Ericsson presents focused business strategy
(Thomson Reuters ONE) -
* Focused business strategy and improved internal efficiency to restore
profitability, significantly improving operating income and margin, and
revitalizing technology and market leadership
* Reallocated resources and increased investments in the following core
portfolio areas: networks, digital services (OSS/BSS and telecom core) and
Internet of Things (IoT)
* Refocused strategy for Managed Services to improve profitability
* Strategic opportunities to be explored for the Media and Cloud
Infrastructure hardware businesses
* Write down of assets to be made in Q1, 2017, with an estimated impact on
operating income of SEK 3-4 b. Restructuring charges estimated to
approximately SEK 6-8 b. for 2017, of which approximately SEK 2 b. in Q1.
* Separately, provisions of an estimated SEK 7-9 b. will be made in Q1,
triggered by recent negative developments related to certain large customer
projects
* Simplified organizational structure and new appointments to the Executive
Team (separate release)
Ericsson (NASDAQ:ERIC) will pursue a more focused business strategy
to revitalize technology and market leadership, improve group
profitability and enable customer success. The overall strategy is to enable
service providers to expand their business across industries and into new profit
pools. We will drive the development of market-leading solutions, fully
leveraging the potential of 5G, IoT and cloud.
Restoring profitability is key and we will start by focusing the portfolio to
fewer areas and securing effectiveness and efficiency in operations.
We will increase emphasis on solutions across the company, combining products
and services, to drive efficiency and better meet customer needs and
requirements. This will also be reflected in a simplified organization. In
parallel we will also accelerate investments both in R&D and services
capabilities in selected core areas to ensure that we can offer our customers
leading solutions.
Börje Ekholm, Ericsson President and CEO, says: "For some time Ericsson has been
challenged on both technology and market leadership and the group strategy has
not yielded expected returns. In our strategy review we have listened carefully
to customers around the world and made an in-depth analysis of our portfolio and
performance. To enable us to immediately take action and move with speed in
execution we are today outlining our path to restoring profitability and to lead
with innovation and best in class solutions in areas we have decided to focus
on."
Portfolio changes
We will take the following steps to focus and strengthen the core portfolio:
Accelerate and increase investments in key areas in Networks to support a
continued global rollout of 4G and establishing a leading position in 5G.
Target the Network Rollout business on Ericsson's own networks portfolio.
Ambition is to optimize the end-to-end offering to address our customers' needs.
The work to improve profitability in this area will be further sharpened.
For the newly created Digital Services Business Area, including cloud based
virtualized network infrastructure and applications, management and monetization
software (OSS/BSS) and related services capabilities, the near term focus is on
re-establishing profitability. As this area is strategically important to our
customers going forward, we will also selectively increase our investments to
enable Ericsson to be the partner of choice for our customers on their journey
to become digital service providers.
Shift the IoT strategy from a systems-integration-led approach to a platform-
and solutions-led strategy to better leverage our global scale and industry
expertise.
Refocus Managed Services strategy with emphasis on automation, fully leveraging
our global scale and OSS capabilities, to provide high-tech services and cost
efficient operations. Full attention on turning business around from a negative
result in 2016, addressing low- performing operations and contracts.
Explore strategic opportunities for the Media business while continuing to
develop our media solutions, to enable the business to scale and succeed in the
evolving media landscape. Our media business consists of two parts, managed
services and technology solutions. We will now create two separate units,
Ericsson Broadcast & Media Services and Ericsson Media Solutions, to create a
stronger operational focus. Video traffic today constitutes over 50% of mobile
data traffic globally, and is forecast to grow to 75% by 2022. We have built a
strong and competitive portfolio and we have become a world leading supplier of
TV & Media products and services.
As a consequence of our increased focus on software technology development
within virtualized core networks and management and monetization software
(OSS/BSS) we will explore strategic opportunities for the IT Cloud
Infrastructure hardware business.
Ekholm continues: "With these changes I am confident that we will create the
most intelligent and efficient networks, deliver the most competitive solutions
and constantly innovate to enable our customers to succeed in a fully connected
world."
Profitability and efficiency
In addition to the actions above, the company will continue our work to
rationalize legacy portfolio and drive company-wide efficiency measures.
Combined, these actions will establish a new and stronger earnings level for
Ericsson.
Ekholm says: "While we will continue our work to take out cost at high pace with
targets surpassing current ambitions, we will not guide on cost levels going
forward as it is an isolated part of the profit and loss statement. With the
actions announced today, and assuming stable market conditions, we foresee
significant improvements already in 2018. And beyond that I am convinced that
Ericsson, on a sustainable basis, can at least double the 2016 Group operating
margin, excluding restructuring charges. But even more importantly, I think that
we can deliver a return on capital employed that will create value for our
shareholders."
