Ericsson targets restructuring as Q1 net sales miss mark

Stockholm: Swedish telecoms giant Ericsson on Thursday targeted greater efficiency after falling net sales brought lower than expected operating profit in the first quarter.

Net income rose 45 percent year on year to 2.1 billion kronor ($260 million; 229 million euros).

But net sales were down two percent year-on-year at 52.2 billion kronor, below market expectations of 54.4 billion as forecast by a Bloomberg poll of analysts, while like for like sales slipped one percent.

Operating profit also missed expectations at 3.5 billion kronor, albeit rising from 2.1 billion a year earlier.

Shares in the telecoms company tumbled just over 11 percent, to 70.05 kronor in mid afternoon trading.

Analyst Daniel Djurberg, of Handelsbanken bank, said he was "concerned" but "not surprised" following the earnings publication.

"There isn't a short-term solution and the full year will be mediocre," he told AFP.

While sales grew in North America and also mainland China on rapid 4G network rollout, sales declined overall, Ericsson said, "following weak development in Europe and a weak macro-economic environment in some emerging markets."

Ericsson added it would target structural changes by expanding an existing nine billion kronor global cost and efficiency programme to bolster efficiency and growth after a quarter-on-quarter fall in sales growth adjusted for comparable units and currency.

First-quarter operating margin stood at 6.7 percent compared with 4.0 a year earlier driven by improvements in mobile networks.

Ericsson, the world's leading maker of telecoms equipment excluding handsets, said it would continue to seek efficiency savings beyond those of 500 million kronor achieved in the first quarter.

"We are confident in our ability to achieve net annual savings of nine billion kronor during 2017 compared with 2014," the group said, highlighting three focus areas for this year -- core business, improved profitability in targeted growth areas and improved cost and efficiency.

Structural changes and greater efficiency would, the company added, create a "more fit for purpose" organisation ready to thrive on the challenges of 5G and cloud-based services.