Ericsson CEO Hans Vestberg was not able to live up to the low expectations. Photo: Daniella Backlund
Ericsson’s state-refresh rooms in the heart of Kista Science Park gathered about thirty reporters and analysts to listen to CEO Hans Vestberg drawing first-half profit on Tuesday. And despite the fact that expectations were low, he managed to make the market disappointed with the numbers.
– It’s been a tough quarter. The negative trend that we saw at the end of last year has intensified in the second quarter. Macro economy has been negative and devaluations have been great, Vestberg said at the press conference.
The numbers landed net sales of SEK 54.1 billion, well below the expected 55.4 billion according to SME Direkt analysts compilation. Ericsson CEO also announced that the current sales trend is expected to continue during the second half of 2016.
But most of the attention created not Vestberg with talk of declining sales – but when he announced that the company is taking significant additional savings measures. The existing savings package at 9 billion will be expanded and the annual operating costs will be reduced by as much as 10 billion.
– It’s quite extensive cost savings that we advertise. Regarding omkostnadsbasen we will double our cuts until the second half of 2017, compared to what we have communicated earlier, says CEO Hans Vestberg told SvD Business.
The new austerity measures Also included among other things, reduced investment in research and development. In total, the entire savings package to at least 14.5 billion.
As a result, Ericsson confirmed that thousands of workers will be laid off, which is expected to knock out the entire global group.
– this will affect people worldwide, and no market is excluded from this, Vestberg says.
the union Ericsson responded with strong criticism of the saving plans – and even questioned the whole Ericsson management. An excessive focus on the economy means that the technology risk of savings, says Per Norlander, Chief union negotiator for the Swedish engineers at Ericsson.
– There is an imbalance that occurred during the time Hans Vestberg. Those, he surrounds himself with the company’s top layers have too much financial weight and too little weight technology, he says, and continues:
– I get disappointed when it presented solutions other than savings program. I miss bets and a belief in the future.
Meanwhile, the restructuring an expensive business for Ericsson. Restructuring costs will land between 4 and 5 billion in 2016, according to the company.
With savings mortified wanted Vestberg stress that Ericsson has to adapt to the weak market for mobile broadband. Instead, Ericsson direct more focus on other selected growth areas 5G, Internet of Things and cloud services.
Ericsson reports received the company’s stock price to ride the roller coaster at the Stockholm Stock Exchange yesterday . At the same time as the press conference began, investors responded by lowering the Ericsson share.
In conjunction with the news of the savings package shares climbed again, to 3 percent plus – but the joy was short-lived. When the stock market closed, the closing price was down the entire 5.59 percent, following yesterday’s decline of over 3 percent. Since year-end a quarter of Ericsson’s market capitalization lost.
And it’s not just the share price which suffered badly during the year. Since Ericsson confessed color in the first quarter, the sea stormed significantly to the company’s highest peak. There has been talk of extravagant bonuses to the company’s management and board, contested lyxflygningar and corruption suspicions. Most recently also revealed SvD Business to Ericsson, according to sources, the use of aggressive accounting to keep up the sales figures.
The recent turmoil has also led to criticism rained upon Vestberg whereupon many have questioned the role of CEO. But for SvD ducks, he asked how long he looks to remain on the record and focus on the present.
– Today we launch again very activities. We’ve talked about a new structure that will be easier and faster to be able to reduce costs. My and management’s focus is to execute this and improve our performance as a company.
Ericsson reports in figures
Net sales for the second quarter of 2016 was SEK 54.1 billion, well below the expected 55.4 billion according to SME Direkt analysts compilation. In annualized terms, sales decreased by 7 percent, adjusted for comparable units and currency effects.
Operating profit was 2.8 billion, compared with expectations of over 3 billion. While backing the operating margin and the gross margin was 5.1 and 33.2 percent, in line with expectations. Sales were pressed in all business areas Networks, Support Solutions and Global Services. However, surprised the Global Service, with the operating margin since last year.
No comments:
Post a Comment