Ericsson is cutting 25,000 jobs or one quarter of its work force in response to its continuing performance woes, according to unnamed sources quoted in a report by the Swedish newspaper, SVD Naringsliv.
The OEM has made no official announcement but it hinted that change was coming during its second quarter earnings call, where it reported a loss before taxes of SEK 1.2 billion, down from a profit of SEK 2.2 billion year over year. Revenues also dropped from SEK 54.1 billion to SEK 49.9 billion in the quarter. Sales adjusted for comparable units and currency declined by 13 percent.
“We are not satisfied with our underlying performance with continued declining sales and increasing losses in the quarter,” Börje Ekholm, Ericsson president and CEO, said during the earnings call. “In light of the current market environment and company performance, we are accelerating actions to reduce costs.”
The Radio Access Network (RAN) equipment market will decline in the high single-digits for the full year 2017, in line with the first half performance and Ericsson’s estimates for the second half. In response to this market, the OEM has increased network research and development and plans to ramp up deliveries of the Ericsson Radio System (ERS).
“Our focused business strategy is designed to take us back to technology and market leadership and improve company performance, also in a tough market,” Ekholm said. “The ERS continues to prove its competitiveness and now represents 49 percent of radio unit deliveries in the quarter. During the quarter, we announced a break-through contract to support Vodafone UK to evolve its 4G network and to provide 5G radio technology.”
Along with reducing the workforce, Ericsson plans to reduce the capitalization of the product platform, software release development and hardware.
Another component in Ericsson’s strategy is to reduce costs and increase efficiency is refocusing the Managed Services business. So far, it has identified 42 contracts that it will either exit, renegotiate or change in some way.
“Considering the current market environment, the company position, and the more focused business strategy, we continue to assess risk exposure in ongoing contracts,” Ekholm said. “To date, we have either exited, renegotiated or transformed nine of these contracts resulting in an annualized profit improvement of approximately SEK 140 million going forward,” Ekholm said.
J. Sharpe Smith is senior editor of the AGL eDigest. He joined AGL in 2007 as contributing editor to the magazine and as editor of eDigest email newsletter. He has 27 years of experience writing about industrial communications, paging, cellular, small cells, DAS and towers. Previously, he worked for the Enterprise Wireless Alliance as editor of the Enterprise Wireless Magazine. Before that, he edited the Wireless Journal for CTIA and he began his wireless journalism career with Phillips Publishing, now Access Intelligence. Click here to contact him.