Ericsson reported worse than expected second quarter earnings on Tuesday and the company remains in the red. Reduced software sales led to lower sales overall, according to Börje Ekholm, who took over as President/CEO of the Swedish telecom in January. However, a bright spot is the company’s new radio platform that allows customers to upgrade to narrow band IoT and 5G.
“We have started to increase investments in R&D in radio and here it is again to prepare ourselves both for stronger product offering in LTE as well as getting ready for the 5G launch, which will happen in the next few years,” said Ekholm, speaking with analysts Tuesday as he explained the results; he pegged penetration of the Ericsson Radio System at 49 percent of deliveries, with the goal of reaching 100 percent next year, according to a Seeking Alpha transcript.
IT and cloud sales losses were largely explained by lower capitalization of R&D expenses, “due to a large or a significant fall in the established product portfolio,” according to Ericsson. The company is executing on a turnaround plan. “We need to establish profitability which is by improving our delivery efficiency,” said Ekholm.
The company is also accelerating plans to cut costs. However, fixing Ericsson will probably take at least two to three years with no guarantee of success, reports Bloomberg, which notes the carrier cannot just eliminate products overnight that telecom operators have built into their infrastructure.
July 19, 2017
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