ERIC Ericsson

By Stu Woo and Dominic Chopping 

Sweden's Ericsson AB said it was taking charges of between 16 billion and 21 billion Swedish kronor ($1.8 billion and $2.4 billion) this year in its latest attempt to draw a line under a costly retooling of its telecom-equipment business, amid falling sales and fierce competition from Chinese rivals.

The supplier of wireless-communications gear said it would book most of the charges -- between 12 billion and 15 billion Swedish kronor -- in write-downs, restructuring costs and provisions 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 telecom 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, and take restructuring charges of 6 billion to 8 billion kronor 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 2.6% on Tuesday.

Tuesday's announcement comes after many months of turmoil at the Stockholm-based company that ousted its chief executive last July as profit 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 is 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.

Write to Stu Woo at Stu.Woo@wsj.com and Dominic Chopping at dominic.chopping@wsj.com

(END) Dow Jones Newswires

March 28, 2017 14:33 ET (18:33 GMT)

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