Ericsson to be hit by SEK2.5B restructuring costs in Q2

Ericsson said its second-quarter results will be hit by restructuring costs of around SEK2.5 billion (€271 million/$304 million) as the company continues to implement measures first announced in November 2014 to reduce costs and improve efficiency.

The Sweden-based vendor, which recently ruled out the prospect of a major acquisition to meet the potential challenge of a merged Nokia and Alcatel-Lucent, said the figure would include additional restructuring charges related to the elimination of 2,100 positions across the group.

In March, to boost profitability and better compete with Huawei, Nokia and Alcatel-Lucent, Ericsson said it would cut around 2,200 jobs in Sweden, mainly in research and development and its supply chain.

The company added that savings related to the cost and efficiency programme would start to have an impact on its results towards the end of 2015. The overall goal of the programme is to reduce costs by around SEK9 billion, with the measures expected to take full effect from 2017.

In mid-April Nokia agreed to buy Alcatel-Lucent in a $17.5 billion (€15.6 billion) deal that would form a powerhouse to rival Ericsson in mobile and fixed networks, though that deal will likely not be completed until the first half of 2016.

It had been speculated that Ericsson would in turn seek a large-scale deal as one potential solution to maintaining the company's leading position in the global infrastructure market in the event the Nokia/Alcatel-Lucent deal gets approved.

However, after a review in late May the company concluded that it could expand its business without pursuing a major deal, according to a senior executive at the vendor.

"We have a very strong focus on core development," Rima Qureshi, Ericsson's chief strategy officer, told Reuters at the time. "We believe that the best approach, and the way we will go about it from a strategic perspective, is organic," she said.

For more:
- see this Ericsson statement

Related articles:
Ericsson decides against big M&A in wake of Nokia/Alcatel-Lucent deal, will focus on organic growth
Ericsson bosses mull large-scale takeovers to defend against merged Nokia/Alcatel-Lucent
Ericsson comes under spotlight after Nokia-AlcaLu unveil plans to merge
Could the Nokia/Alcatel-Lucent deal drive Ericsson to broaden its portfolio with a Ciena, Infinera or Juniper buy?

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