Nokia and Ericsson ADRs Tumble on a Slowdown in Demand for Telecom Equipment

Falling demand for telecommunications equipment impacted sales at Nokia (NOK) and Ericsson (ERIC), and American Depositary Receipts (ADRs) of the two companies dropped in early trading on Friday. 

Nokia reduced its full-year sales guidance to between 23.2 billion and 24.6 billion euros ($26.1 billion and $27.6 billion) from 24.6 billion and 26.2 billion euros ($27.6 billion to $29.4 billion). It also cut the upper end of its operating margin range outlook to 11.5% to 13% from 11.5% to 14%. The company also said it anticipates second quarter revenue of 5.7 billion euros ($6.4 billion), missing analysts forecasts.

Nokia said that the reduced forecast was based on “both the macro-economic environment and customers’ inventory digestion.” It noted that high inflation and rising interest rates are leading some customers to push off projects until next year. 

Ericsson reported operating profits, excluding restructuring costs, sank 62% to 2.8 billion Swedish crowns ($271 million). The firm blamed a reduction in spending by operator clients, especially in North America.

CEO Boerje Ekholm indicated that the second quarter performance was in line with the company’s expectations, “despite the uncertain macro backdrop and significant changes in market mix.” 

ADRs of Nokia and Ericsson were down about 10% in midday trading on Friday following the news.