Why Ericsson’s Losses Widened in 3Q17



Ericsson posted a 4.3 billion krona loss

For 3Q17, Europe-based (EFA) telecom equipment vendor Ericsson (ERIC) posted a net loss of 4.3 billion Swedish kronor, compared with its loss of 180 million kronor in 3Q16. Analysts, on average, were expecting Ericsson to report a loss of 1.4 billion kronor for 3Q17.

The loss in its latest quarter came on revenues of 47.8 billion kronor, marking a 6.0% YoY (year-over-year) fall due to generally tough market conditions for telecom equipment vendors.

Ericsson and its European peer Nokia (NOK) have been reporting weak sales in their network units amid a slowdown in network investment by communication services providers now that the deployment of 4G LTE has nearly peaked in many key markets. According to a new report by OpenSignal, 4G availability has reached 96.7% in South Korea, 94.1% in Japan (EWJ) and 86.9% in the US (SPY).

Restructuring costs

While a decline in sales may have contributed to Ericsson’s loss in 3Q17, the widening of its losses relative to one year ago may have stemmed largely from rising restructuring charges and provisions as the company strives for more efficiency and responds to tough market conditions.

The company’s restructuring costs totaled 2.8 billion kronor in 3Q17, with costs arising from adjusted capacity and staff levels. Ericsson laid off ~3,000 employees in 3Q17 and finished the quarter with nearly 106,000 employees worldwide.

Provisions and adjustments

Ericsson made provisions and adjustments of roughly 2.3 billion kronor in 3Q17. The company said that these provisions and adjustments were largely related to the consequences of strategy implementation and changes in market environments in some countries.

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