Wireless carriers not cutting capex: Ericsson CEO
SAN FRANCISCO (Reuters) - Ericsson's (ERICb.ST) chief executive said on Tuesday he does not see wireless operators cutting capital spending any further but added that signs of an economic recovery remain elusive.
"The whole world is suffering from decline that is bigger than anything we've seen," said Carl-Henric Svanberg in an interview at the company's new Silicon Valley office.
Ericsson, the world's biggest supplier of cell phone network equipment, is facing a challenging business market as customers hold back on buying new gear amid the global recession and with competition mounting from aggressive newcomer Huawei HWT.UL.
Spending on telecommunications equipment has fallen sharply over the past few years, though Ericsson's position in the fast-growing Chinese and Indian markets, as well as its services business, has given the company some ballast.
Svanberg said wireless carriers appear to have stopped cutting spending on equipment made by Ericsson and other infrastructure suppliers.
"It is not our impression that there is further cutting being made," said Svanberg.
Svanberg also said Ericsson's money-losing cell phone handset joint venture with Sony Corp (6758.T) could arrange any necessary financing from banks before seeking contributions from the parent companies. He declined to forecast when it would turn profitable.
"The first thing you do as a company is not to run to your shareholders and ask for more money. The first thing you do is try to arrange normal financing," Svanberg said, arguing that lending conditions had improved from six months ago.
Svanberg said that Ericsson remained committed to providing financing for the JV if necessary. Ericsson would not "leave them in the cold if they end up in that situation," he added.
Despite Sony-Ericsson's small, roughly 5 percent share of the global handset market versus larger rivals Nokia (NOK1V.HE) and Samsung Electronics (005930.KS), the joint venture provides an important part of Ericsson's overall wireless strategy, said Svanberg.
While that benefit does not justify continuing losses at the business, Svanberg said Sony-Ericsson is adjusting to a quickly falling market and is determined to return to profitability. He said there was no time frame for when the joint venture needed to become profitable again.
Svanberg, who will leave Ericsson to become chairman of BP Plc (BP.L) in January, was in San Jose for the opening ceremony of the company's new IP and Broadband business division headquarters, the company's only product group based outside of its home base in Sweden.
"If you are a world class engineer in IP, you are here, and if you're not here, you move here," said Bert Nordberg, the head of Ericsson's 1,200 employee Silicon Valley business.
Ericsson is stepping up its efforts in the North American market. In July, the company signed a $4.5 billion to $5 billion contract with Sprint Nextel Corp to manage the company's network.
Ericsson also won an auction to purchase key wireless assets from bankrupt Canadian equipment maker Nortel Networks for $1.13 billion. Continued...
