Ericsson ends Q1 on an unsatisfactory note

Sales continue to decline despite a good performance in the Network segment
CEO Ekholm stays confident of turnaround in profitability by 2018
CEO Ekholm stays confident of turnaround in profitability by 2018


Ericsson has reported a 11% decrease in sales in Q1, 2017. Börje Ekholm, president and CEO of Ericsson called the performance in the first quarter 'unsatisfactory', adding that "Segment Networks delivered a solid result despite lower sales". However, losses in segments IT & Cloud and Media increased significantly.

" In the quarter a more focused business strategy and a new executive team were announced. The immediate priority is to improve profitability while also taking action to revitalise technology and market leadership," Ekholm said. 

The CEO highlighted that the adjusted operating margin of Networks Segment has "improved sequentially", supported by "an improved business mix and a more competitive portfolio. The new Ericsson Radio System platform contributed to improving profitability and stabilising the market share position, after several years of decline."

As for the increasing losses in the IT & cloud segment, Ekholm said that it's going to continue to be an important focus area of Ericsson. He added that the new management is initiating actions to turn the business around. Tangible improvements in profitability are being expected around 2018. He reiterated his earlier statement that beyond 2018, Ericsson believes it can "at least double the underlying 2016 operating margin".

Not satisfied with the existing cost structure of the company, Ekholm said that Ericsson will "intensify its efforts to reduce cost with focus on structural changes to generate lasting efficiency gains and increase cost competitiveness." 

" Our target is to surpass previous ambitions. However, we need to increase investment in certain core areas to develop our product portfolio, which can temporarily increase cost levels," he added. 

The quarterly results also compared unfavourably with the Zacks Consensus Estimate of earnings of 3 cents, marking the fifth consecutive earnings miss for the Swedish communication technology and services company. (Source: Nasdaq). 



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