17 January 2017
After last year’s dismal financial results which ultimately led to the departure of Hans Vestberg as its CEO in July, Ericsson is trying to reassure backers that it will continue to focus on accelerating its strategy execution and improve performance.
At its annual meeting of investors held in New York last November, the Swedish company said the total addressable market is expected to grow by one to three per cent in 2016-2018, despite an expected decline in the mobile infrastructure market by two to six per cent this calendar year.
Ericsson’s strategy for faster business execution is based on a new company structure that was implemented in July 2016 and features three segments: Networks; IT and Cloud; and Media.
Jan Frykhammar – who officially took up his position as Ericsson’s new president and CEO on 16 January 2017 – said: “We are forcefully executing our strategy to drive incremental profit improvements through greater efficiency, monetising our installed base in Networks and building new revenue base in IT and Cloud and Media. Current focus is on speed, efficiency and fine tuning of strategy execution.”
Based on its new segment structure with products and services combined, Ericsson estimated an addressable market for its Networks division of USD100bn in 2016, with -2 to 0 per cent CAGR growth during 2016-2018.
For IT and Cloud, it estimated an addressable market of USD100bn in 2016, with five to seven per cent CAGR growth during 2016-2018.
And for Media, it estimated an addressable market of USD12bn last year, with nine to 11 per cent CAGR growth over 2016-2018.
Starting 1Q17, the firm will introduce a new financial reporting structure based on the three segments.
The restated numbers for 2015 and 2016 will be disclosed ahead of the 1Q17 report. Meantime, it has provided the following high level, unaudited numbers for the new segments based on FY15:
- Networks: 75 per cent of net sales with mid-teens operating margin, excluding restructuring charges
- IT and Cloud: 20 per cent of net sales with break-even operating margin, excluding restructuring charges
- Media: five per cent of net sales with negative low-teens operating margin, excluding restructuring charges