Ericsson revenue drops 2% to $6.4 bn, 70% dip in net income

Ericsson CEO Hans Vestberg
Ericsson said its revenue fell 2 percent to SEK 52.2 billion or $6.42 billion in the first quarter of 2016 – primarily due to weak development in Europe and a weak macro-economic environment in some emerging telecom markets.

Sales of Ericsson grew in North America, Mainland China and in South East Asia.

Net income of Ericsson plummeted 70 percent to SEK 2.1 billion or $258 million.

In order to become more profitable, Ericsson, which competes with Huawei, Nokia, ZTE, etc. also announced a leaner organization. Its main rival Nokia recently announced it would cut thousands of employees following the acquisition of Alcatel-Lucent.

Segment Networks sales declined 2% to SEK 25,820 million
Global Services sales fell 4% to SEK 23,018 million
Support Solutions sale up 10% to SEK 3,371 million 

Ericsson said the number of employees on March 31, 2016 was 115,300 compared with 116,281 on Dec 31, 2015. Reductions as part of the global cost and efficiency program continued. However, the number of Ericsson services professionals remained unchanged at 66,000 on March 31, 2016.

Hans Vestberg, president and CEO of Ericsson, said: “Sales, adjusted for comparable units and currency, were stable. Growth in North America, Mainland China and South East Asia was offset by weak development in Europe and some emerging markets. Profitability increased, driven by improvements in Networks while Global Services had a challenging quarter.”

Segment Networks sales declined 2 percent to SEK 25,820 million. A continued weak macro-economic environment impacted sales negatively in some emerging markets in the Middle East and Latin America. In addition, sales in Europe were down primarily driven by completion of mobile broadband projects in 2015. Mobile broadband sales in North America and South East Asia grew and the fast pace of 4G deployments in Mainland China continued.

Sales in Global Services declined 4 percent to SEK 23,018 million mainly due to lower Network Rollout activities in Europe and Latin America. Professional Services sales were stable with growth in Consulting and Systems Integration driven by transformation projects and stable Managed Services sales with 21 contracts signed in the quarter.

Sales in Support Solutions increased 10 percent to SEK 3,371 million due to higher IPR licensing revenues. The underlying demand remains strong in OSS and BSS as data growth and increased focus on customer experience drives operators to transform their OSS and BSS solutions.

Structural changes

Ericsson announced structural changes to accelerate strategy execution and drive efficiency and growth. It will create a leaner, more fit for purpose, organization. “As 5G, the Internet of Things and Cloud drive the next phase of industry development, the time is right to make this change,” said Hans Vestberg on Thursday.

The new structure will have five business units and one dedicated customer group for Industry & Society.

Baburajan K
[email protected]