Short term financial implications
As a consequence of the change in Group strategy, certain intangible assets
including capitalized development within current segments Media and IT & Cloud
will be impaired in Q1. Ericsson estimates the operating income impact of this
in Q1 to SEK 3-4 b. with no impact on cash flow.
As a result of a planned higher pace in cost reductions, with current visibility
we estimate restructuring charges for 2017 to amount to approximately SEK 6-8
b., compared to previous estimate of SEK 3 b, of which approximately SEK 2 b. in
Q1.
Provisions related to events in Q1, 2017
Separately, provisions of an estimated SEK 7-9 b. will be required in Q1,
triggered by recent negative developments related to certain large customer
projects.
New company structure
The company also announces an organizational structure to support the long-
term strategy. A set of changes will be made to simplify the organization to
increase efficiency and speed up time to market and customer responsiveness.
In addition, actions are taken to increase accountability and empowerment
throughout the organization. Today the company has significant common costs that
are allocated. These resources will gradually be moved out to business and
market areas.
The new organization and P&L structure is built on a simplified model, combining
products and services where relevant into solutions to increase internal
efficiency and better reflect customer needs and requirements. The new structure
will have three Business Areas, Networks, Digital Services and Managed Services
as well as two separate units for the Media business, Ericsson Broadcast & Media
services and Ericsson Media Solutions. The current 10 regions are reduced to
five Market Areas, all represented in the Executive Team. The new Market Area
set up will align better to our global customers and reduce the number of
interfaces for them.
The new Executive Team will be effective April 1, 2017. All changes to structure
and management can be found on Ericsson press release page.
The first quarter of 2017 will be reported in accordance with the Segment
structure communicated on March 10, 2017, see press release. From Q2 and onwards
Segment Media will be renamed Segment Other and Segment IT & Cloud will be
renamed Segment Digital Services. Any additional changes to Segment reporting
and disclosures as a consequence of today's announcement will be communicated in
conjunction with the Q1, 2017 report.
CONFERENCE CALLS FOR ANALYSTS, INVESTORS AND JOURNALISTS
Two conference calls for financial analysts, investors and journalists will
begin at 9.00 CET and 15.00 CET.
President and CEO Börje Ekholm and CFO Carl Mellander will comment on today's
announcements and take questions.
To join the conference call, please call one of the following numbers:
International/UK: +442030089801 / UK Toll-Free Number: 08082370059
SE: +46856642691 / SE Toll-Free Number: 0200883817
US: +16465025116 / US Toll-Free Number: +18557532235
Please call in at least 15 minutes before the conference call begins. As there
is usually a large number of callers, it may take some time before you are
connected.
A live audio webcast of the conference call will be available
at: www.ericsson.com/investors and at: www.ericsson.com/press
REPLAY:
A replay of the conference call will be available from about one hour after it
has ended until April 4, 2017.
Sweden Toll Number: +46 85 664 2638
International Number: +44 20 3426 2807
Conference Number: 685390# - for 09.00 call
Conference Number: 685383# - for 15.00 call
FOR FURTHER INFORMATION, PLEASE CONTACT
Ola Rembe, Head of External Communications, Ericsson
Phone: +46 73 02 44 873
E-mail: ola.rembe(at)ericsson.com
Ericsson Corporate Communications
Phone: +46 10 719 69 92
E-mail: media.relations(at)ericsson.com
Ericsson Investor Relations
Phone: +46 10 719 00 00
E-mail: investor.relations(at)ericsson.com
NOTES TO EDITORS
For media kits, backgrounders and high-resolution photos, please visit
www.ericsson.com/press
FOLLOW US:
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Ericsson is a world leader in communications technology and services with
headquarters in Stockholm, Sweden. Our organization consists of more than
111,000 experts who provide customers in 180 countries with innovative solutions
and services. Together we are building a more connected future where anyone and
any industry is empowered to reach their full potential. Net sales in 2016 were
SEK 222.6 billion (USD 24.5 billion). The Ericsson stock is listed on Nasdaq
Stockholm and on NASDAQ in New York. Read more on www.ericsson.com.
This information is information that Telefonaktiebolaget LM Ericsson is obliged
to make public pursuant to the EU Market Abuse Regulation. The information was
submitted for publication, through the agency of the contact person set out
above, at 07.30 CET on March 28, 2017.
Ericsson presents focused business strategy:
http://hugin.info/1061/R/2091169/790019.pdf
This announcement is distributed by Nasdaq Corporate Solutions on behalf of Nasdaq Corporate Solutions clients.
The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.
Source: Ericsson via GlobeNewswire
Unternehmensinformation / Kurzprofil:
Datum: 28.03.2017 - 07:31 Uhr
Sprache: Deutsch
News-ID 532733
Anzahl Zeichen: 13016
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