Ericsson said that it will pursue a more focused business strategy to revitalize technology and market leadership, improve group profitability and enable customer success.
The overall strategy is to enable service providers to expand their business across industries and into new profit pools. We will drive the development of market-leading solutions, fully leveraging the potential of 5G, IoT and cloud.
Restoring profitability is key and we will start by focusing the portfolio to fewer areas and securing effectiveness and efficiency in operations.
We will increase emphasis on solutions across the company, combining products and services, to drive efficiency and better meet customer needs and requirements. This will also be reflected in a simplified organization. In parallel we will also accelerate investments both in R&D and services capabilities in selected core areas to ensure that we can offer our customers leading solutions.
Ericsson highlights the following point as its strategy moving forward;
- Focused business strategy and improved internal efficiency to restore profitability, significantly improving operating income and margin, and revitalizing technology and market leadership
- Reallocated resources and increased investments in the following core portfolio areas: networks, digital services (OSS/BSS and telecom core) and Internet of Things (IoT)
- Refocused strategy for Managed Services to improve profitabilityStrategic opportunities to be explored for the Media and Cloud Infrastructure hardware businesses
- Write down of assets to be made in Q1, 2017, with an estimated impact on operating income of SEK 3-4 b.
- Restructuring charges estimated to approximately SEK 6-8 b. for 2017, of which approximately SEK 2 b. in Q1.
- Separately, provisions of an estimated SEK 7-9 b. will be made in Q1, triggered by recent negative developments related to certain large customer projects
- Simplified organizational structure and new appointments to the Executive Team.
The company also announces an organizational structure to support the long-term strategy. A set of changes will be made to simplify the organization to increase efficiency and speed up time to market and customer responsiveness, said Ericsson.
The new organization and P&L structure is built on a simplified model, combining products and services where relevant into solutions to increase internal efficiency and better reflect customer needs and requirements. The new structure will have three Business Areas, Networks, Digital Services and Managed Services as well as two separate units for the Media business, Ericsson Broadcast & Media services and Ericsson Media Solutions.
The current 10 regions are reduced to five Market Areas, all represented in the Executive Team. The new Market Area set up will align better to our global customers and reduce the number of interfaces for them.
Borje Ekholm, President and CEO, Ericsson
For some time Ericsson has been challenged on both technology and market leadership and the group strategy has not yielded expected returns. In our strategy review we have listened carefully to customers around the world and made an in-depth analysis of our portfolio and performance. To enable us to immediately take action and move with speed in execution we are today outlining our path to restoring profitability and to lead with innovation and best in class solutions in areas we have decided to focus on.
