Ericsson reshapes business structure, Q1 profit rising 49%

Updated: 2016-04-22 14:13


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Ericsson reshapes business structure, Q1 profit rising 49%

Ericsson's Chief Executive Hans Vestberg speaks to media at a presentation of the interim financial report in Stockholm, Sweden April 21, 2016. [Photo/Agencies]

Ericsson, the world's leading telecom equipment maker, has just announced structural shake-up measures to accelerate strategy implementation and drive growth and profitability.

The measures include setting up five business units and one dedicated to customer group for industry and society, in line with its strategic focus on core business, targeted growth areas and improving efficiency.

Also on Thursday, the company announced its financial results for the first three months this year. Its earnings hit US$244 million, growing a massive 49 percent year-on-year, with strong support from intellectual property rights revenues. Net sales in the first quarter of the year remain almost the same as the corresponding period of 2015.

Meanwhile, Ericsson's cost reduction and efficiency move has attained tangible results. The program, beginning in 2014, aims at annual net savings of US$1.1 billion (SEK 9 billion) through 2017.

Nevertheless, Hans Vestberg, Ericsson president and chief executive officer, has set his targets higher. "We are not satisfied with our overall growth and profitability development over the past years and I am convinced this will make us more competitive and enable us to grow both our company and our earnings," he said.

With Hans Vestberg at the steering, Ericsson is undergoing business transformation, expanding to new business areas including software, television and media, and other industries, in addition to its traditional stronghold in high-speed mobile broadband like 3G and 4G networks.

Up to 40 percent of the mobile networks in the world are produced by Ericsson, and the company owns 39,000 patents.

The new corporate structural change, including business unit Network Products, business unit Network Services, business unit IT and Cloud Products, business unit IT and Cloud Services and business unit Media, is expected to align the company tightly with the market. For the rapidly growing Industry and Society business, a separate customer group will be set up later.

Analysts say the new organizational structure will make the company more responsive to its customers and capture emerging business opportunities in the mobile age.

"We will create a leaner, more fit for purpose, organization to cater to the needs of different customer segments and to faster capture market opportunities. As 5G, the Internet of Things and Cloud drive the next phase of industry development, the time is right to make the change," said Hans Vestberg.

"The changes will make it easier for our customers to do business with us, whether they are operators, media companies or other industries."

Ericsson is the world's largest mobile telecoms manufacturer and its equipment and services supports networks that connect more than 2.5 billion mobile users in the world. It has approximately 115,000 employees, with business partners in 180 countries and regions.