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Ericsson's cost cuts start to pay off as shares soar

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Ericsson's cost cuts start to pay off as shares soar
Changing fortunes? Ericsson CEO Börje Ekholm. Photo: Christine Olsson/TT
11:39 CEST+02:00
Swedish telecoms giant Ericsson posted improved first quarter results on Friday, but the good news did not come without costs.

Investors welcomed the news, with Ericsson's share price jumping over 17 percent on the Stockholm stock exchange in Friday trading.

Ericsson reported an 80 million euro ($99 million) loss for the first three months of 2018 – a major improvement from the 1.13 billion euro loss of the same period last year.

"The improvements in the quarter are encouraging," the statement said, adding that it had raised its gross margin from 19 percent to 36 percent.

"However, more work remains to be done. We have confidence in the strategic direction laid out and remain fully committed to our long-term targets."

The company in July 2017 launched a major restructuring drive that has seen nearly 18,000 jobs cut, the statement said.

Some 3,000 of the layoffs were made in the first three months of this year.

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Chief executive Börje Ekholm at Ericsson's headquarters in Kista, Stockholm. Photo: Jonas Ekströmer/TT

Ericsson, once a market leader in the mobile phone industry, has seen its earnings slump year after year following the meteoric rise of smartphone giants in the United States and Asia.

But it has fought on against the odds, adapting to the rapidly shifting market by focusing its attention on research and development of new technologies for telecoms equipment.

"Our efforts to improve efficiency in service delivery and common costs are starting to pay off," CEO Börje Ekholm said in the statement.

"We continue to increase our R&D investments in networks to lead in 5G," added Ekholm, who took over at Ericsson in January 2016.

The company is also investing in cloud technology, and in telecoms systems for self-driving vehicles.

"Ericsson has been optimistic about its future for some time but this is the first time we actually see it in its reported numbers," Joakim Bornold, an economist at investment bank Nordnet, told AFP.

"Improvements are due to the cost programme and not increasing revenues. It's a clear sign that the reconstruction is on the right track," he added.

Ericsson was founded in 1876 as a repairs workshop for telegraph instruments, and started making phones in 1878, according to its website.

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