& cplSiteName &

Ericsson Must Hit M&A Trail to Boss B/OSS – Analyst

Iain Morris
3/31/2017
50%
50%

Ericsson needs to bulk up its BSS and OSS (B/OSS) business through takeover activity if it is serious about the opportunity, according to a leading analyst.

The Swedish vendor earlier this week insisted that B/OSS remained highly "strategic" both to Ericsson and customers when challenged on its decision to retain the loss-making unit.

CEO Börje Ekholm told analysts he was exploring "options" for the company's media and cloud hardware assets, hinting at a likely sale of those businesses, but remains committed to other parts of the business, including the B/OSS division. (See Ericsson Tightens Focus, Warns of $1.7B Q1 Hit.)

But if it really thinks B/OSS is "strategic," Ericsson AB (Nasdaq: ERIC) needs to start buying some innovative companies in this market, says James Crawshaw, a senior analyst at the Heavy Reading market research business.

"What kind of companies should they buy?" posited Crawshaw in a comment on the Light Reading website. "Something to help operators manage inventory in a dynamic environment like NFV (the legacy systems can't cope), something to help operators provide a cool consumer-facing front end to the BSS to enable self care, and something to help increase the automation of network management." (See Ekholm's Vision of Slimmer Ericsson Lacks Detail & Dazzle.)

Without such capabilities, clearly, Ericsson risks losing out to rivals eyeing fresh opportunities in this market. Those include Chinese equipment giant and nemesis Huawei Technologies Co. Ltd. , which already appears to have stolen market share from Ericsson in the mainstream networks business.

Yet takeovers may be the last thing on Ekholm's mind while Ericsson retrenches. The company aims to double its operating margin to about 12% in future, but it is getting battered by restructuring costs and impairment charges on unprofitable operations. It also appears to have lost out on some major contracts in the last few months.

Cash flow from operating activities slumped about a third, to 14 billion Swedish kronor ($1.6 billion), in 2016, while net income plummeted 86%, to just SEK1.9 billion ($210 million).


Want to know more about cloud services? Check out our dedicated cloud services content channel here on Light Reading.


Ericsson would also need to weigh any takeover opportunity very carefully indeed in the current circumstances. It has built up its media business over the last few years largely through takeover activity, and yet this has not translated into sales success. Restated financials published a few weeks ago showed that media revenues fell 7% in 2016, to SEK9.7 billion ($1.1 billion), while operating losses doubled to SEK2.4 billion ($270 million).

Previously reported as "support solutions," the B/OSS unit generated about SEK12.5 billion ($1.4 billion) in revenues for Ericsson last year, 17% less than in 2015 (the decline would have been shallower but for unfavorable foreign exchange movements).

Ericsson blamed the setbacks on "lower sales of legacy products and lower software sales in digital transformation projects where sales are mainly project milestone based."

Ekholm says an immediate priority is to re-establish profitability at the B/OSS business. The next step will be a portfolio review that could lead to the jettisoning of some legacy B/OSS activities. And there is to be more integration of product with systems integration capabilities to simplify internal procedures.

"It is a combination of those two that will restore profitability," Ekholm told analysts during a call earlier this week. "We need to reinvest in the parts of the business where there is a strong product offering today."

— Iain Morris, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, News Editor, Light Reading

(1)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View        ADD A COMMENT
corihuela
50%
50%
corihuela,
User Rank: Light Beer
4/6/2017 | 3:20:07 PM
Portfolio Analysis
I don't quite agree with this post. Specifically, the idea is first presented as "how ome the O/BSS landscape is strategic" for Ericsson.

It is strategic because of the huge market share that Ericsson has on this domain. 

Ericsson is on both Magic quadrant of Gartner for OSS and BSS for third year in a row, because it has the best portfolio for both domains. 

Not true about inventory for NFV. There is a very strong solution in place today for that. Verizon just acquired Orchestration solution from Ericsson. And this involves, of course, a strong Inventory for NFV's. 

