Ericsson announces cost reductions after 24% net profit fall
Telecom company records fall in second quarter after weak product demand in its markets
Swedish telecommunications company Ericsson were forced into announcing cost-cutting measures on Tuesday after seeing their net profit for the second quarter fall by 24%, missing expectations by a long way.
Ericsson B
kr0.00
16:46 14/11/24
The company said its net profit for the period that ended in June fell to 1.59bn Swedish kronor ($0.186 billion) from 2.09bn kronor a year earlier. Second-quarter revenue came to 54.11bn kronor, down 11%, compared with 60.67bn kronor in the year-earlier period.
The fall in profits was blamed on the budget cuts by telecom operators, as well as difficulties in emerging markets.
"In light of market development, management has, with the support of the board of directors, initiated significant actions to further reduce cost," said CEO Hans Vestberg in statement.
Specifically, research and development investments in intellectual property and capture efficiency would see reductions, after only being announced in April.
The prospect of action on costs appears to have gone down well with investors as the shares rose by as much as 1.6% during early European trading, but shares remain 19.9% lower than they were in January this year.
The company hopes the total annual savings will reduce the annual running rate of expenses to 53bn Swedish kronor in 2017, compared with 63bn in 2014.