Activist investor calls on Ericsson to ‘drain the swamp’

Activist investor calls on Ericsson to ‘drain the swamp’

The investor is demanding that Ericsson clean up its act and eliminate losses.

Activist investor Cevian Capital called Ericsson’s third-quarter results “disappointing” and demanded changes be made, according to Bloomberg News. The call came after the telecom network provider reported profit that missed analysts’ estimates. The stock dropped to its lowest level in more than two years. 

“The earnings miss is driven by the divisions outside Networks, namely Cloud Software & Services and Enterprise,” said Christer Gardell, founder and managing partner of Cevian, which owns about 5 percent of Ericsson according to data compiled by Bloomberg. “Here, you must drain the swamp of losses.” This is not the first time that Cevian has demanded an urgent course correction from the telco giant.

Adjusted quarterly operating profit was 7.2 billion Swedish kronor ($643 million), Ericsson said in a statement on Thursday. That missed analysts’ forecast of 8.51 billion Swedish kronor, according to the average of estimates in a Bloomberg survey. 

CFO blames rising energy costs

The company, one of the world’s biggest providers of 5G networking equipment, said it would make pricing adjustments and find ways to manage margins. Ericsson CFO Carl Mellander said he’s looking for ways to save money and could consider cuts to headcount, property holdings and energy use. At the same, Mellander emphasized it’s too early to say anything definitive about potential job losses. 

Rising energy costs are making Ericsson’s customers more price sensitive, and the company is looking for ways to promote technology that’s more efficient, the CFO added. “Energy consumption has become, I would say, more and more important as part of that evaluation. There many components there, but energy has really come up because of the climate, of course, CO2, but also the soaring energy prices.”