In reporting second-quarter earnings, Ericsson officials assured analysts today that cost-cutting measures are on track and that expenses are going to drop in the second half of this year.
The Global Efficiency Program, as it’s called, “accelerated” during the second quarter as “some 4,000 people” left the company, CEO Hans Vestberg said on today’s conference call. That figure doesn’t include cuts in Sweden — 2,100 jobs being cut, resulting in 1,700 employees leaving — that were announced in June and will be accounted for in the second half of the year.
Ericsson employs more than 110,000 people.
Analysts seemed disappointed that operating expenses, at SEK 16.1 billion ($1.9 bilion), weren’t down further compared with last year. The number is actually larger than it was in last year’s second quarter, but it’s down when normalized for currency effects and a restructuring charge, officials said.
Still, Vestberg promised the company would slim down further, especially after the cuts in Sweden are accounted for. His target has been a savings of SEK 9 billion ($1 billion) in 2017 compared to 2014.
Ericsson also hopes its gradual move to a software model — a common theme among networking vendors — will save costs as well. For now, there’s some investment involved, particularly in three engineering centers being built in Sweden and Canada.
But that’s the type of investment that will streamline the company in the long run by making software testing more efficient, CFO Jan Frykhammar said on the call.
Ericsson reported second-quarter sales of SEK 60.7 billion ($7 billion) and net income of SEK 2.1 billion ($243 million), or SEK 1.45 (17 cents) per share. Taking into account restructuring charges and other write-downs, earnings per share were SEK 0.64 (7 cents).
In last year’s second quarter, Ericsson reported sales of 54.8 billion kronor ($6.4 bilion) and net income of 2.7 billion kronor ($313 million), or SEK 0.79 (9 cents) per share.