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American depositary receipts for Ericsson (Nasdaq: ERICY) were down US$1.81 at $11.19 early Friday after the Swedish mobile-phone maker said results for the last quarter were weaker than analysts hoped, and that it would stop making its own products, outsourcing production instead.
Ericsson said sales and orders were higher in the fourth quarter ended December 31st than a year earlier, and in line with expectations.
"We have generated a solid growth, and in mobile systems we have once again managed to grow even faster than the market, with good profitability," said president and chief executive officer Kurt Hellstrom.
However, Hellstrom added that "the results in our mobile phones business, while in line with expectations, remain unsatisfactory."
Delivery failures from key
suppliers and an "inadequate product mix in the entry-level market" hurt
sales 
and led management to take "costly restructuring measures," Hellstrom said.
Components manufacturer Flextronics will take over phone production for Ericsson, a plan that will save money and allow the company to keep its strong market position, Hellstrom said. Effective April 1st, Flextronics will take over all Ericsson's facilities in Brazil, Malaysia, Sweden, the UK and some of the company's Lynchburg, Virginia plant.
"In light of current market dynamics, we have taken a fundamental look at how we run the consumer business, and we have decided to completely outsource supply and production of mobile phones," said Hellstrom.
Ericsson said it expects full-year sales to be 15 to 20 percent above year-earlier levels, as benefits from the restructuring plan kick in.
"A more uncertain economic environment and a more cautious capital market contribute to more uncertainty also in our industry," the company said. "However, we remain optimistic about our business."
Some 4,200 employees will join Flextronics, but there will be a "redundancy"
of about 600 workers in Sweden, Ericsson said.
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