Ericsson shares dip as company cites 'more challenging' market

Ericsson HQ (ericsson)
Ericsson continues to struggle in a tough worldwide market for telecom gear vendors.

Ericsson shares tumbled after it pushed back a key long-term financial target, citing a “more challenging” market than it had anticipated.

The venerable Swedish telecom gear vendor said it now aims to achieve a 12% operating margin excluding restructuring beyond 2020. Earlier this year, the company said it had hoped to pass that mark “on a sustainable basis” beyond 2018.

The announcement was issued as Ericsson hosted an event for investors in New York.

“Ericsson remains fully committed to this ambition [of a 12% operating margin] but the starting point has become more challenging and therefore will take some additional time than originally planned for,” the company said in a statement. “This is due to a weaker-than-expected Radio Access Network equipment market that will have significant compound effect over the coming years, [foreign exchange issues] against the U.S. dollar and an even more challenging situation in Digital Services than the original assessment indicated."

Ericsson continues to struggle in a brutal market for telecom gear vendors as carriers plot their strategies to transition to 5G. Earlier this week, it announced that Jan Frykhammar, executive vice president and advisor to the CEO, was leaving the company effective immediately. Frykhammar, a former CFO at Ericsson with 26 years under his belt at the company, was appointed interim CEO in July 2016 when the company ousted former chief Hans Vestberg.

Reports surfaced in August that Ericsson was considering cutting 25,000 jobs as part of its ongoing effort to cut costs. While the company hasn’t disclosed details regarding those reports, a company spokesperson confirmed to FierceWireless this morning that layoffs “are underway across the world.”

Ericsson didn’t disclose any plans for additional job cuts in today’s announcement.

The company’s revenue fell 6% year over year during its latest quarter to $5.9 billion, marking its fourth straight quarterly loss. Its net loss came in at $590 million, significantly worse than the $24.5 million net loss it posted last year, and network sales dropped 4% annually.

In March, Ericsson unveiled plans to streamline its operations by combining products and services and upping its investments in both R&D and “services capabilities” in several core areas.