Ericsson charges millions after reorganization of business division

Ericsson charges millions after reorganization of business division

Ericsson, Sweden, says it will charge $687 million in the fourth quarter, after a revamp of its loss-making Business Support System (BSS) unit failed. That’s what Reuters says. The mobile telecom equipment manufacturer now says it is implementing a new BSS strategy.

A previous plan to scale up BSS with a new platform to help customers who needed to upgrade to large IT systems turned out to have had no revenue. “The expected demand from customers did not come true,” says Ericsson. “In addition, some complex transformation projects were delayed and cost more than expected.”

Shares in Ericsson fell by 4.1 percent when the company also said it expected other costs in 2019, which are related to planned measures. It’s about cutting staff, among other things. These costs amount to 1.5 billion crowns.

Logical step

Cevian Capital, one of Ericsson’s largest shareholders, says the plans to adjust the strategy were logical. “Today’s decision is fully in line with our plan for a more focused, simpler and improved Ericsson,” says Cevian. The investor said to accelerate the reorganization of BSS and to focus on its core products. This should reduce BSS losses in 2019.

BSS is part of Digital Services and offers products to create accounts in real time. Digital Services as a whole accounts for approximately 17 percent of sales and generated sales of SEK 25.1 billion between January and September 2018. However, the department made a loss of SEK 4.9 billion.

Ericsson says he expects his new BSS strategy to put Digital Services on a “strong path” to achieve his low margin goals by 2020. This margin should reach 10 to 12% by 2022.

This news article was automatically translated from Dutch to give a head start. All news articles after September 1, 2019 are written in native English and NOT translated. All our background stories are written in native English as well. For more information read our launch article.