Ericsson's Q2 sales decreased by 11% YoY, or down 7% YoY when adjusted for comparable units and currency, as mobile broadband sales continued to decline particularly in markets impacted by a weak macro-economic environment, such as Brazil, Russia and the Middle East.
"The negative industry trends from the first quarter have intensified impacting demand for mobile broadband, especially in markets with a weak macro-economic environment. We are delivering on ongoing cost reduction activities. However, in light of market development, management has, with the support of the Board of Directors, initiated significant actions to further reduce cost," stated Hans Vestberg, President and CEO of Ericsson.
In addition to its ongoing cost and efficiency program targeting savings of SEK 9 b. during 2017, Ericsson said it now plans to reduce R&D investments in IP and capture efficiency gains from the new company structure. Together, these activities are expected to reduce the annual run rate of operating expenses, excluding restructuring charges, to SEK 53 b. in the second half of 2017. This is to be compared with SEK 63 b. for full-year 2014 and equates to double the previously targeted savings in operating expenses.
- In Europe, completion of mobile broadband projects in 2015 continued to have a negative effect on sales growth YoY. 4G sales in Mainland China were stable YoY as the fast pace of deployments continued.
- Network sales in North America were stable YoY driven by continued mobile broadband capacity investments. Global Services sales declined in North America as activities in Professional Services were lower.
- The transition from 3G to 4G continued primarily in parts of Asia, contributing to solid sales growth in region South East Asia and Oceania.
- Sales in the targeted growth areas were 20% of total sales and grew by 5% in the quarter in constant currencies.