Ericsson will refocus its business for managed services, explore options for its loss-making media arm and take several writedowns, in a first move from its new CEO to lead the telecoms equipment maker out of its worst crisis in a decade.
Veteran board member Borje Ekholm took over as CEO in January and a new strategy has been widely expected by the market since then, as the firm grapples with shrinking markets and fierce competition from China’s and Finland’s .
The Swedish company said it would take provisions of an estimated SEK 7-9 billion ($797 million-$1.02 billion) in the first quarter related to recent negative developments in certain large customer projects.
“What has happened in the first quarter that makes them take provisions of 7 to 9 billion? It’s a lot of money. It seems very strange to me,” said Inge Heydorn, fund manager at Sentat Asset Management, who has a short position in Ericsson.
The company will also write down assets in the first quarter, with an estimated impact on operating income of SEK 3-4 billion ($342-$456 million), it said in a statement. It estimated restructuring charges would amount to SEK 6-8 billion in 2017, of which it would book 2 billion in the first quarter.
Ekholm said he expected significant improvements in 2018.
“Beyond that I am convinced that Ericsson, on a sustainable basis, can at least double the 2016 Group operating margin, excluding restructuring charges,” he said.
© Thomson Reuters 2017