Ericsson requires even steeper cost cuts

Ericsson cautioned that turning around the beleaguered phone-equipment maker will require even steeper cost cuts, testing the patience of investors who sent the stock tumbling the most this year.

Ericsson fell as much as 13 per cent in Stockholm after the company posted a second-quarter loss and warned that a faltering market amid technology shifts could cause as much as five billion kronor (€521 million) of operating income to evaporate over the next 12 months.

Chief executive Borje Ekholm, who took the helm in January, is under pressure from activist investor Christer Gardell to deliver a speedy turnaround. His plan hinges on reducing costs and scaling back expansion plans that haven't panned out, while refocusing on Ericsson's core business of selling networking equipment ahead of the expected roll-out of 5G networks. Mr Gardell's fund Cevian has acquired a 6.5 per cent stake in the company since March.

Ericsson's closely watched adjusted gross margin shrank by 3.4 percentage points from a year earlier to 29.8 per cent in the second quarter. The company swung to a net loss of SKr1 billion from a profit of SKr1.59 billion a year earlier. – Bloomberg