Ericsson Presses Cuts After Posting a Loss -- WSJ

By Dominic Chopping Features Dow Jones Newswires

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (July 19, 2017).

Continue Reading Below

STOCKHOLM-- Ericsson AB (ERIC) pledged to step up its cost-cutting plans after swinging to a net loss in the second quarter as mobile broadband and network sales eroded further, and it warned that earnings could weaken further as the market continues to struggle.

The supplier of wireless-communications gear reported a net loss for the three months ended June 30 of 1.01 billion Swedish kronor ($122.3 million) compared with a profit of SEK1.59 billion a year earlier, missing analysts' expectations for a loss of SEK511 million, according to a FactSet poll. Revenue was down 7.7% at SEK49.9 billion.

"In light of the current market outlook, we will accelerate our actions to ensure that we can meet our target of doubling the 2016 operating margin beyond 2018," Chief Executive Borje Ekholm said.

Any cost-cutting actions the company makes will not include R&D, it said. The company hopes to find cost savings that yield an annual effect of at least SEK10 billion by mid-2018.

However, considering the current market environment, the company position, and the more focused strategy, Ericsson continues to assess risk exposure in ongoing contracts and sees an increased risk of further market and customer project adjustments. This could hit results by SEK3 billion-SEK5 billion for the coming 12 months, it said.

Continue Reading Below

In addition, due to technology and portfolio shifts the company will reduce the capitalization of its product platform, software release development expenses and hardware costs. Together, this could hit second-half operating income by SEK2.9 billion.

Sales in the quarter were hurt by a weak mobile broadband market while networks sales fell 8% on the year, driven by lower demand in Europe, Latin America and the Middle East and Africa. Lower software sales within Networks can in part be explained by an unusually strong performance in the second quarter last year, but the company pointed out that investment levels within mobile broadband were cautious.

Write to Dominic Chopping at dominic.chopping@wsj.com; Twitter: @domchopping @WSJNordics

(END) Dow Jones Newswires

July 19, 2017 02:48 ET (06:48 GMT)