It’s been a long and painful first quarter for Swedish equipment maker Ericsson as the company reported its quarterly revenue decreased 11 percent year-over-year to $5.2 billion. The infrastructure vendor also reported a net loss of $1.2 billion for the quarter.
The drop in revenue was blamed on the decrease in mobile broadband sales and an increase in write-downs and restructuring charges. Restructuring charges were $1.5 billion for the quarter.
Ericsson CEO Börje Ekholm admitted the company’s performance was unsatisfactory and said that the previously-announced cost reduction program had not done enough to turn things around for the company. In 2014 Ericsson announced the plan and said it would save the company more than $1.05 billion in expenses by year-end 2017. At the end of 2016, the company said it was on track with that plan.
Ekholm said the company will intensify its efforts to reduce costs and will continue to make structural changes. “We need to intensify efforts on cost side,” he said. “We need to streamline our portfolio and free up resources and simplify the organizational structure.”
Ericsson’s networks business continues to be its bright spot. The division reported an adjusted operating margin of 12 percent, despite lower sales and reduced IPR licensing revenues.
“We feel that the performance here is solid and showing the strength of the product portfolio,” he said.
But it’s a different story for Ericsson’s Cloud and IT division, which continues to rack up the losses. That division’s sales were down 7 percent. Ekholm said this was because of the decline in the sales of its legacy products, which dropped faster than expected. And the company also saw slower growth in the new product portfolio. He said the company expects this to improve but may not see results until 2018.
North America continues to be a strong market for Ericsson. Ekholm said the market is stable but experienced a 10 percent decline primarily due to the company’s managed services contract with an operator that was reduced in scope.
Interestingly, Ericsson said it expects radio access network equipment in the U.S. to decline by 2 percent to 6 percent this year.
In late March, Ericsson announced it would have restructuring charges of between $1.8 billion and $2.4 billion this year as it tries to revamp its struggling business amid slowing sales of 4G equipment and increased competition from Chinese vendors like Huawei and ZTE.
At the time, Ekholm said that Ericsson had been spreading itself too thinly and would focus on core businesses like networks, digital services, IT, and cloud. The company also said it may consider selling its media and cloud infrastructure hardware businesses that have been unprofitable.