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© filipefrazao84 dreamstime.com_ Electronics Production | July 19, 2016

Ericsson steps up savings program - new layoffs awaits

The Swedish telecom company saw it sales declined by -11% YoY during its second quarter and net income dropped -26% YoY – as a response, the company is intensifying its actions to further reduce cost.
“To manage the lower demand for mobile broadband investments, a set of significant actions has been initiated to further drive efficiency improvements and reduce cost,” the company states in a press release.

The cost and efficiency program targeting savings of SEK 9 billion (EUR 948 million) during 2017, is progressing according to plan according to Ericsson. However, the company will still reduce its R&D investments in IP and aim to capture efficiency gains from its new company structure.

Together, these activities are expected to reduce the annual run rate of operating expenses, excluding restructuring charges, to SEK 53 billion (EUR 5.58 billion) in the second half of 2017. This is to be compared with SEK 63 billion (EUR 6.64 billion) for full-year 2014 and equates to double the previously targeted savings in operating expenses.

“Given current industry trends, we will intensify our activities to reduce cost of sales and adapt our operations to a weaker mobile broadband market,” the company writes, and continues: “We will focus on maintaining a strong net cash position through structural improvements in working capital and profitability. In addition, the capital expenditure level will decline as the investments in the global ICT centers have peaked.”

When asked by Swedish news agency TT if there will be a new wave of redundancies, CEO Hans Vestberg responded saying: “There is no country that will be excluded from this.”

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