Ericsson’s (ERIC) Q2 2016 Earnings Call

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Ericsson’s (ERIC) CEO Hans Vestberg Q2 2016 Results

Negative top line growth  and declining bottom line

“If you look into the sales first, you can see that we now have 10 out of 11 regions coming down… And then, the regions that we already saw the challenge like Middle East, part of Europe, Latin America continue them to have a challenge to grow the business right now.

Note from the second Quarter Report: Sales declined by -11% YoY. Sales, adjusted for comparable units and currency, declined by -7%. Mobile broadband sales continued to decline particularly in markets impacted by a weak macro-economic environment such as Brazil, Russia and the Middle East…Profitability declined sequentially.

 

Recovery not expected in some countries.

We don’t think that this second part of 2016, we don’t think that that will revert in countries like Russia, Brazil et cetera, Middle East which have had a tough time; we don’t think that they very quickly in short-term will recover.

 

Focus on significant cost cutting measures on cost of sales and Opex to bolster profitability

That means also that our cost program becomes even more important. We are on the program of the SEK 9 billion that we announced at the end of 2014; half of it going to OpEx and half of it to cost of sales. That program is tracking well. But, we’re also now initiating extensive and significant new cost reductions, given the scenario, both in order to cater for lower volumes but more important to see that we can improve — continuously improve on our profitability.

 

Cost reductions a sign of adjusting to negative industry trends

“Given current industry trends, we will intensify our activities to reduce cost of sales and adapt our operations to a weaker mobile broadband market.

 

Cost reductions necessitated by expected Lower volumes

“What we are now doing, we are basically doubling the reduction on OpEx for the same timeframe or the second half of 2017 run rate to reduce the double in OpEx. And the main reason is that of course we see a lower volume, but also that again we’ve put a new company structure that was designed to take out cost..