Lawsuit filed over Ericsson warning
Ericsson is being sued in the US for allegedly misleading the market after issuing a profit warning on October 15 that wiped out a quarter of its market value - about $15bn - in about one day. A US law firm has alleged the company and its senior managers knew Ericsson's earnings were bad well before they told the market. Coughlin Stoia Geller Rudman & Robbins also alleges Ericsson was aware of its problems when it held a conference for investors just three weeks earlier in London on September 11.
It is seeking compensation for anyone who bought shares between September 11 and October 15. If successful, the suit could cost Ericsson millions of dollars. The class-action suit has been filed and Coughlin Stoia is seeking shareholders to join the action. Ericsson, the world's largest telecommunications equipment company, issued the profit warning after learning that operating income would drop 39 per cent to SKr5.6bn ($878m) in the third quarter compared with the previous quarter. The company attributed the decline in earnings to "a shortfall in sales in mobile network upgrades and expansions which resulted in an unfavourable business mix that also negatively affected margins".
According to the complaint, Ericsson and its chief executive, Carl Henric Svanberg, and former chief financial officer, Karl-Henrik Sundström, who resigned after the warning, "issued materially false and misleading statements regarding the company's business and financial results". Ericsson said in a statement: "We are very sorry to hear about this class-action suit. We follow the rules as stated by the stock exchange as well as in our stock exchange contract. At the moment we are reviewing the class-action suit and any further comment will be decided upon later."
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