There is indeed truth on the other point though, regarding self care, but this is very much a market situation. Most operators have created their self care systems over the years, having one solution for this is not as relevant as having a strong revenue management solution. What operators need in this area is a strong midleware that can unify all their sales channels.
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.
Women in Comms Introduction Videos
Cisco: Mentoring Critical to Attract & Retain Women

7|19|17   |   6:40   |   (1) comment


Liz Centoni, senior vice president and general manager of Cisco's Computing System Product Group, shares why mentoring in all its forms is important for women and what Cisco is doing that's made a difference for women in tech.
LRTV Custom TV
Gigabit LTE With Snapdragon 835

7|12|17   |     |   (1) comment


At an event in Wembley stadium, EE used its live network to demonstrate gigabit LTE using a Sony Xperia XZ Premium smartphone with a Qualcomm Snapdragon 835 chip.
LRTV Custom TV
Implementing Machine Intelligence With Guavus

7|12|17   |     |   (0) comments


Guavus unites big data and machine intelligence, enabling many of the the largest service providers in the world to save money and drive measureable revenue. Learn how applying Machine Intelligence substantially reduces operational costs and in many cases can eliminate subscriber impact, meaning a better subscriber experience and higher NPS.
LRTV Custom TV
Unlocking Customer Experience Insights With Machine Intelligence

7|12|17   |     |   (0) comments


When used to analyze operational data and to drive operational decisions, machine intelligence reduces the number of tasks which require human intervention. Guavus invested in Machine Intelligence early. Learn about the difference between Machine Learning and Machine Intelligence.
Women in Comms Introduction Videos
Verizon VP Talks Network, Career Planning

7|12|17   |   4:49   |   (0) comments


Heidi Hemmer, vice president of Technology, Strategy & Planning at Verizon, shares how bold bets and the future of tech define her career.
Telecom Innovators Video Showcase
Masergy's NFV Journey

7|11|17   |     |   (0) comments


Ray Watson, vice president of global technology at Masergy, discusses the advantages and challenges in entering the still-maturing NFV market for the past three years.
Telecom Innovators Video Showcase
Mavenir on RCS Cloud Platform & Multi-ID

7|10|17   |     |   (0) comments


Guillaume Le Mener, head of marketing and corporate development at Mavenir, discussed RCS and the recent launch of Multi-ID, which supports T-Mobile's DIGITS, the revolutionary new technology that breaks down the limitation of one number per phone and one phone per number.
LRTV Custom TV
ADTRAN Executive Outlines Trends in Next-Generation 10-Gigabit Cable Networks

7|10|17   |     |   (0) comments


Hossam Salib, VP of Cable and Wireless Strategy at ADTRAN, outlines key trends as MSOs begin to deploy next-generation Gigabit and 10-Gigabit cable networks. In the interview, Hossam outlines the advantages of a Fiber Deep architecture, FTTH options including EPON and RFoG, and the importance of SDN and NFV in building next-generation high-bandwidth cable networks.
LRTV Interviews
Global Capacity: Bandwidth Demand Driving Ethernet Growth

7|6|17   |   6:37   |   (0) comments


At Light Reading's Big Communications Event in Austin, Texas, Global Capacity's VP of Marketing Mary Stanhope talks about how the demand for bandwidth is changing the way service providers deliver broadband services.
LRTV Interviews
Colt's Services Chief on Digital Delivery

7|5|17   |   16:12   |   (0) comments


Rogier Bronsgeest, the chief customer experience officer (chief CEO!) at Colt, discusses the way in which the service provider interacts with its customers these days and his aggressive net promoter score (NPS) targets.
Women in Comms Introduction Videos
BT VP: Women Should Fill Security Talent Gap

7|5|17   |   6:00   |   (2) comments


By 2020 there will be six security jobs for every qualified worker, and Kate Kuehn, vice president of Security for BT in the Americas, says BT wants to encourage women to fill the shortage in jobs.
LRTV Interviews
Colt Sales Exec on Services Trends

7|4|17   |   12:59   |   (0) comments


Colt's sales director for enterprise, James Kershaw, sheds some light on the services currently in demand and how network upgrades are influencing customer demand.
Upcoming Live Events
September 28, 2017, Denver, CO
October 18, 2017, Colorado Convention Center - Denver, CO
November 1, 2017, The Royal Garden Hotel
November 1, 2017, The Montcalm Marble Arch
November 2, 2017, 8 Northumberland Avenue, London, UK
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
Mobile to Power Online Video Consumption – Zenith
Aditya Kishore, Practice Leader, Video Transformation, Telco Transformation, 7/19/2017
Can Mushroom Sprout in Crowded SD-WAN Field?
Carol Wilson, Editor-at-large, 7/18/2017
AI Will Be Ubiquitous in 2020 but Overhyped in 2017 – Gartner
Sarah Thomas, Director, Women in Comms, 7/18/2017
Brocade, Broadcom Merger in Doubt
Iain Morris, News Editor, 7/19/2017
Qualcomm Takes Q3 Pummeling From Apple
Iain Morris, News Editor, 7/20/2017
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
Fuzzy Quick Fix Click Here
If you can't access it, is it really broken?
Latest Comment
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.