Ericsson Pulls Plug On Handset
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Swedish mobile developer Ericsson announced today that it is abandoning its handset manufacturing arm, after posting fourth quarter pre-tax profits that fell below expectations, slumping by #284 million (4 billion Kronor).
The company said that it is to outsource its mobile handset manufacturing business, and instead concentrate on the networking sector, where it is already steaming ahead in building a third-generation infrastructure. The handset manufacturing process will be transferred to the world's third largest electronics manufacturer, Flextronics International.
Previously, Ericsson had been the third largest handset producer in the world but has been forced to cut its production owing to lack of demand, paving the way for Nokia and Motorola to gobble up market share.
Ericsson chief executive, Kurt Hellstrom, said that the company would only break even in the first quarter, predicting group sales to rise by 15% from strong growth in its mobile network business. "The results in our mobile phones business, while in line with expectations, remain unsatisfactory," said Hellstrom, "therefore we have decided to completely outsource supply and production of mobile phones". He added that the decision had been taken to cut handset production over a "more uncertain economic environment and a more cautious capital market".