Ericsson Steps Up Restructuring, Announces Fresh Cost-Cutting Measures

Weaker than expected second-quarter sales and profits in a poor growth climate prompted Swedish telecom giant Ericsson to announce fresh cost-cutting measures Tuesday.

Ericsson posted a fourth straight quarterly loss in unveiling April to June figures of SEK 1 billion (EUR 105 million or roughly Rs. 777 crores) on sales dropping 8 percent to SEK 49.9 billion (roughly Rs. 38,762 crores), dipping beneath analysts' forecasts of 50.5 billion.

The company said it saw "increased risk of further market and customer project adjustments with an estimated negative impact on operating income of SEK 3 to 5 billion for the coming 12 months."

"We are not satisfied with our underlying performance with continued declining sales and increasing losses in the quarter," said CEO Borje Ekholm.

"Execution of our focused business strategy is gaining traction. However, in light of current market conditions, we are accelerating the planned actions to reduce costs."

Those cost cuts, to include notably unprofitable service contracts, will amount to at least an annual SEK 10 billion by 2018 with the goal to double operating margins of 2016, a year which saw net profit slump 86 percent.

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Since then Ericsson has seen a slowing of investments in networking equipment, its core business, and now anticipates a market contraction of between 5 and 9 percent across 2017 rather than an initial forecast of a 2 to 6 percent drop.

The firm's choppy performance so far this year saw ratings agency Moody's downgrade it a notch to Ba1 in May noting rising restructuring charges and provisions.

In early Tuesday trading in Stockholm, shares in the firm were off 7.5 percent at SEK 56.30.