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One Day after Cisco Deal, Ericsson’s Shares Tumble

Hans Vestberg, President and CEO of Ericsson, left, and Chuck Robbins, CEO of Cisco. Hans Vestberg, President and CEO of Ericsson, left, and Chuck Robbins, CEO of Cisco.
Hans Vestberg, President and CEO of Ericsson, left, and Chuck Robbins, CEO of Cisco. Photographs by Getty Images

A day after announcing a big partnership with Cisco, Ericsson’s shares dropped 6.3% on Tuesday after the company lowered its financial guidance.

Ericsson, which specializes in gear and services for managing mobile networks, said that it expects an annual growth rate of 2% to 4% from 2014 to 2018. That is down from 3% to 5% growth for 2013 through 2017 that the company had predicted a year ago.

Although Ericsson said on Monday that it could gain an additional $1 billion or more in revenue by 2018 through its partnership with networking giant Cisco, investors focused on the slower than expected growth projection. Shares in the company (ERIC) fell 63 cents to $9.36 on Tuesday.

In its latest earnings report, Ericsson reported a 16% increase in third-quarter profits, well below analyst expectations of 40% growth, reported the Wall Street Journal. A decline in sales in China contributed to the weak earnings, the report said.

Ericsson’s shares have been falling ever since April.

Chief Executive Hans Vestberg told investors during Ericsson’s analyst day that the company has a strategy to lift profits, but there’s still work to be done, Reuters reported. “We are not yet where we are satisfied,” Vestberg said.

Cisco’s shares (CSCO) fell 20 cents, or .7%, on Tuesday to $27.98.

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