© Ericsson Electronics Production | January 10, 2019
Troubles on the horizon for Swedish Ericsson
The Swedish telecom company’s segment, Digital Services, is not moving along as planned, and the Business Support System (BSS) areas is not showing the progress it needs, thus jeopardising the entire Digital Services segment’s overall profitability target for 2020.
Ericsson’s focus on simplifying and stabilising the business has during the three first quarters of 2018 resulted in stronger gross margins and a stabilising topline. Focus has been on addressing underperforming areas while creating a strong platform for future growth; and there has been solid progress in most portfolio areas. However, the segment Digital Services, has yet to complete its turnaround, actions proceed according to plan with efficiency improvements and cost reductions. However, the Business Support System area is not showing the improvements needed, the company explains in a press release. The anticipated customer demand for a full-stack pre-integrated BSS solution has not materialised. Delays in product and feature development has also made the full-stack Revenue Manager less competitive. R&D resources in BSS have been focused on full-stack Revenue Manager, causing further delays in product releases of the established platform. In addition, certain complex transformation projects experienced delays and cost overruns, the company says. Therefore, Ericsson is going to tackle this issue with a revised BSS strategy which includes increased investments in the established platform, Ericsson Digital BSS, and refocusing the full-stack Revenue Manager to fulfilling existing customer commitments only. The company says that focusing on the established and competitive billing, charging, mediation, order management, and catalog portfolio, with an existing large installed base, will strengthen Ericsson’s BSS business. As a result of this Ericsson has decided to pursue additional measures to speed up the restructuring of the BSS business, including its product and contract portfolio. Provisions for the cost for executing on these planned measures will, together with necessary contract loss provisions, negatively impact operating income in Q4 2018 by SEK 6.1 billion (EUR 594.97 million), mainly impacting gross margin. Out of this amount, SEK 3.1 billion (EUR 302.31 million), is treated as restructuring charges. Further restructuring charges related to the planned measures, including related headcount reductions, estimated to SEK 1.5 billion (EUR 146.28 million). are anticipated in 2019.