Ericsson Presses Cuts After Posting a Loss -- WSJ
July 19 2017 - 3:03AM
Dow Jones News
By Dominic Chopping
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (July 19, 2017).
STOCKHOLM-- Ericsson AB (ERIC) pledged to step up its
cost-cutting plans after swinging to a net loss in the second
quarter as mobile broadband and network sales eroded further, and
it warned that earnings could weaken further as the market
continues to struggle.
The supplier of wireless-communications gear reported a net loss
for the three months ended June 30 of 1.01 billion Swedish kronor
($122.3 million) compared with a profit of SEK1.59 billion a year
earlier, missing analysts' expectations for a loss of SEK511
million, according to a FactSet poll. Revenue was down 7.7% at
SEK49.9 billion.
"In light of the current market outlook, we will accelerate our
actions to ensure that we can meet our target of doubling the 2016
operating margin beyond 2018," Chief Executive Borje Ekholm
said.
Any cost-cutting actions the company makes will not include
R&D, it said. The company hopes to find cost savings that yield
an annual effect of at least SEK10 billion by mid-2018.
However, considering the current market environment, the company
position, and the more focused strategy, Ericsson continues to
assess risk exposure in ongoing contracts and sees an increased
risk of further market and customer project adjustments. This could
hit results by SEK3 billion-SEK5 billion for the coming 12 months,
it said.
In addition, due to technology and portfolio shifts the company
will reduce the capitalization of its product platform, software
release development expenses and hardware costs. Together, this
could hit second-half operating income by SEK2.9 billion.
Sales in the quarter were hurt by a weak mobile broadband market
while networks sales fell 8% on the year, driven by lower demand in
Europe, Latin America and the Middle East and Africa. Lower
software sales within Networks can in part be explained by an
unusually strong performance in the second quarter last year, but
the company pointed out that investment levels within mobile
broadband were cautious.
Write to Dominic Chopping at dominic.chopping@wsj.com; Twitter:
@domchopping @WSJNordics
(END) Dow Jones Newswires
July 19, 2017 02:48 ET (06:48 GMT)
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