ERIC Ericsson

By Stu Woo and Dominic Chopping 

Sweden's Ericsson AB said it is taking charges of between $1.8 billion and $2.4 billion this year in its latest attempt to draw a line under a costly retooling of its telecoms-equipment business, amid falling sales and fierce competition from Chinese rivals.

The supplier of wireless-communications gear said between 16 billion ($1.82 billion) and 18 billion Swedish kronor in write-downs, restructuring costs and provisions would be booked this quarter.

Ericsson also said it has settled on a fresh turnaround plan, to be put in place by a streamlined management team and focused on its core business of selling telecoms equipment and services. Other activities, including one that helps pay-TV broadcasters transmit video, could be sold, the company said.

Detailing the charges, Ericsson said it would write down 3 billion to 4 billion kronor in the value of some of its intellectual property, take restructuring charges of 6 billion to 8 billion as part of an accelerating cost-reduction program, in addition to provisions of around 7 billion to 9 billion kronor on some large projects.

Ericsson shares dropped about 3% in early trading Tuesday

Tuesday's announcement comes after many months of turmoil at the Stockholm-based company which ousted it chief executive last July as profits plunged. Ericsson took restructuring charges of 7.6 billion kronor last year and announced it would cut 3,000 jobs in Sweden before reporting a slump in yearly net profit, down at 1.9 billion kronor from 13.7 billion kronor in 2015 on a 10% slide in revenue.

Demand for cellphone towers and related equipment has slowed since much of the world has installed the mobile-equipment infrastructure it needs. At the same time, Ericsson faces tough competition from longtime Finnish rival Nokia Corp. in addition to fast-expanding Chinese suppliers, Huawei Technologies Co. and ZTE Corp.

Chief Executive Börje Ekholm, who took over in October, said on Tuesday that Ericsson would also focus on developing services for what is known as the Internet of Things: The idea that everyday items such as refrigerators, cars and sneakers will be connected to the web.

The latest makeover of the company, which has around 111,000 employees world-wide, includes the stripping out of a layer of senior management, with four senior executives to quit April 1.

Less clear is the future for Ericsson's media division, which is the one of the world's leaders in managing video-on-demand and digital-video-recorder, or DVR, services for cable companies. Demand for such services are expected to slip as people shift to watching videos from Netflix Inc. and other online providers.

Ericsson said it would consider "strategic opportunities," which include partnerships or sales, of its media division as well as its cloud-computing hardware business.

(END) Dow Jones Newswires

March 28, 2017 05:45 ET (09:45 GMT)

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