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Bloomberg
Ericsson AB will accelerate cost cuts after posting sales that missed analysts’ estimates, as Chief Executive Officer Hans Vestberg battles waning demand for mobile-network gear.
Ericsson said it will reduce research and development spending and try to reap efficiency gains from a new company structure. Second-quarter sales fell 11 percent to 54.1 billion kronor ($6.3 billion) as phone carriers in Europe, Russia and Brazil curbed investments in wireless equipment. Analysts predicted a 9 percent drop to 55.2 billion kronor on average.
With sales in decline, Vestberg has little choice but to keep cutting costs while Ericsson fights for market share and waits for an upturn in spending from coming 5G wireless networks. A partnership with Cisco Systems Inc. allows the company to lower its investments in so-called internet protocol networks that carry web traffic.
“It’s tough out there and we believe it will stay so for at least the remainder of this year,†Chief Financial Officer Jan Frykhammar said in an interview. “We’re going to keep investing in our 5G leadership while reducing some of our spending in the IP space.â€
Shares of Ericsson fell 2.3 percent to 62.90 kronor at 11:54 a.m. in Stockholm. They had slumped 22 percent this year through on Monday.