Ericsson, Humbled by Huawei, Takes Another $1.8 Billion in Charges -- Update
January 16 2018 - 07:31AM
Dow Jones News
By Dominic Chopping
STOCKHOLM-- Ericsson AB said it is writing down $1.77 billion in
assets, the latest in a series of charges at the Swedish
telecom-equipment maker as it retools itself to better compete with
nimbler Chinese manufacturers.
Ericsson said it would take the write-down of 14.2 billion
Swedish kroner in the fourth quarter of 2017, attributing most of
it to the reduced value of its digital-services unit and a
collection of other assets, most of which it said it acquired 10 or
more years ago. Last year, the company disclosed a series of
separate provisions and charges--totaling about 20 billion
kroner--in costs associated with a monthslong turnaround.
The company said the assets it announced Tuesday have "limited
relevance" for its current business.
Once among the world's dominant telecom-equipment suppliers,
Ericsson and rivals like Nokia Corp. have been humbled by the fast
rise of Chinese competitors, especially Huawei Technologies Co.
Huawei is now the world's market leader for the telecoms gear at
the center of modern mobile communications--though it hasn't made
much headway in U.S.
Ericsson ousted its chief executive and cut staff in 2016 amid
plunging profit. Early last year, Ericsson said it was embarking on
a major turnaround effort, streamlining management and focusing on
selling telecom equipment and services.
It and Nokia have been hit by a double whammy: Demand has fallen
from many of their legacy customers--carriers in the U.S. and
Europe that have essentially wrapped up the rollout of today's
so-called 4G mobile networks. At the same time, Huawei and other
Chinese upstarts have competed fiercely around the world with lower
prices.
Ericsson, Nokia, Huawei and others are now all gearing up to
compete in the fast-approaching rollout of 5G, the latest and
fastest network, though technical standards about what that will
entail haven't been finalized. It falls to Chief Executive Börje
Ekhom, who took over in October 2016, to position Ericsson as a key
provider of this new gear--though it may be years before customers
start buying any of it.
Ericsson said Tuesday that after completing a fresh round of
impairment testing in conjunction with its restructuring, the
company said it decided to take the fresh, noncash write-downs.
"The adjustments have no influence on Ericsson's commitment to
executing its strategies and to investing in technology to support
customers' success," it said in a statement.
Ericsson also joined a parade of companies disclosing accounting
adjustments because of changes in U.S. tax law. It said the recent
cut to the corporate income-tax rate, to 21% from 35%, which went
into effect Jan. 1, required a revaluation of its U.S. deferred tax
assets. These assets, essentially tax credits, are worth less at
the lower tax rate. Ericsson said the estimated impact will be a
noncash charge of around 1 billion kronor.
Ericsson said its gross and net cash position remain strong,
despite the noncash charges.
Write to Dominic Chopping at dominic.chopping@wsj.com
(END) Dow Jones Newswires
January 16, 2018 07:16 ET (12:16 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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