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The
sweeping measures mapped out by Borje Ekholm include exploring
options for its loss-making media arm as well as restructuring
its business designing, building and managing networks for
operators.
The Swedish business insider and veteran board member took over
as CEO in January and investors have been keen to hear how he
plans to deal with shrinking markets and mounting competition
from China's Huawei and Finland's Nokia <NOKIA.HE>.
"Restoring profitability is key and we will start by focusing
the portfolio to fewer areas and securing effectiveness and
efficiency in operations," Ericsson said in a statement on
Tuesday.
The company said it would take provisions of 7-9 billion crowns
($797 million-$1.02 billion) in the first quarter "triggered by
recent negative developments related to certain large customer
projects."
Ekholm declined to name those contracts in a conference call,
but said they were few and isolated, and not related to the
group's strategy change.
"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.
Ericsson's shares fell as much as 4.6 percent, but were down a
more modest 0.7 percent by 0926 GMT (5:26 a.m. ET). Ericsson
shares have fallen 26 percent over the past year.
The company said it would write down intangible assets within
the Media and IT & Cloud businesses in the first quarter, with
an estimated impact on operating income of 3-4 billion crowns,
and that it would "explore strategic opportunities" in those
businesses.
It estimated restructuring charges would amount to 6-8 billion
crowns in 2017, up from an earlier estimate of 3 billion crowns,
of which it would book 2 billion in the first quarter.
The company said it did not see a change of its previous
forecast for the mobile infrastructure market to decline by 2 to
6 pct in 2017 and Ekholm said on the call with investors he
didn't foresee any big announcements on job cuts.
Ekholm said he expected significant improvements from the
actions already 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.
(Writing by Johannes Hellstrom; editing by Niklas Pollard and
Louise Heavens)
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