Ericsson to book up to $1.4b in costs

Mr Ekholm, who took over as chief executive officer in January, has mapped out a new strategy to help lead Ericsson out of its worst crisis in a decade.
Mr Ekholm, who took over as chief executive officer in January, has mapped out a new strategy to help lead Ericsson out of its worst crisis in a decade.PHOTO: REUTERS

STOCKHOLM • Ericsson will refocus its business for managed services, explore options for its loss-making media arm and take several write-downs, in a first move from its new chief executive officer 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 Huawei and Finland's Nokia.

The Swedish company said it would take provisions of an estimated seven to nine billion krona (S$1.11 billion to S$1.42 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 seven to nine billion? It's a lot of money. It seems very strange to me," said Sentat Asset Management fund manager Inge Heydorn, 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 three to four billion krona, it said in a statement. It estimated restructuring charges would amount to six to eight billion krona in 2017, of which it would book two billion in the first quarter.

Mr 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.

REUTERS

A version of this article appeared in the print edition of The Straits Times on March 29, 2017, with the headline 'Ericsson to book up to $1.4b in costs'. Print Edition | Subscribe