Ericsson CEO disappointed as rebuilding costs hit Q1

Borje Ekholm

Ericsson CEO disappointed as rebuilding costs hit Q1

Ericsson suffered an “unsatisfactory and mixed” Q1, CEO Borje Ekholm (pictured) said, as the vendor booked a net loss of SEK10.9 billion ($1.2 billion) and an 11 per cent year-on-year decline in sales.

Speaking on the company’s earnings call, Ekholm said Ericsson’s performance had been impacted by its well-publicised restructuring costs, in addition to a faster than anticipated decline in sales of its legacy portfolio.

In a largely downbeat call covering its performance in the first three months of 2017, the company highlighted the need to intensify its cost-saving efforts, and increase the speed of its new product pipeline and business development initiatives.

Part of its ongoing business review will include an assessment of its contract procedures and discounts offered to customers, in a bid to increase margins.

Ekholm said while the network business had been performing well, despite lower sales, the decline in its legacy media product sales and IT and Cloud business segments had made an impact.

Discussing Ericsson’s Q1 performance, Ekholm said: “It was tough, but it was mixed. We have a very stable networks business that is performing well. We have IT and cloud and media with big significant losses. We are taking actions so we can turn that around and reach our long-term ambitions.”

Continued losses

For the quarter, the company reported SEK13.4 billion of restructuring costs, asset write-downs and what it described as “provisions and adjustments related to certain customer projects.”

Sales fell from SEK52.2 billion in Q1 2016 to SEK46.4 billion in the recent quarter, while the net loss compared with a SEK2.1 billion net profit in Q1 2016.

In a statement, Ericsson said it was “not satisfied with the cost structure of the company and the existing cost and efficiency program is not yielding sufficient results.

“Based on current profitability, we will intensify our efforts to reduce cost with focus on structural changes to generate lasting efficiency gains and increase cost competitiveness.”

Ekholm predicted the company would make a profit in 2018, with a target to double its underlying 2016 operating margin by 2019.

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