Ericsson takes another $1.8B in charges amid ongoing restructuring

Ericsson
Ericsson is taking another write-down of its business. (Ericsson)

Network equipment vendor Ericsson said it would record another $1.8 billion write-down related to the falling value of parts of its business. The action is just the latest in a long series of cutbacks and restructuring actions at the troubled telecom vendor.

Specifically, Ericsson said around half of the write-down is related to its “digital services” business, which in part houses the company’s customer relationship management software for telecom companies. The other half of the write-down covers the company’s business that sells services to TV broadcasters and others; that unit is reportedly for sale.

“The majority of goodwill originates from investments made 10 years ago or more, and has limited relevance for Ericsson's business going forward,” the company said in a statement about the write-down. “All impairments are non-cash accounting adjustments. The adjustments have no influence on Ericsson's commitment to executing its strategies and to investing in technology to support customers' success.”

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Ericsson also said it would take a roughly $120 million charge related to the changes in U.S. tax law.

The actions are just the latest in Ericsson’s efforts to right its flagging business. The company has already replaced its CEO, cut thousands of jobs and suffered through a series of quarterly financial losses—it also took a write-down last year. As the Wall Street Journal noted, research firm IHS Markit recorded Ericsson’s telecom market share at just 12.5% in 2016, giving the company a third place behind Huawei and Nokia. That’s a far cry from Ericsson’s market-leading share from just a few years ago.

Ericsson though isn’t alone. The telecom equipment market in general is suffering through a lull as mobile operators put the finishing touches on their LTE network buildouts and set the stage for their 5G rollout efforts. The resulting network-spending trough has been dragging at vendors’ collective financial results.

But Ericsson isn’t standing still. In recent weeks the company said it inked credit facilities worth $370 million that it plans to use in part for research and development for 5G. “Already now we have 38 operators engaged with us on developing and preparing for 5G networks. This is more than any other company,” said Erik Ekudden, Ericsson chief technology officer, in a press release issued at the time.

And Verizon is one of those customers. Verizon said last month it had tapped Ericsson to provide networking equipment for a “prestandard” launch of commercial, fixed-wireless 5G in the second half of 2018.

Ericsson has said it expects there will be 1 billion 5G subscriptions by the end of 2023.

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