Published in Mobiles

Swedish Ericsson returns to networks

by on27 June 2017

New business is borked 

Swedish outfit Ericsson has given up on getting more clients beyond the telecoms industry to refocus on selling networks to mobile phone companies.

The move is to try and cut costs and halt a dramatic fall in its share price.

Ericsson’s key clients include Vodafone and Verizon but it has seen its profits fall due to competition from Nokia and China's Huawei. Telecoms companies are also cutting back and Ericsson shares have fallen 30 percent in two years.

In 2014 it announced plans to diversify so that by 2020 up to 25 percent of revenue would come from industries beyond telecoms, such as media, utilities and transport, from an estimated 10 percent in 2013.

But according to Reuters that cunning plan has failed and the company will drop the target as new chief executive Borje Ekholm repositions to focus on the core business of mobile networks.

Ericsson's new head of Digital Services Ulf Ewaldsson told Reuters in a recent interview that it would focus on telco clients and networks exclusively for now.

The U-turn comes at a challenging time for Ekholm, who after only five months in the top job is being pressed by activist investor Cevian Capital, which has a $1 billion stake in the company, to make faster changes.

Ekholm unveiled a cost-cutting plan in March and announced up to $1.7 billion in provisions, writedowns and restructuring costs. He said this would include exploring options for its loss-making media arm and turning its managed services business around.

Increasing dependence on telecoms operators is just as risky as they are struggling to grow revenue due to fierce competition and so are unwilling to spend more on networks even as they prepare for 5G fifth-generation wireless broadband technology.

Last modified on 27 June 2017
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