Ericsson Investor Update 2016
- Continued focus on accelerating strategy execution and improved performance
- Ericsson total addressable market expected to grow by 1 to 3 percent in 2016-2018, despite expected decline in mobile infrastructure market by 2 to 6 percent in 2017
- Update on progress of implementation and execution of new company structure, including high level 2015 financials per new reporting segment
Ericsson (NASDAQ: ERIC) is today holding its annual Investor Update event in New York. The company is reporting on its strategy implementation for faster business execution based on its new company structure with three segments: Networks, IT & Cloud, and Media. The new structure was implemented on July 1, 2016.
Ericsson’s strategy builds on efficiency and scale in its core business and investments in the new revenue base from its targeted growth areas. This will enable the company to secure leadership in an emerging broader 5G market – from technology to new business models and services – enabling Ericsson to be a strong business partner to existing and new customers.
Jan Frykhammar, President and CEO, Ericsson says: “We are forcefully executing our strategy to drive incremental profit improvements through greater efficiency, monetizing our installed base in Networks and building new revenue base in IT & Cloud and Media. Current focus is on speed, efficiency and fine tuning of strategy execution.”
Market size and outlook
Based on the new segment structure with products and services combined, the company has estimated its addressable market sizes and growth rates as follows:
- Networks: addressable market of USD100 billion in 2016, with -2 to 0% CAGR growth 2016-2018
- IT & Cloud: addressable market of USD100 billion in 2016, with 5 to 7% CAGR growth 2016-2018
- Media: addressable market of USD12 billion in 2016, with 9 to 11% CAGR growth 2016-2018
The company’s total addressable market is expected to grow by 1 to 3 percent in 2016-2018.
The negative industry trends from the first half of 2016, due to weaker demand for mobile broadband, are expected to prevail short-term. Therefore, the company is adapting operations to lower business volumes to secure resilience and competitiveness. Ericsson expects that the market for mobile infrastructure will decline 10 to 15 percent during 2016 and a further decline of 2 to 6 percent in 2017.
New financial reporting structure
As announced earlier, Ericsson will introduce a new financial reporting structure as of Q1 2017, based on the new company structure. Results will be reported in three segments: Networks, IT & Cloud, and Media. Each segment includes the combined sales from products and services.
The restated numbers for 2015 and 2016 will be disclosed ahead of the Q1 2017 report. In the meantime, the company provides the following high level, unaudited numbers for the new segments based on full year 2015:
- Networks: 75% of total net sales with mid-teens operating margin, excluding restructuring charges
- IT & Cloud: 20% of total net sales with break-even operating margin, excluding restructuring charges
- Media: 5% of total net sales with negative low-teens operating margin, excluding restructuring charges
Details of the event
President and CEO Jan Frykhammar and deputy CFO Carl Mellander will be joined by members of the company’s executive leadership team.
Ericsson’s Investor Update event in New York can be accessed via the Ericsson website. Presentation materials can also be downloaded from the website once the webcast has started.
For media kits, backgrounders and high-resolution photos, please visit www.ericsson.com/press
Ericsson is the driving force behind the Networked Society – a world leader in communications technology and services. Our long-term relationships with every major telecom operator in the world allow people, business and society to fulfill their potential and create a more sustainable future.
Our services, software and infrastructure – especially in mobility, broadband and the cloud – are enabling the telecom industry and other sectors to do better business, increase efficiency, improve the user experience and capture new opportunities.
With approximately 115,000 professionals and customers in 180 countries, we combine global scale with technology and services leadership. We support networks that connect more than 2.5 billion subscribers. Forty percent of the world’s mobile traffic is carried over Ericsson networks. And our investments in research and development ensure that our solutions – and our customers – stay in front.
Founded in 1876, Ericsson has its headquarters in Stockholm, Sweden. Net sales in 2015 were SEK 246.9 billion (USD 29.4 billion). Ericsson is listed on NASDAQ OMX stock exchange in Stockholm and the NASDAQ in New York.