DoJ, SEC investigation could result in ‘monetary and other measures’ for Ericsson, CEO says

Ericsson reported its Q3 2018 financials this week and CEO Börje Ekholm said the company is showing a profit for the first time since 2016 as the network infrastructure vendor continues to execute on a multi-pronged cost-cutting strategy.

Eckholm said on a webcast the savings strategy started 18 months ago has reduced costs by more than $10 billion on a run-rate basis on the back of workforce reductions, exiting non-strategic contracts and reworking unprofitable contracts. Ericsson is also “investing in R&D for technology leadership and recruited some 3,000 new engineers, the CEO said.

As it relates to 5G, Eckholm called out North America and Northeast Asia as global leaders in commercializing next-generation cellular networks. “5G is becoming commercial reality today,” he said. “We see 5G today being commercially deployed in North America in networks that are taking in subscribers. It’s not a what, if and when; it’s actually today.”

He said initial operator investments are meant “to bring down cost of data. 5G is needed for operators to cope with the exploding data traffic.” He also called out fixed wireless access investments—like what Verizon is offering in four U.S. markets with its new 5G Home service—as a way for operators to compete in the residential broadband segment.

Ericsson reported a year-over-year sales increase of 9% with the company’s networks business growing 5% year-over-year “adjusted for comparable units and currency” with investment from North America, Europe and Latin America driving the growth. Here’s a detailed look at the Q3 financial reporting.

Eckholm acknowledged the growth was “modest” but it’s growth nonetheless. “That’s important,” he said. “It’s critical to us as a company.”

Another variable the CEO brought up is the potential outcome of a long-term investigation into Ericsson’s compliance with the U.S. Foreign Corrupt Practices Act being led by the U.S. Department of Justice and the U.S. Securities and Exchange Commission. The company has been cooperating with authorities since 2013, Eckholm said, and the outcome “will likely result in monetary and other measures, the magnitude of which cannot be estimated currently but may be material,” Eckholm said in a statement. “We continue our efforts to improve on our compliance program.”




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