First quarter revenues fall 11% Ericsson opens up a difficult transition

The transformation of telecommunications giant Ericsson is full of thorns. Although the newly appointed CEO Borje Ekholm is actively promoting the transformation, reducing weight for the team and increasing operating profitability, investors of the Swedish telecom equipment manufacturer will worry that the transition of Ericsson will be slow.

Due to the weak performance of mobile widescreen business in North America and Latin America, Ericsson’s revenue in the first quarter fell by 11% year-on-year to SEK 46.4 billion (US$5.3 billion), which was lower than the analysts’ previous forecast of SEK 47.3 billion.

In the first quarter, Ericsson suffered a loss of 12.3 billion Swedish kronor (1.4 billion U.S. dollars), but the situation did not look so bad. This figure has been affected by a series of asset impairment and restructuring charges. Ekholm started his career as CEO in January this year.

In Tuesday's trading, Ericsson's share price once fell 2%.

More importantly, if Ekholm chooses to sell or close its loss-making media and IT businesses, the goal of doubling the operating profit from the 2016 level seems completely achievable (elimination of reorganization costs). Ericsson’s core network business accounted for 3/4 of its net revenue, with a profit margin of 12%, close to Ekholm's 12.4% target.

The question is whether investors should believe that Ekholm can do this.

The reorganization costs announced in March surprised investors. And if bad news is made public, investors may no longer buy it.

In addition, Ekholm has not specified his plans for the media and cloud infrastructure hardware business, but said that he will explore "strategic options." It may be difficult to find buyers to accept these services, and the cost of closing the business is very expensive.

Cost reduction for the entire company is slowly advancing. In the first quarter, Ericsson’s operating expenses fell by less than 1% (excluding restructuring charges, asset impairments and provisions). Ericsson’s corporate value is less than 8 times EBITDA, which is also lower than that of rival Nokia. This reflects that the market believes that Ekholm's transformation plan is theoretically good, but the promotion of this plan will continue to be greatly disturbed.

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Printed circuit board, also known as printed circuit board, printed circuit board, often uses the English abbreviation PCB, is an important electronic component, is the support of Electronic Components, and is the provider of Electronic Components circuit connection. Because it is made using electronic printing technology, it is called a "printed" circuit board. Simply put, PCBA can be a series of technological processes consisting of SMT chip processing, DIP plug-in processing and PCBA testing, referred to as PCBA.
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