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Fire at supplier dents Ericsson handset business
Posted: 23-Jul-2000 [Source: FT]

[Ericsson single sourced a key handset component and got "burned".]

Stockholm -- "Ericsson, the world's third largest maker of mobile phones, revealed on Friday that a fire at one of its component factories in the US had caused big losses in its handset business.

"The revelation caused Ericsson shares to fall by more than 11 per cent. Some analysts accused the company of failing to disclose crucial information. "It was crazy not to tell us ... This made a huge impact," said one.

"... The fire, at a factory in New Mexico owned by Philips of the Netherlands, left the Swedish company with large stocks of unfinished mobile phones awaiting a key component. The factory supplied Ericsson with advanced silicon semiconductors.

"Ericsson has struggled to keep pace with Nokia, the Finnish company, and Motorola of the US. The mobile phone unit accounts for one-fifth of its entire business.

"The Swedish company rebuffed accusations that it had been unwise to source a crucial component for its mobile phones from a single source.

"Depending on one supplier is common in this business and this supplier [Philips] has a good record historically," Kurt Hellstrom, president, said.

"The company, when asked why it had not informed markets earlier about the fire, said: "We guide the markets about the whole company, not parts of the company."

"Mr Hellstrom said that the silicon semiconductor in question represented cutting-edge techonology which no other supplier could provide.


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