Jan Frykhammaron, the CEO of Ericsson (L.M.) Telephone Co. (NASDAQ:ERIC), said that 3Q2016 proved to be an extremely challenging quarter. The negative investor trends, as spotted in the previous two quarters, got accelerated in 3Q2016. This in turn resulted in a situation where the company had to pre-announce financial report. The impact of noted trends meant that the firm recorded a performance that was lagged compared to expectation.

The highlights

The lag in performance primarily came from the mobile broadband operations within networks. It also impacted the network rollout operations in services. The network sales dropped 20% YoY and that compares to 11% recorded in 2Q2016 YoY, confirming the drop in acceleration. Gross margin also came lower impacted by the reduced capacity sales in the nations that are impacted by macro economy, and also lower sales in certain parts of Europe.

Ericsson, as a leadership team, launched with the program to minimize costs, and turn more efficient. The company has witness strong progress on back of cost declines, and still there remains more to be done. Frykhammaron added that they remain on the goal that they have discussed in 2Q2016, which is operating expenses down SEK53 billion sake by 2H2017. He indicated that they consider that the present challenging market environment then being to mobile broadband and then being to this margin count with weak macro, will continue in next quarter.

The current business mix that Ericsson have with capacity and coverage would remain short-term. The company have a seasonal growth usually between the third quarter and the fourth. Considering this fact, the company is somewhat lagging this year. It’s vital to remember usually the fourth quarter is extremely big in respect of seasonality in some of the main regions such as Latin America, Africa and Middle East. And whatever comments that the management is making is connected to the same reasons mentioned during financial report release of the preceding two quarters.

Ericsson reported a remarkable quarter for its cloud and IP operations where it witnessed good progress in sales for cloud platform and the blade server platform.