Ericsson reported a net loss of SEK 1.6 billion for the fourth quarter compared to a profit of SEK 7.0 billion a year earlier, due to increased restructuring charges and continued weakness in the mobile broadband market. The company said it executed its restructuring plans faster than expected in the quarter, and full-year charges reached SEK 7.6 billion compared with an estimated SEK 5.5-6.5 billion.
Quarterly revenues dropped 11 percent to SEK 65.2 billion. This was mainly due to a drop in licensing revenues after exceptional payments from the Apple deal a year earlier, while sales otherwise benefited from currency effects and some hardware orders being moved ahead from Q1. Operating profit excluding restructuring charges decreased to SEK 4.4 billion from SEK 11.7 billion.
Networks sales increased by 39 percent on a sequential basis, but were still down 13 percent year-on-year to SEK 32.4 billion, hurt by the economic weakness in parts of Latin America and the MEA region. Global services revenue also dropped by 4 percent on an annual basis to SEK 29.4 billion, mainly due to reduced scope on a North America contract, Ericsson said.
Over the full year, net profit was also sharply lower, at SEK 1.9 billion versus SEK 13.7 billion in 2015. Operating cash flow fell to SEK 14.0 billion from SEK 20.6 billion, impacted again by the Apple deal. Ericsson cuts its dividend to SEK 1.00 per share from SEK 3.70 a year earlier.
Ericsson said it was on track with its cost and efficiency program, first initiated in November 2014. This is expected to result in a reduction in the annual run rate of operating expenses, excluding restructuring charges, to SEK 53 billion by the second half of 2017, compared to SEK 56.4 billion last year. Ericsson expects another SEK 3 billion in restructuring charges this year.
The company predicted the market conditions and business mix of coverage and capacity sales in mobile broadband to continue in 2017, with a 10-15 percent drop in the RAN market, as predicted at its investor update last November. The new CEO Borje Ekholm, who started earlier this month, said the company is working on setting its priorities to focus investments in areas "where we both can and we must win". In the near term, it will fabour stability and profitability over growth, while still working on efficiency.
