Ericsson Targets To Reduce Costs By At Least SEK 10 Bln By Mid-2018

(RTTNews) - Ericsson (ERIC) said that it has a target to reduce costs by at least 10 billion Swedish kronor by mid-2018 compared to 2017. By the end of the year, 6 billion kronor in cost savings had been achieve.

For 2020, when Ericsson expects net sales of 190 billion kronor - 200 billion kronor, the plans now in place will bring the company to a gross margin of 37-39% and an operating margin of at least 10%, excluding restructuring charges. Over time, with the ramp up of 5G and contribution from innovation and new businesses, Ericsson's target is an operating margin of at least 12%.

Ericsson said it is well-positioned within 5G and the company has aimed to make the transition from 4G to 5G as easy as possible for its customers. This has generated a growing interest in the company's 5G product portfolio.

Speaking at the Ericsson Annual General Meeting, President and CEO Börje Ekholm summarized the company's focused business strategy, its financial performance and the measures taken to improve company performance during 2017.

Ekholm said, "We are confident that the strategic choices we have made will create a strong and successful Ericsson over time. But as you know, we are not there yet."

Ekholm said, "2017 was a tough year with a continued declining market. We are far from satisfied with our performance and have taken a number of actions to turn around the development and improve profitability, to build a strong Ericsson for the long term."

Ekholm explained that Ericsson has worked to stabilize the business and simplify the organization. This work has included: 42 non-strategic contracts identified in Managed Services, of which 23 has been either exited or renegotiated during the year. In Digital Services, product roadmaps and project delivery have been stabilized, and 45 non-strategic or unprofitable contracts have been identified, of which around 50 percent should be either concluded or exited during 2018. Large cost savings in the media business, a majority of Media Solutions divested.