Ericsson To Speed Up Restructuring Of BSS; Estimates Costs Of SEK 6.1 Bln In Q4
Ericsson’s (ERIC) announced the company’s focus on simplifying and stabilizing the business during the three first quarters of 2018 resulted in stronger gross margins and a stabilizing topline. However, the Business Support System (BSS) area is not showing satisfactory progress jeopardizing Segment Digital Services’ overall profitability target for 2020, the company said.
Ericsson has now decided to pursue additional measures to speed up the restructuring of the BSS business, including its product and contract portfolio. Provisions for the cost for executing on these planned measures will, together with necessary contract loss provisions, negatively impact operating income in fourth quarter 2018 by 6.1 billion Swedish kronor, mainly impacting gross margin. Out of this amount, 3.1 billion Swedish kronor, is treated as restructuring charges.
Ericsson noted that further restructuring charges related to the planned measures, including related headcount reductions, estimated to 1.5 billion Swedish kronor are anticipated in 2019.
Ericsson said the planned measures will materially contribute to reducing losses in the BSS area already in 2019 and de-risk the plan. The company’s current assessment is that the reshaped BSS strategy will set Segment Digital Services on a strong path to achieving the operating margin targets (excluding restructuring) of low single-digit in 2020 and 10 – 12 percent no later than 2022.
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