Ericsson Stock Falls After Impairment Charge Announcement

The U.S.-listed shares of Ericsson accelerated their decline during afternoon trading on Wednesday. This came after the Sweden-based telecommunications equipment maker announced that it would record a third-quarter impairment charge of 32 billion Swedish krona related to the Vonage acquisition.

Stock Reacts to Impairment Charge

The stock had already fallen by 0.6% before the announcement, but it experienced a sharper decline of 3.5%, reaching an intraday low of $4.68. However, it managed to recover slightly and was last down 2.0%.

Impairment Charge Explanation

Ericsson explained that the non-cash charge, which amounts to approximately $2.93 billion, was primarily driven by the drop in market capitalization of Vonage's publicly traded peers, as well as increased interest rates and a general slowdown in Vonage's core markets.

Acquisition Details

Ericsson had completed its $6.2 billion acquisition of Vonage in July 2022, just a few months before announcing the impairment charge.

Revised Sales Expectation

The company also disclosed that it anticipates third-quarter sales to reach SEK64.5 billion, falling short of the current FactSet consensus of SEK67.2 billion. Ericsson is scheduled to publish its financial results on October 17.

Year-to-Date Performance

As of now, Ericsson stock has decreased by 18.6% year to date, while the S&P 500 has gained 13.5%.