Ericsson to book up to $1.7b in charges in Q1

Ericsson has announced plans for a major strategic refocus after allocating up to $1.7 billion in provisions, writedowns and restructuring charges for the first quarter.

The company announced it will take provisions of around 7 billion to 9 billion krona ($792.8 million to $1.02 billion) during the first quarter, triggered by “recent negative developments related to certain large customer projects.”

Ericsson did not provide further details of the reason for the provision, which has raised the eyebrows of investment analysts.

In addition, the company will write down assets during the first quarter that will have an estimated impact on operating income of 3 billion to 4 billlion krona ($339.8 million to $453.1 million), and has allocated around 2 billion krona for restructuring charges for the period.

As a result of the challenges it is facing, Ericsson said it will pursue a more focused business strategy to restore profitability and healthy operating margins, focused on leveraging the potential of 5G, IoT and cloud.

Ericsson’s portfolio will be reduced to fewer areas, and the company will be more focused on developing solutions combining products and services. The company aims to simplify its organizations structure and accelerate its R&D investments in certain core areas.

“For some time Ericsson has been challenged on both technology and market leadership and the group strategy has not yielded expected returns,” Ericsson CEO Börje Ekholm said.

“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.”

Focus areas will include networks and network rollouts, digital services, the IoT, managed services as well as ICT cloud infrastructure hardware.