Ericsson shows improvement in quarterly results as cost cuts pay off

Gross margin improves from 19 percent to 36 percent. The company launched a major restructuring drive in July 2017 as a result of which the total workforce has been reduced by almost 18,000. To date, the annual run-rate effect of cost savings is approximately SEK 8.5 b ($1.01 billion).
"The improvements in the quarter are encouraging. However, more work remains to be done," Ekholm says.
"The improvements in the quarter are encouraging. However, more work remains to be done," Ekholm says.

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Ericsson has ended Q1, 2018 with an improvement in the gross margin (36%) tracking well towards the Group target of 37-39% by 2020.

Börje Ekholm, president and CEO of Ericsson said: "We have continued to execute on our focused business strategy creating solutions that help our customers improve their business.

"Our efforts to improve efficiency in service delivery and common costs are starting to pay off."

In Networks the gross margin improved to 40% (35%). In Digital Services, the gross margin  improved to 41% (-25%), supported by cost reductions mainly in service delivery. However, operating income in Digital Services remains challenging. In Managed Services the gross margin improved to 9% (-7%) supported by efficiency gains in service delivery and customer contract reviews, resulting in a positive operating income.

While the combined operating income of Media Solutions and Red Bee Media improved YoY, these businesses showed a loss of SEK -0.5 billion in the quarter. "We expect to close the announced Media Solutions divestment by the end of the third quarter," Ekholm said.

In the quarter the company reduced the total workforce by more than 3,000. Since the reduction activities were launched in July last year, it has reduced the total workforce by almost 18,000.

"The improvements in the quarter are encouraging. However, more work remains to be done. We have confidence in the strategic direction laid out and remain fully committed to our long-term targets," Ekholm added.

"Looking ahead, we expect the rapidly increasing focus on 5G to continue, with initial business discussions focusing on enhanced mobile broadband. We continue to work closely with customers to define the optimal business models to enable them to tap into new revenue streams and capture the full value of 5G."

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