Nokia and Ericsson hit by US consumer slump

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Nokia cut its annual sales forecast on Friday, while Ericsson reported a sharp drop in quarterly profit as a slump in US consumer spending hit Europe’s two biggest telecoms equipment makers.

Both companies said customers, especially in North America, are curbing spending and reducing inventory levels amid high inflation and rising interest rates, indicating a possible prolonged recession across the region. .

In an update on Friday, Finland’s Nokia said sales this year would now be between €23.2bn and €24.6bn, down from an earlier forecast of €24.6bn to €26.2bn, as customers hit hard on the economic backdrop is the pressure of

The company also reduced the upper limit of its profit margin from 14 per cent to 13 per cent, while keeping the lower limit at 11.5 per cent.

Telecom conglomerates have been hurt by a worsening economic scenario, which has forced businesses to cut their budgets and pull investments in technology and upgrades, especially in markets such as the US.

“High inflation and rising interest rates are increasingly impacting customer spending plans, with some projects now being pushed back to 2024 – particularly in North America,” Nokia said. The company added lower forecasts related to its network infrastructure and mobile network units.

Nokia said it is “actively managing costs to protect profitability” and “will continue to take measures to ensure it remains on track toward its long-term goal of growing faster than the market”. are”.

Sweden-based Ericsson on Friday reported a 62 per cent decline in its operating profit for the three months ended June, slightly below market expectations. The decline was due to a 42 percent decline in year-over-year comparable North American sales.

Sales growth in India partially offset “softer” growth in other markets, “particularly in North America, where buildout pace slowed and customer inventory levels decreased”, said chief executive Bjorge Ekholm.

Ericsson shares fell 8 per cent on Friday morning. Shares of Nokia, which have been falling since April after missing quarterly profit estimates, were down 10 percent.

In an earnings call on Friday, Ekholm said he expects a “gradual improvement” in the market in late 2023 and further improvement in 2024.

“You can’t get away from macroeconomic constraints,” said PP Foresight analyst Paolo Pescatore, adding that “with supply-side constraints, especially the challenges of sourcing chipsets, it’s potentially difficult for telecom equipment makers.” May be the start of a long winter”. ,