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How Is Ericsson Looking to Increase Its Shareholder Value?

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Restoration of financial performance

At its investor event in November 2016, Ericsson (ERIC) stated that one of its short-term priorities was to restore its financial performance by way of cost-savings and the reduction of its working capital. The company’s medium-term goal is to have a broader and more competitive portfolio, with continued focus on financial discipline for profitable growth.

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Focus on high-growth areas

As we’ve learned, Ericsson is looking to invest in high growth areas such as 5G (fifth-generation) and IoT (Internet of Things) technology. Ericsson aims to spend 40% of its capital expenditure (capex) in the IT (information technology), cloud, and media sectors.

EPS and dividend

As seen in the above chart, Ericsson’s earnings per share (or EPS) rose from 1.8 Swedish krona in 2012 to 3.72 krona in 2013, 3.57 krona in 2014, and 4.17 krona in 2015. The company’s dividend per share also rose from 2.75 krona in 2012 to 3 krona in 2013, 3.4 krona in 2014, and 3.70 krona in 2015.

Ericsson stated that its capex accounted for 3% of its net sales between 2012 and 2015. It expects its capex to fall to 2% of its net sales in 2016 and 2017. The company spent over 5 billion krona (~$542 million) from 2012 to 2015.

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