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Ericsson takes $687 million hit as it changes course in services

FILE PHOTO: The Ericsson logo is seen at the Ericsson’s headquarters in Stockholm, Sweden June 14, 2018. REUTERS/Olof Swahnberg/File Photo

STOCKHOLM (Reuters) – Swedish mobile telecom equipment maker Ericsson will book charges of 6.1 billion crowns ($687 million) for the fourth quarter as it abandons an unsuccessful strategy for its loss-making Business Support System (BSS) unit.

The unit provides real-time charging and billing products and had tried to scale up to help customers with large transformation projects but said on Thursday the so-called full-stack revenue manager had not generated any revenue.

“The anticipated customer demand …has not materialized,” Ericsson said in a statement. “In addition, certain complex transformation projects experienced delays and cost overruns.”

Ericsson said it would speed up restructuring of the BSS business, part of its Digital Services business which accounts for around 17 percent of group sales, and concentrate on its core products, materially reducing BSS losses in 2019.

Its shares were down 4.5 percent by 0930 GMT, underperforming a 1.0 percent drop for the STOXX Europe 600 Technology Index.

Ericsson shares rose sharply in 2018 as a cost savings and efficiency program started to yield success across many of its businesses after years of crisis during which telecom network operators reined in spending.

The company said it foresaw further restructuring charges related to the planned measures, including related headcount reductions, of 1.5 billion crowns in 2019.

Reporting by Johannes Hellstrom, additional reporting by Olof Swhanberg; editing by Niklas Pollard and Georgina Prodhan

via Reuters