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Ericsson will take time to bounce back – Svanberg

The chief executive of Swedish telecom giant Ericsson, Carl-Henric Svanberg, warned on Wednesday that the company would not bounce back immediately from a drop in operating performance in the first quarter.

On the Stockholm stock exchange, shares in the company closed down 4.62 percent at 24.80 Swedish kronor.

Speaking at the company’s Capital Markets Day in New York, which was broadcast on the Ericsson website, Svanberg said: “Don’t expect much difference in Q2 (the second quarter) from Q1 (the first quarter)”.

At the end of April, Ericsson announced that its operating margin in the first quarter had dropped 4.0 percentage points compared with the equivalent figure for 2005 to 16.9 percent, significantly below expectations.

Shares in the company had closed down 7.0 percent after the news.

Analysts said at the time that the fall in the margins was a result of an increase in sales of low-margin services, rather than the more profitable network equipment of the company.

Margins were also hurt by the cost of integrating British company Marconi, which Ericsson acquired last year for £1.2 billion (16.3 billion kronor).

Svanberg said on Wednesday that the costs of restructuring Marconi would be 2.0 billion kronor, but that costs savings of the same amount would be realised by the end of the year.

Sales of Marconi equipment have been better than expected since the takeover, said Svanberg, adding that contracts had been won from TIM of Italy, Telefonica of Spain, Vodafone of Britain and France Telecom.

SWEDEN AND UKRAINE

Ericsson suspends all Russia operations indefinitely

Swedish network equipment maker Ericsson said Monday that it was suspending all of its Russian operations over the war in Ukraine for the foreseeable future.

Ericsson suspends all Russia operations indefinitely

The telecom giant already announced in late February that it would stop all deliveries to Russia following Moscow’s February 24 invasion of Ukraine.

“In the light of recent events and of European Union sanctions, the company will now suspend its affected business with customers in Russia indefinitely,” Ericsson said in a statement.

The company added that it was “engaging with customers and partners regarding the indefinite suspension of the affected business.”

“The priority is to focus on the safety and well-being of Ericsson employees in Russia and they will be placed on paid leave,” it said.

READ ALSO: How has Sweden responded to Putin’s war in Ukraine so far?

Hundreds of Western firms ranging from Ikea to Coca-Cola, Goldman Sachs and McDonald’s have stopped operations in the country since the invasion, with French banking group Societe Generale announcing Monday it was selling its stake in Russia’s Rosbank.

Ericsson has around 600 employees in Russia, and is a “major supplier to the largest operator MTS and the fourth largest operator Tele2,” a company spokeswoman told AFP, adding that together with Ukraine, Russia accounts for less than two percent of revenue.

As a result, the equipment maker said it would record a provision for 900 million Swedish kronor ($95 million, 87 million euros) for the first quarter of 2022 for “impairment of assets and other exceptional costs,” though no staff redundancy costs were included.
Ericsson is due to publish its first quarter earnings on April 14.

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