Ericsson to Cut Costs Further After 24% Drop in Net Profit --Update

By Matthias Verbergt 

STOCKHOLM--Swedish telecom-equipment maker Ericsson AB announced further cost reductions after reporting a 24% drop in second-quarter net profit, citing continued weak product demand in most of its markets.

The company, one of the world's largest telecom-equipment providers, said on Tuesday its net profit for the period that ended in June fell to 1.59 billion Swedish kronor ($0.186 billion) from 2.09 billion kronor a year earlier. Second-quarter revenue amounted to 54.11 billion kronor, down 11%, compared with 60.67 billion kronor in the year-earlier period.

Ericsson attributed the decline in sales to budget cuts by telecom operators, many of which completed large broadband projects last year, while several emerging markets suffered from slower economic growth.

The company said it would double its savings in operating expenses by 2017, having announced earlier an efficiency program of 9 billion Swedish kronor.

Ericsson added that it would reduce research and development investments in intellectual property and capture efficiency gains from the new company structure it announced in April.

The firm expects the savings to lower its annual running rate of operating expenses, excluding restructuring charges, to 53 billion kronor in the second half of 2017, compared with 63 billion kronor for full-year 2014.

"To manage the lower demand for mobile broadband investments, a set of significant actions has been initiated to further drive efficiency improvements and reduce cost," Ericsson Chief Executive Hans Vestberg said.

Write to Matthias Verbergt at [e-mail]

(END) Dow Jones Newswires

July 19, 2016 03:01 ET (07:01 GMT)

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