Guo Xiaofeng reported on October 23
The latest quarterly earnings of Ericsson this old communications equipment manufacturers some disadvantage.
Financial reported that Ericsson's net revenue for the third quarter was SEK 47.8 billion (about 38.77 billion yuan), down 6 percent from the same period last year and a net loss of SEK 4.3 billion (US $ 530 million) Year net loss of 2 billion kronor (about 240 million US dollars).
For loss, Ericsson is due to a severe development environment. Ericsson president and CEO Borje Ekholm said: "The market situation is still grim. At present, our business in North America is relatively stable, while sales in mainland China fell, mainly because after a large-scale 4G network deployment, the market has stabilized.
Before the arrival of 5G, the global operators of the network investment slowdown is an indisputable fact. In the quarter, Ericsson's online business sales fell 4% year-on-year. Gross margin was 25.4%, compared with 28.3% last year, a slight decline. Similarly, the shrinking market environment also affected in Huawei. Last year, Huawei's business revenue growth rate of only 4%, far less than the previous year's 16.4%.
Bad environment, Ericsson had to make drastic adjustments. In fact, Ericsson's transformation and streamlining has continued over the past few years. In the face of fierce competition in the industry and the reduction in the cost of wireless operators, last year, Bao Yikang since the president and CEO, stressed the profitability and efficiency, intended to revitalize the technology and market leadership.
In terms of business, Ericsson first decided to focus on reducing the portfolio of products to ensure the effectiveness and efficiency of the company. Ericsson will reallocate resources and increase investment in the network, digital business (OSS / BSS and telecom core network) and Internet of Things (IoT), and will explore the media and cloud infrastructure hardware business.
In addition, to increase investment to enhance competitiveness is also an important one. It is understood that the third quarter earnings included a restructuring of 2.8 billion kronor, including an information and communication technology center related to the 1.6 billion kronor of the provision of assets. Ericsson hopes to be able to compete in the same competition with Huawei become more competitive. Ericsson expects the company's reorganization spending for the full year of 2017 to be between SEK 9 billion and SEK 10 billion.
In line with the new strategy, Ericsson also streamlined the company's organizational structure, the abolition of the previous executive leadership team and the global leadership team two-tier leadership structure, the formation of a separate executive team. In addition, the global 10 regional institutional settings will become five market areas, business areas will be re-divided and reduced to three areas.
Cutting costs and improving efficiency is a core component of Ericsson's focus on development strategies. In the quarter, Ericsson accelerated the adoption of measures and launched a plan to cut labor in multiple markets. This quarter, the global staff cut the net number of 3,000 people.
In this regard, Tencent technology from the relevant person in charge of Ericsson learned that the scope of the layoffs spread to the world, focusing on Europe and Latin America, the Chinese market layoffs rarely, little impact. The specific number of its not disclosed.
The market is still challenging, but Ericsson has also made some encouraging progress.
Through the third quarter earnings, from which you can see the Ericsson situation to some of the clues, Ericsson in the situation to reverse the efforts are playing a role. For example, Ericsson will focus on the profitability of the IT & amp; Cloud business, which is expected to help improve gross margin in 2018. Core business - network operations achieved double-digit adjusted operating margins in the fourth quarter of 2017 and many more.
"We continue to pursue a more focused business development strategy," he said. Although the market environment is still grim, there is still a lot of work to do, but we have begun to see the company's performance has made some encouraging progress. According to the North American region after the re-defined scope of the management services contract and currency exchange rate adjustment, the network business year-on-year sales rose slightly. Network operations adjusted operating margin of 11%. Despite the continued loss of IT & amp; Cloud business, the stability of our product line and project has been enhanced.
The outside world have also optimistic about this series of Ericsson initiatives. Affected by this, Ericsson's shares in the Stockholm trading market rose 5.6%, reaching the biggest gain since June 2016.
In addition, in the 5G side, the outside world generally believe that this is Ericsson to reverse the decline in the performance of an important turning point.
In the just-concluded China 5G technology research and development test the second phase of the test, Ericsson 5G wireless 3.5GHz prototype test equipment to achieve through the air port transmission, complete single-user, multi-user performance demonstration and mobile distance test, the performance is very satisfactory. Ericsson's indicators have now reached the Ministry of Industry test standards, 3.5GHz URLLC delay of less than 0.5 milliseconds, single-node throughput of about 1.6Gbps, high frequency can achieve 14.4Gbps, and successfully received by the Ministry of Industry issued 5G technology research and development test certificate.
Ericsson, as a leader in communications technology, especially mobile communications technology and markets, has been working with industry partners to promote the development of the 5G industry in recent years. Next year, global operators will usher in large-scale 5G testing and deployment, which is a good opportunity for Ericsson to stand up.