Ericsson Recognizes $76M Charge To Drive Profitability In Cloud Software And Services
Following a portfolio and customer contract review, Ericsson (NASDAQ: ERIC) decided to exit certain subscale agreements and product offerings as it executed its revised strategy in the Cloud Software and Services segment.
Ericsson recognized a one-off negative impact on EBIT of SEK -0.8 billion ($76 million) in Q4 2022, of which SEK -0.7 billion will likely impact cash flow, mainly in 2023.
The target is to break even in full-year 2023 on EBIT and EBITA levels with gradual improvements toward attractive long-term profitability.
In December, the Swedish telecom gear maker said it would restructure parts of the business, which it expanded in July with the $6.2 billion acquisition of cloud communications firm Vonage, to improve profitability, Reuters reports.
Ericsson has previously set a target for the business to reach break-even in 2023 at the operating level.
"It is good to see a tangible step from Ericsson in this area, but we doubt that it will be enough to move credit spreads, all else equal," the report cited Danske Bank Credit Research analyst Mads Lindegaard Rosendal. "That said, we still view Ericsson as a strong trade for 2023."
Price Action: ERIC shares traded higher by 1.6% at $6.03 on the last check Wednesday.
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