& cplSiteName &

Ericsson Tightens Focus, Warns of $1.7B Q1 Hit

Iain Morris
3/28/2017
100%
0%

Ericsson's new CEO, Börje Ekholm, has unveiled the Swedish giant's new business strategy, one that is built around the vendor's traditional strengths in mobile networks, backed up by professional services, supporting software (including virtualization) and the development of Internet of Things (IoT) platforms.

There are, however, some strategic sacrifices. Ericsson says it is exploring "options" for its media and cloud hardware assets, hinting at a potential sale of the struggling units. (See Ericsson Presents New Business Strategy.)

With the new business strategy comes a revamp of the management team, though the change is more in structure and designated responsibilities than in personnel. (See Ericsson Unveils New Management Team .)

The much-anticipated update comes after Ekholm took charge of the Swedish vendor at the start of the year and is aimed at returning Ericsson AB (Nasdaq: ERIC) to growth and healthy profitability following a torrid few months in which the company has lost market share to rivals, Ekholm acknowledged today. (See Loss-Making Ericsson Still Short on Vision and Ericsson's Ekholm Trumpets 5G Role But Still Lacks Plan.)

During a conference call with analysts, Ekholm said the ultimate profitability target was "at least double" the overall group margin that Ericsson reported last year, when the company's operating margin, minus restructuring charges, was 6.2%.


For all the latest news from the wireless networking and services sector, check out our dedicated mobile content channel here on Light Reading.


In the short term, the pain is likely to persist. Besides tightening its focus, Ericsson this morning revealed that it would book up to 15 billion Swedish kronor ($1.7 billion) in additional costs in the January-to-March quarter -- equating to about 7% of sales last year -- because of writedowns at its media and IT and cloud businesses, along with "negative developments related to certain large customer projects."

Ericsson appears to have suffered a couple of major setbacks since December last year. In Italy, it is reported to have lost a contract to China's ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763) to manage networks for Hong Kong's Hutchison and Russia's VimpelCom, which are merging their Italian operations, while in Russia VimpelCom Ltd. (NYSE: VIP) is said to have terminated a similar deal with Ericsson, opting to use Huawei Technologies Co. Ltd. instead. (See ZTE Suffers $340M Net Loss on US Fine and VimpelCom to Pioneer 'Multivendor' NFV; Downbeat on 5G.)

"We are not commenting on what contracts," said Ekholm, when pressed on the specifics of the negative customer developments. "On market share, we know that over the last few years we've lost market position and we've lost market share."

The figure of up to SEK15 billion ($1.7 billion) for additional first-quarter costs includes SEK3-4 billion ($340-460 million) in impairment charges, SEK7-9 billion ($800 million to $1.03 billion) relating to negative customer developments and another SEK2 billion ($230 million) in extra restructuring charges.

Ericsson said that restructuring charges over the whole of 2017 would rise to about SEK6-8 billion ($680-910 million), up from a previous estimate of just SEK3 billion ($340 million), and that the company would stop providing guidance on overall operating expenditure.

Next page: Portfolio pruning

(4)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View        ADD A COMMENT
James_B_Crawshaw
100%
0%
James_B_Crawshaw,
User Rank: Blogger
3/29/2017 | 3:24:46 PM
Re: Only two Major Telecom Suppliers making money?
ZTE? Not last year - http://www.lightreading.com/regulation/zte-suffers-$340m-net-loss-on-us-fine/d/d-id/730941

 
James_B_Crawshaw
50%
50%
James_B_Crawshaw,
User Rank: Blogger
3/29/2017 | 3:22:34 PM
Re: Video failure
Was Cisco's acquisition of Scientific Atlanta any better? Both are classic examples of skating to where the puck was ...
msilbey
100%
0%
msilbey,
User Rank: Blogger
3/28/2017 | 1:09:48 PM
Video failure
It really has been difficult to see any traction in the video market for Ericsson. What a waste of a lot of money. Why oh why did it buy Microsoft's Mediaroom in the first place?
sarcher60555
50%
50%
sarcher60555,
User Rank: Lightning
3/28/2017 | 12:04:34 PM
Only two Major Telecom Suppliers making money?
ZTE and Huawei?
From The Founder
Kicking off BCE 2017, Light Reading founder Steve Saunders lays blame for NFV's slow ramp-up and urges telecom to return to old-fashioned standards building and interoperability.
Flash Poll
Live Streaming Video
Charting the CSP's Future
Six different communications service providers join to debate their visions of the future CSP, following a landmark presentation from AT&T on its massive virtualization efforts and a look back on where the telecom industry has been and where it's going from two industry veterans.
LRTV Custom TV
The Overall Objective Is to Win the Game

6|26|17   |     |   (0) comments


SCTE•ISBE's Chris Bastian discusses Energy 2020's success to date and the importance of a flexible approach that allows for changes in specific strategies in order to reach significant milestones.
LRTV Interviews
CenturyLink: Let's Get Past SD-WAN Hype

6|23|17   |   04:02   |   (0) comments


Technology becomes a "shiny object" unless it's properly focused on solving business needs for enterprise customers, says Bill Grubbs, network solutions architect for CenturyLink. He explains to Light Reading why SD-WAN deployments have to be tailored to specific needs – and more.
Women in Comms Introduction Videos
Infinera's Sales Director Paints Tech's Big Picture

