Ericsson is set to make further redundancies and reduce its real estate footprint as part of a new SEK10 billion ($1.2 billion) round of cuts, announced after the company revealed it remained in the red during Q2 following a 164 per cent year-on-year drop in net income.
CFO Carl Mellander told Mobile World Live the cuts were a big part of the company’s bid to make “real efficiency gains”. Although unwilling to discuss staff numbers or regions impacted, he confirmed the latest round of savings would be “geared towards addressing underperforming parts of the business”.
A full public announcement into the specifics is expected to be made at a later date, although Mellander confirmed the changes are set to be executed “very quickly” internally.
The CFO’s comments come as the troubled manufacturer revealed its financial results for the three months to end-June.
Net sales were down 8 per cent year-on-year to SEK49.9 billion. Its net income declined 164 per cent year on year as its bottom line swung from a SEK1.6 billion profit in Q2 2016 to a loss of SEK1 billion in 2017.
The company pointed to a number of factors across most of its business units, but noted the faster than anticipated decline of the overall RAN (Radio Access Network) market – led by reduction in demand from China and India.
Ericsson anticipates the worldwide RAN market will continue to suffer during 2017. It now expects the value of the segment to reduce by “high single digit percentage” during the year compared to previous forecasts of a 2 per cent to 6 per cent decline.
New cuts come despite a number of measures to address its slide in recent years, including an expensive ongoing restructuring programme, which was in part blamed for losses reported in Q1 2017.
Part of Ericsson’s new strategy includes focusing on the company’s core telecommunications segment while reducing the impact of under-performing units and reviewing long-running unprofitable contracts.
Mellander confirmed its review into the business included “assessing strategic options” for the potential divestment or part-divestment of its media and broadcasting businesses, widely rumoured in June.
While the CFO does not expect to see a tangible impact from the roll-out of 5G on the company’s bottom line until 2019 at the earliest, he noted LTE still had a “lot to give” as operators needed to continually increase capacity on their networks.
“There are huge sections of the population not covered by 4G, so I think a lot will happen there. The 4G technology being brought in now is geared towards 5G evolution. Short-term I don’t want to be overly optimistic – we are seeing a decline in the market which is a bit larger than we thought – but longer-term we want to double our profitability beyond 2018.”
While Mellander said it was early days for the company’s turnaround strategy, he saw early signs of traction – even though this was not yet reflected in the numbers.