Ericsson said around half the savings will come in operating expenses and half in cost of sales. The efficiency measures will primarily relate to five areas: portfolio streamlining and ways of working in R&D; structural enhancements in IS/IT; accelerated service delivery transformation; supply chain efficiencies; and structural efficiency gains in G&A. Savings will include both headcount reductions as well as savings in external costs. Measures will include both new and already initiated actions, such as the discontinuation of the modems operations and savings from the establishment of global ICT centres.
CFO Jan Frykhammar said the company's aim is to strengthen the core business, build strength in targeted areas and continue to improve cash flow. Its core business remains radio, core and transmission network equipment along with associated services, while faster growth is expected to come from the targeted areas: cloud, IP networks, TV and media, OSS and BSS, as well as 'Industry & Society', addressing new customer segments outside the telecom operator domain.
Ericsson said the growth areas require a high degree of software and professional services, provide a high degree of recurrent business and show higher market growth than the core business areas. In addition, the targeted areas are less capital intensive than the core business.
At the Capital Markets event, Ericsson also reiterated its long-term growth targets for the market. Ericsson estimates that the total network equipment market during the years 2013-2017 will show a CAGR of 2-4 percent, the telecom services market is estimated to show a CAGR of 4-6 percent, and the market for support solutions is forecast to show a CAGR of 7-9 percent in the same period. The company aims to continue to grow faster than the total addressable market, estimated to show a CAGR of 3-5 percent over 2013-2017.
