Swedish Ericsson targets change as sales miss mark

Swedish telecoms giant Ericsson is aiming to boost efficiency after falling net sales brought lower than expected operating profit when its first-quarter figures were released on Thursday.

Swedish Ericsson targets change as sales miss mark
Ericsson's CEO Hans Vestberg presents the report. Photo: Christine Olsson/TT

Net income rose 45 percent year-on-year to 2.1 billion kronor ($260 million), Ericsson said.

But net sales were down two percent at 52.2 billion kronor, below market expectations of 54.4 billion as forecast by a Bloomberg poll of analysts, while like-for-like sales, exluding effects of expansion, slipped one percent.

Operating profit also missed expectations at 3.5 billion kronor, albeit rising from 2.13 billion a year earlier.

While sales grew in North America and mainland China on rapid 4G network rollout, sales declined overall, Ericsson said, “following weak development in Europe and a weak macro-economic environment in some emerging markets”.

Ericsson added it would target structural changes by expanding an existing nine billion kronor global cost programme to bolster efficiency and growth after a quarter-on-quarter fall in sales growth adjusted for comparable units and currency.

First quarter operating margin stood at 6.7 percent compared with 4.0 a year earlier driven by improvements in mobile networks.

Ericsson, the world's leading maker of telecoms equipment excluding handsets, said it would continue to seek efficiency savings beyond those of 500 million kronor achieved in the first quarter of the year.

“We are confident in our ability to achieve net annual savings of nine billion kronor during 2017 compared with 2014,” the group said in highlighting three focus areas for 2016, core business, improved profitability in targeted growth areas and improved cost and efficiency.

Structural changes and greater efficiency would, the company concluded, create a “more fit for purpose” organization ready to thrive on the challenges of 5G and cloud-based services.

It has previously announced that tech-loving Stockholm and Tallinn will be the first cities to have 5G network, to be rolled out in 2018.

Ericsson did not specify exactly how it planned to streamline the global company. Last year thousands of jobs were axed across Sweden in a cost-cutting move.