Ericsson is seeing increased momentum in 5G, including in North America, but it continues to struggle as the demand for LTE gear dwindles, reporting its fifth straight quarter of losses while announcing a shakeup in the executive ranks.
The Swedish vendor reported sales decreased by 12% in the fourth quarter, with sales decreasing by 10% for the full year 2017 in all segments. Its net loss was $2.4 billion for the fourth quarter.
Shares were trading down about 8%, to $6.40, after the report came out.
“It was a tough year, no question,” said President and CEO Börje Ekholm during a press briefing. In Digital Services specifically, the losses were expected "but unacceptable,” he said. “We clearly need to focus on turning Digital Services around.”
The changes mean Ulf Ewaldsson, currently head of Business Area Digital Services, will leave the executive team effective Feb. 1 after having put that organization in place; he will be assuming a role as advisor to the CEO. Also leaving is Elaine Weidman, currently head of Group Function Sustainability & Public Affairs.
Jan Karlsson, currently head of Solution Area BSS, will step in as acting head of Business Area Digital Services. In the area of emerging business, Åsa Tamsons, formerly with McKinsey & Company’s Stockholm office, was appointed head of Business Area Emerging Business and a member of the Ericsson executive team.
All of this comes as Ericsson cut about 17,000 jobs, both internal and contract, in 2017, of which 10,000 were during the fourth quarter. Ericsson said that to date, the annual run-rate effect of cost savings is approximately SEK 6 billion compared with the target of SEK 10 billion for mid-2018; the impact of the cuts is expected to be increasingly visible in the first half 2018.
While Ekholm said 5G momentum is growing in North America, the 5G business isn’t expected to produce any significant upturn for a while. In mainland China, Ericsson is seeing reduced investments but it’s also growing market share.
While it competes with Chinese manufacturers Huawei and ZTE, it’s also competing with Finnish rival Nokia, whose CEO has acknowledged early 5G positioning in China. During Nokia’s third-quarter conference call, CEO Rajeev Suri said the cost of gaining or maintaining footprint in that country is significant and Nokia is working to address the situation as it wants to ensure the right long-term footprint, “but not at any cost.”
There is some positive news amid the doom and gloom for Ericsson. For 2018, its Radio Access Network (RAN) equipment market is expected to decline by 2% compared with an estimated 8% decline in 2017. The Chinese market is expected to continue to decline due to reduced LTE investments, but there is positive momentum in North America.
In the fourth quarter, Ericsson won a deal with Verizon to provide networking equipment for its commercial 5G launch. Verizon will deploy the pre-standard 5G commercial radio network and the 5G core network in select markets in the second half of 2018.
About a year ago, Verizon tapped Hans Vestberg, who was ousted as CEO of Ericsson in 2016, as its executive vice president for the new Network and Technology team reporting to CEO Lowell McAdam. Last fall, another former Ericsson executive, Rima Qureshi, joined Verizon’s leadership team, taking the role of SVP and chief strategy officer, also reporting to McAdam.