Ericsson AB said it is writing down $1.77 billion in assets, the latest in a series of charges at the Swedish telecom-equipment maker as it retools itself to better compete with nimbler Chinese manufacturers.
Ericsson said it would take the write-down of 14.2 billion Swedish kroner in the fourth quarter of 2017, attributing most of it to the reduced value of its digital-services unit and a collection of other assets, most of which it said it acquired 10 or more years ago. Last year, the company disclosed a series of separate provisions and charges--totaling about 20 billion kroner--in costs associated with a monthslong turnaround.
The company said the assets it announced Tuesday have "limited relevance" for its current business.
Once among the world's dominant telecom-equipment suppliers, Ericsson and rivals like Nokia Corp. have been humbled by the fast rise of Chinese competitors, especially Huawei Technologies Co. Huawei is now the world's market leader for the telecoms gear at the center of modern mobile communications--though it hasn't made much headway in U.S.
Ericsson ousted its chief executive and cut staff in 2016 amid plunging profit. Early last year, Ericsson said it was embarking on a major turnaround effort, streamlining management and focusing on selling telecom equipment and services.
It and Nokia have been hit by a double whammy: Demand has fallen from many of their legacy customers--carriers in the U.S. and Europe that have essentially wrapped up the rollout of today's so-called 4G mobile networks. At the same time, Huawei and other Chinese upstarts have competed fiercely around the world with lower prices.
Ericsson, Nokia, Huawei and others are now all gearing up to compete in the fast-approaching rollout of 5G, the latest and fastest network, though technical standards about what that will entail haven't been finalized. It falls to Chief Executive Börje Ekhom, who took over in October 2016, to position Ericsson as a key provider of this new gear--though it may be years before customers start buying any of it.
Ericsson said Tuesday that after completing a fresh round of impairment testing in conjunction with its restructuring, the company said it decided to take the fresh, noncash write-downs.
"The adjustments have no influence on Ericsson's commitment to executing its strategies and to investing in technology to support customers' success," it said in a statement.
Ericsson also joined a parade of companies disclosing accounting adjustments because of changes in U.S. tax law. It said the recent cut to the corporate income-tax rate, to 21% from 35%, which went into effect Jan. 1, required a revaluation of its U.S. deferred tax assets. These assets, essentially tax credits, are worth less at the lower tax rate. Ericsson said the estimated impact will be a noncash charge of around 1 billion kronor.
Ericsson said its gross and net cash position remain strong, despite the noncash charges.
Write to Dominic Chopping at firstname.lastname@example.org
Ericsson's chief executive is Borje Ekholm. "Ericsson, Humbled by Huawei, Takes Another $1.8 Billion in Charges -- Update," published at 1201 GMT, misspelled his last name as Ekhom.
(END) Dow Jones Newswires
January 16, 2018 08:24 ET (13:24 GMT)