Ericsson CEO said operating income could fall more than $360 million in next 12 months
Swedish infrastructure giant Ericsson reported across the board sales losses in a Tuesday Q2 financial report with CEO Borje Ekholm projecting a continued decline in operating income between $362 million and $600 million over the next year.
Total sales were down 8% compared to Q2 2016, and expectations are that the radio access network (RAN) equipment market will continue to decline by “a high single digit percentage” in the remainder of 2017 as operator build outs of LTE in lucrative markets reaches completion.
“It’s quite clear we need to improve our own efficiency,” Ekholm said this week, noting the need to cut costs in not only service delivery but in internal infrastructure, real estate and similar operating expenditures. “We’re also continuing our investments in innovation and new business development including our investment in [internet of things].”
The sales decline is not confined to a single market, as Ericsson reported decreases in Europe, Latin America, the Middle East, Africa and North America; sales in Southeast Asia and Oceania were flat, according to the company.
The company is still pinning lots of hope on investment in IoT and 5G, although the latter has yet to be standardized by international bodies, and is not expected to see commercial launches until the 2020 timeframe.
Ekholm said the company’s radio platform is “very competitive” in that it “allows customers to upgrade to narrowband IoT and 5G in just a software upgrade.”
The equipment supplier has also identified 42 “challenged” managed services contracts that need to be renegotiated “of which nine have been [already] been renegotiated or exited. We expect to be able to do that by the end of next year.”
In response to a question, Ekholm said the company has “clearly lost market share. That’s no question. We have no reason to believe that we will continue to lose market share. I don’t see that happening. What we see instead is that our new Ericsson radio system is a very competitive platform and we are gaining a lot of customer momentum.”
The Ericsson board of directors appointed Ekholm president and CEO of the company effective Jan. 16, 2017. That move came after months of uncertainty following previous CEO Hans Vestberg stepping down from his position. The departure was the result of declining sales, decreasing operating income and poor quarter-to-quarter performance.
