Ericsson will book a SEK6.1 billion ($687 million) charge in its Q4 2018 results related to the restructure of its ailing BSS business, with further charges and job cuts expected in the division over the next year.
The provision includes SEK3.1 billion in direct restructuring costs, with the figures to be confirmed when Ericsson releases its Q4 figures on 25 January.
During 2019, the vendor also expects to incur a further SEK1.5 billion in charges and will make headcount reductions in the business unit.
Ericsson said its BSS business was not showing “satisfactory progress” and was jeopardising the chances of the wider Digital Services division meeting its profitability target for 2020. Provisions made in Q4 relate to customer compensation payments, delay charges and write-downs of intangible assets.
The vendor added its BSS product strategy of targeting large transformation projects with pre-integrated solutions had failed. Its cloud-based “full-stack Revenue Manager” product, which was launched in 2016 and marketed as a BSS product “for the digital future”, is yet to generate any revenue.
Lack of demand
In an investor statement Ericsson said: “The anticipated customer demand for a full-stack pre-integrated BSS solution has not materialised. Delays in product and feature development has also made the full-stack Revenue Manager less competitive. R&D resources in BSS have been focused on full-stack Revenue Manager, causing further delays in product releases of the established platform. In addition, certain complex transformation projects experienced delays and cost overruns.”
Ericsson will focus future BSS investments on its older products and restrict activities related to the Revenue Manager to fulfilling existing commitments.
In recent financial statements Ericsson executives have hailed the success of the company’s cost-cutting and turnaround plan across the wider business, however progress in its Digital Services division has been slower, with its BSS division cited as problematic.Subscribe to our daily newsletter