6|21|17   |   4:14   |   (1) comment


Shannon Williams, Infinera's director of sales, shares how she achieves work's many balancing acts -- between her role and the broader company, today and tomorrow's tech and more.
LRTV Custom TV
SD-WAN Innovation & Trends

6|20|17   |     |   (0) comments


Versa CEO Kelly Ahuja discusses with Carol Wilson the current status and trends in the SD-WAN market, Versa's innovation around building a software platform with broad contextualization, and the advantages that startups can bring to the SD-WAN market.
LRTV Interviews
Ovum's Dario Talmesio on 5G in Europe

6|20|17   |   02:16   |   (0) comments


At 5G World 2017, Dario Talmesio, principal analyst and practice leader on Ovum's fixed and mobile telecoms European team, explains the emerging trends amongst European operators as they prepare for 5G.
LRTV Custom TV
Putting Power on a Pedestal

6|19|17   |     |   (0) comments


ARRIS's John Ulm says a major accomplishment of SCTE•ISBE's Energy 2020 program is increased focus on power cost and consumption, including inclusion of energy requirements in operators' RFPs and RFIs.
LRTV Custom TV
Gigabit Access: The Last-Mile Pipe for All Future Services

6|19|17   |     |   (0) comments


A Gigabit access platform being deployed today must be able to deliver all types of services to an increasing number of devices. A non-blocking architecture is necessary to support the ever-increasing growth in bandwidth demand. The Huawei Gigabit access solution is based on a distributed design that is fully scalable to deliver a unprecedented performance.
LRTV Custom TV
Key Factors to Successfully Deploy an SD-WAN Service

6|19|17   |     |   (0) comments


As service providers transition their SD-WAN solution from trials and limited deployments into production at large scale, there are important considerations to successfully operationalize these solutions and realize their full potential, without adding complexity, introducing uncertainty or disrupting current business operations. Sunil Khandekar, CEO and Founder ...
LRTV Custom TV
IoT Solutions: Rational Exuberance

6|19|17   |     |   (0) comments


IoT solutions are morphing from hype into viable business opportunities. Huawei has the platform and ecosystem support to help carriers successfully address new business opportunities in the IoT space.
LRTV Custom TV
Realizing ICN as a Network Slice for Mobile Data Distribution

6|19|17   |     |   (1) comment


Network slicing in 5G allows the potential introduction of new network architectures such as Information-centric Networks (ICN) as a slice, managed over a shared pool of compute, storage and bandwidth resource. Services over an ICN slice can benefit from many architectural features such as Name Based Networking, Security, Multicasting, Multi-homing, Mobility, ...
LRTV Interviews
Ovum's Mike Roberts on 5G Uptake

6|19|17   |   04:08   |   (0) comments


Mike Roberts, research director for Ovum's service provider markets group, explains why he has boosted his 5G subscriptions forecast.
LRTV Interviews
AT&T's Hubbard on Intersection of SD-WAN & MPLS

6|15|17   |     |   (0) comments


Rick Hubbard, SVP of Network Product Management for AT&T Business Solutions, discusses how AT&T's approach to SD-WAN fits in with its overall virtualization strategy, explains how SD-WAN can improve enterprise customers' use of the cloud and addresses the intersection of SD-WAN and MPLS.
Upcoming Live Events
October 18, 2017, Colorado Convention Center - Denver, CO
November 1, 2017, The Montcalm Marble Arch
November 1, 2017, The Montcalm Marble Arch
November 30, 2017, The Westin Times Square
All Upcoming Live Events
Infographics
With the mobile ecosystem becoming increasingly vulnerable to security threats, AdaptiveMobile has laid out some of the key considerations for the wireless community.
Hot Topics
No Imagination: UK Chip Biz Goes Up for Sale
Iain Morris, News Editor, 6/22/2017
Does AT&T Deserve Time Warner?
Mari Silbey, Senior Editor, Cable/Video, 6/23/2017
Netflix's Lesson in Culture Expectation Settings
Sarah Thomas, Director, Women in Comms, 6/21/2017
Kalanick Steps Down as Uber CEO
Sarah Thomas, Director, Women in Comms, 6/21/2017
Like Us on Facebook
Twitter Feed
BETWEEN THE CEOs - Executive Interviews
Following a recent board meeting, the New IP Agency (NIA) has a new strategy to help accelerate the adoption of NFV capabilities, explains the Agency's Founder and Secretary, Steve Saunders.
One of the nice bits of my job (other than the teeny tiny salary, obviously) is that I get to pick and choose who I interview for this slot on the Light Reading home ...
Animals with Phones
Live Digital Audio

Playing it safe can only get you so far. Sometimes the biggest bets have the biggest payouts, and that is true in your career as well. For this radio show, Caroline Chan, general manager of the 5G Infrastructure Division of the Network Platform Group at Intel, will share her own personal story of how she successfully took big bets to build a successful career, as well as offer advice on how you can do the same. We’ll cover everything from how to overcome fear and manage risk, how to be prepared for where technology is going in the future and how to structure your career in a way to ensure you keep progressing. Chan, a seasoned telecom veteran and effective risk taker herself, will also leave plenty of time to answer all your questions live on the air.