Ericsson Shares Drop on Q1 Results

Company sets reorg to to drive more growth, profitability
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Shares in Ericsson were down almost 14% in morning trading Thursday after the company announced disappointing Q1 results and a restructuring aimed at driving further growth and profitability into the tech giant.

Sales dropped 2.4%, to 52.2 billion kroner (US$6.4 billion), off from the 54.4 billion kroner expected by analysts, according to estimates compiled by Bloomberg. Gross operating margins slid to 33.3% from 35.4% in the year-ago period.

In its new structure, which takes effect July 1 and designed to bring more agility and speed to the company, Ericsson will operate under five business units, and one dedicated customer group for Industry & Society.

Its core business will be made up of Business Unit Products and Business Unit Services, and will seek growth opportunities via its new IT & Cloud business units (Business Unit IT & Cloud Products and Business Unit IT & Cloud Services) along with a new Business Unit Media.

"The changes we are making will make it easier for our customers to do business with us, whether they are an operator, a media company or from another industry,” Ericsson president and CEO Hans Vestberg said, in a statement. “The changes will also take into account the different characteristics, needs, and pace of each of the businesses we are in. I am convinced this will make us even more competitive and enable us to grow both our company and our earnings.”

Shares in Ericsson were down $1.36 (13.95%) to $8.39 each in morning trading Thursday.

Amid heated competition from rivals such as Huawei Technologies and Nokia (which closed its acquisition of Alcatel-Lucent in January), Ericsson and Cisco Systems forged a business and tech partnership last November focused on building next-gen networks.

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