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Ericsson suffers on slowdown

July 19, 2016

Ericsson reported a further slow in sales in the second quarter, with revenues down 11 per cent year-on-year to SEK 54.1 billion (€5.7bn). The economic weakness in areas such as Brazil, Russia and the Middle East hit sales, while the company’s growth markets, China and North America, posted flat sales. Ericsson said it expects the sales trend to continue in the second half of the year.

A larger share of mobile broadband coverage contracts and services business led to a fall in the gross margin to 32.3 per cent from 33.2 per cent a year ago, and the operating margin dropped to 5.1 per cent from 5.9, also impacted by a negative revaluation effects of currency hedge contracts. Net profit declined 26 per cent year-on-year to SEK 1.6 billion, and operating cash flow was a negative SEK 0.7 billion.

The company said it will take further actions to reduce costs, targeting a new annual run rate of operating expenses, excluding restructuring charges, of SEK 53 billion in the second half of 2017, compared to SEK 63 billion in 2014. This is double its previous target.

Meanwhile, the company said it had a good start to its partnership with Cisco, with more than 30 deals already, laying a base towards the targeted sales of USD 1 billion for 2018. Over 200 more deals are in the pipeline.

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