Ericsson's sales continue to decline in Q2
Company sees an increased risk of further market and customer project adjustments
Ericsson's reported sales decreased 8% YoY in the second quarter of the year.
Gross margin for Q2 stood at 27.9% while operating income amounts to SEK -1.2bn ($ -150bn). Sales in the Middle East and Africa declined 17% YoY.
"We are not satisfied with our underlying performance with continued declining sales and increasing losses in the quarter," said Börje Ekholm, president and CEO of Ericsson. "Execution of our focused business strategy is gaining traction. However, in light of current market conditions, we are accelerating the planned actions to reduce costs."
Ekholm further cautioned that considering the current market environment, the company position, and the more focused business strategy, Ericsson foresees an increased risk of further market and customer project adjustments, which would have a negative impact on results, estimated to SEK 3-5bn ($360- 600m) for the coming 12 months, of which 30% is estimated to impact cash.
"One key component in our focused business strategy is to reduce costs and increase efficiency," he added. "In light of the current market outlook, we will accelerate our actions to ensure that we can meet our target of doubling the 2016 operating margin beyond 2018. Actions will be taken primarily in service delivery and common costs and do not include R&D. Our plan is to implement cost savings with an annual run rate effect of at least SEK 10bn ($1.2bn) by mid-2018, of which approximately half will be related to common costs."