Ericsson Takes $687M Charge to Overhaul BSS Unit
Anne Morris | January 10, 2019
Ericsson will take a $687 million charge to support an overhaul of its digital business support systems (BSS) business unit that will impact its results for the fourth quarter of 2018. Approximately $348 million of that amount will be treated as restructuring charges. In addition, further restructuring charges related to the planned measures, including headcount reductions, are anticipated in 2019, and are estimated at about $168 million.Ericsson conceded at its Capital Markets Day last November that its previous approach to digital BSS was not working. The Sweden-based vendor said it will now accelerate the restructuring of its BSS unit amid fears that a continuing poor performance in this area could prevent the Digital Services division from reaching its profitability targets.The financial support mainly relates to estimated costs associated with expected changes in the scale of projects, including customer compensation payments, provisions for project delays, and write-down of intangible assets.In November, Ericsson management appeared to be cautiously optimistic about the company’s financial future. CEO Börje Ekholm said that the company was seeing more traction with its product portfolio and that its investment in research and development, particularly around growth areas like 5G and IoT, were paying off. It set a profitability target for the Digital Services division, which includes digital BSS, 5G and IoT, of a low single-digit operating margin for 2020, and between 10 percent to 12 percent for 2022.