned that third-quarter sales, operating income and cash flow would be lower than expected.(AP Photo/Jonas Ekstromer)
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)
China Telecom chairman Wang Xiaochu speaks at the company's interim results press conference in Hong Kong on Tuesday, August 28, 2007. ( AP Photo/Lo Sai Hung )
China Telecom chairman Wang Xiaochu speaks at the company's interim results press conference in Hong Kong on Tuesday, August 28, 2007. ( AP Photo/Lo Sai Hung )   (Associated Press)
As several companies in the telecom field stutter, analysts are wondering if the problem is sector-wide.
As several companies in the telecom field stutter, analysts are wondering if the problem is sector-wide.   ((c) 4rank)
Ericsson Chief Executive Carl-Henric Svanberg, stands by during the presentation of the third-quarter financial results Tuesday Oct. 16, 2007, in Stockholm, Sweden. Svanberg said that a drop in sales in mobile network upgrades and expansions had resulted in an unfavorable business mix and hurt the company's margins. Shares in LM...
Ericsson Chief Executive Carl-Henric Svanberg, stands by during the presentation of the third-quarter financial results Tuesday Oct. 16, 2007, in Stockholm, Sweden. Svanberg said that a drop in sales...   (Associated Press)
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Ericsson's investors aren't happy
Financial Times (UK)

 
telecom industry • Nokia • Ericsson • Alcatel Lucent

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