Ericsson has warned a slowing Chinese market will hit the performance of the industry's big vendors, as its own struggles continued with a loss of SEK4.8 billion.
The Swedish vendor, which is in the midst of a major turnaround plan, reported its Q3 financials this morning, with sales in both its Networks business and IT & Cloud arm falling amid what it described as "tough" market conditions.
Overall, net sales were down six percent to SEK47.8 billion year on year, but only down 0.1 percent on a like for like basis. On a like for like basis, adjusted operating income was zero, down from SEK1.6 billion a year ago.
Within its Networks business, the engine room of the company, sales dropped four percent to SEK35.5 billion, largely driven by a 12 percent fall in network services.
It said this decline was due to lower sales of managed services and network rollouts.
Work is underway on trying to extricate itself from 42 managed service contracts, which are also dragging down its network business.
The vendor said 13 of these have been dealt with, up from nine at the end of its second quarter, and noted this will boost profits by SEK400 million.
Operating income in this part of the business plummeted 87 percent to SEK400 million but on a like for like basis, profits increased by 12 percent to SEK3.8 billion.
IT & Cloud saw sales fall 12 percent, or by nine percent on a like for like basis, which it blamed on reduced sales in north east Asia and falling demand for its legacy portfolio products.
Its operating losses surged from SEK1.7 billion in the second quarter to SEK4.2 billion in Q3.
Looking ahead, Ericsson warned Q4 sales would be much lower than the 24 expected percent.
Speaking to European Communications, Ericsson CFO Carl Mellander said China was starting to "normalise" after years of explosive LTE sales. He said: "We want to flag the fact that sales volumes are down from extremely high levels."
When asked if this tailing off of one of the industry's powerhouse market would affect vendor rivals Nokia and Huawei, he said: "Yes, exactly."
He said the vendor continued to be stung by projects that are proving more difficult than first thought to implement, highlighting the "deteriorating" India as the main culprit. The vendor continues to be buffered by a tough macroeconomic environment, he added.
However, he said the company was "bringing discipline to its sales process". He added: "We are continuing to talk internally about pushing profits above growth. There have been a lot of lessons learned."
He added there were no further plans to increase its headcount reduction plans. Three thousand employees left during the quarter, although Ericsson did hire 1,100 in R&D.
Responding to the results, Ekholm said: "We continue to execute on our focused business strategy. While more remains to be done we are starting to see some encouraging improvements in our performance despite a continued challenging market."