Ericsson aims to reduce costs by $1.2 billion by mid-2018

Ericsson aims to reduce costs by $1.2 billion by mid-2018
Published: 29 March 2018 - 5:52 a.m.
By: CommsMEA staff writer

To improve profitability, Ericsson has a target to reduce costs by at least SEK 10 billion($1.2 billion) by mid-2018 compared to 2017, as revealed at the recent AGM.

President and CEO Börje Ekholm explained that the starting point for Ericsson’s strategy is the focus on its customers, the service providers, and their three main challenges – decreasing the cost per gigabit, becoming fully digital, and finding new revenues. The strategy builds on three cornerstones; technology leadership, product-led solutions, and global scale and skill.

“We are confident that the strategic choices we have made will create a strong and successful Ericsson over time. But as you know, we are not there yet.”

For the full year 2017, Ericsson’s reported net sales decreased by 10 %, to SEK 201 billion($24 billion).

Ekholm said: “2017 was a tough year with a continued declining market. We are far from satisfied with our performance and have taken a number of actions to turn around the development and improve profitability, to build a strong Ericsson for the long term.”

Ekholm further explained that in the first phase Ericsson has worked towards stabilising the business. This has been done by renegotiating or exiting non-strategic contracts, stabilising product roadmaps and project deliveries, and completely or partly leaving non-strategic areas. Moreover, the company has generated cost savings by divesting a majority of Media Solutions as well as Ericsson Power Modules and around 20% of the US number portability business. Ekholm elaborated on the development of 5G, saying that the development in 2017 has been faster than expected and that 5G is now a commercial reality.

Over time, with the ramp up of 5G and contribution from innovation and new businesses, Ericsson’s target is an operating margin of at least 12%.

“In 2017 we stabilised and simplified the company, we took out significant costs, and invested in the future. We have a clear strategy and clear targets for turning Ericsson to profitability and a strong long-term development,” Ekholm said.

The proposed dividend of SEK 1($0.12) per share was approved by the AGM.

Ronnie Leten was elected new Chairman of the Board. Jon Fredrik Baksaas, Jan Carlson, Eric A. Elzvik, Nora Denzel, Börje Ekholm, Kristin S. Rinne, Helena Stjernholm och Jacob Wallenberg were re-elected to the Board. Kurt Jofs and Ronnie Leten were elected new Board members. Leif Johansson, Kristin Skogen Lund and Sukhinder Singh Cassidy left the Board in connection with the AGM.

 

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