Ericsson announced it will book SEK14.2 billion ($1.77 billion) in write-downs in its Q4 2017 earnings, mostly relating to its Digital Services and Other divisions, along with a separate SEK1 billion charge related to US tax changes.

The troubled infrastructure vendor warned in December 2017 it was likely to book an impairment charge in its Q4 earnings, which it is due to release on 31 January, after a review into its position following a corporate restructure.

In a statement, Ericsson said the majority of revaluations relate to investments made over ten years ago with “limited relevance for Ericsson’s business going forward” and would have no impact on cash flow or its cash position: “The adjustments have no influence on Ericsson’s commitment to executing its strategies and to investing in technology to support customers’ success.”

The majority of the write-downs relate to goodwill from its Digital Services segment, accounting for SEK6.7 billion, and SEK6 billion goodwill from its Other segment.

Goodwill covers a range of non-physical assets, including brand name and reputation, and is often added to balance sheets after the acquisition of another company.

Ericsson’s Digital Services division is one of CEO Borje Ekholm’s (pictured) priority areas for the business and is being refocused towards software services to reflect its customers’ changing priorities. The Other reporting segment includes its media and broadcast units, which the company is rumoured to be selling.

The additional SEK1 billion charge due to be booked in Ericsson’s Q4 relates to a change in the corporate income tax rate in the US.

Business review
The review of Ericsson’s position follows a restructuring of its business segments announced in 2017, which itself follows an expensive and extensive cost-cutting programme as the company seeks to offset the decline of its traditional network business.

Ericsson booked a loss of SEK4.3 billion in Q3 2017, which included a restructuring charge of SEK2.8 billion and a write-down of assets in Canada billed at SEK1.6 billion.

In an interview with Mobile World Live following its Q3 results, CFO Chris Mellander warned restructuring costs would also run into Q4 with a charge of between SEK 3 billion and SEK 4 billion likely to be booked.