- Stock falls most in three weeks one day before 2Q results due
- Swedish media alleges up to $17.5 billion booked too early
Ericsson AB rejected a report in Swedish media that the maker of wireless networks may be inflating sales by booking revenue before some clients are invoiced.
The stock fell as much as 5.3 percent in Stockholm, the steepest intraday decline in three weeks, following a report in Svenska Dagbladet alleging the company may have recognized as much as 150 billion kronor ($17.5 billion) as sales before some clients received their first invoice. The stock was down 4.7 percent as of 2:04 p.m. in the Swedish capital.
“The claim that Ericsson has incorrectly recognized revenue in its accounts is false,” the company said in an e-mailed statement on Monday. Ericsson recognizes orders as sales once the risks and benefits of a contract have been transferred to customers, it said.
Chief Executive Officer Hans Vestberg is fending off criticism from investors over lackluster share performance during his more than six years at the helm of the company. More recently, he’s faced questions on probes into the company’s alleged corruption in Asia and Europe. Amid cut-throat competition from rivals Huawei Technologies Co. and Nokia Oyj, the stock is down 23 percent this year, giving it a market value of 212 billion kronor.
Ericsson, based in Stockholm, said its quarterly statements are reviewed by Price Waterhouse Coopers according to international standards and that its accountants perform a complete audit of all annual reports. The company is due to publish second-quarter results on Tuesday.
Analysts predict a 9 percent drop in sales at Ericsson and a 22 percent decline in net income, on average, for the second quarter.
“We see no sign of a pick-up” for the period, Swedbank analyst Mathias Lundberg said in a note. “Big spending operators like China Mobile and Vodafone have made budget cuts from last year and at the same time many of the typically 2Q-strong emerging markets are in recession.”