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Struggling Ericsson spends billions in bid to turn things around

A bid by troubled Swedish telecoms giant Ericsson's new chief executive to turn the company's fortunes around will hit the company's first-quarter 2017 accounts hard.

Published: 28 March 2017 16:18 CEST
Struggling Ericsson spends billions in bid to turn things around
Ericsson CEO Börje Ekholm. Photo: Björn Ewenfeldt/TT

Ericsson – which is struggling to fend off stiff competition from rivals such as China's Huawei – said in a statement it would book up to 15 billion kronor ($1.71 billion) in restructuring costs, write-downs and provisions in the first quarter.

New chief executive Börje Ekholm, who took over in January after having served on Ericsson's board for ten years, has announced plans to slim down the company.

“For some time Ericsson has been challenged on both technology and market leadership and the group strategy has not yielded expected returns,” Ekholm said in a statement.

“Ericsson will pursue a more focused business strategy to revitalize technology and market leadership, improve group profitability and enable customer success,” Ekholm said.

He said Ericsson's improvement needed to come primarily from better internal efficiency, and said he expected the group's operating margin to improve as of next year.

Last year was an annus horribilis for Ericsson, during which it fired its previous chief executive Hans Vestberg, slashed 5,000 jobs, and posted an 86-percent plunge in net profit for the whole of 2016.

A pioneer in mobile telephony, the group has since the early 2000s been fighting off rivals such as Nokia, Alcatel-Lucent, Siemens, Huawei and ZTE to cling to its position as world leader in mobile networks.

Ericsson said it planned to reorganize to have three main business areas: networks, digital services and managed services. It also planned to restructure or sell its media and cloud divisions.

“Ericsson is doing the worst in an already weak market. And it seems as though Nokia is gaining market share. And the Chinese are tough rivals,” said Nordnet analyst Joakim Bornold.

Some observers are speculating about a possible capital hike.

“Ericsson has a really tough period ahead. There will probably be more savings programmes, and they may need more money from owners,” the analyst told news agency TT.

“Until now it has felt like a new share issue has been far off, but it's coming ever closer now,” he said.

“You definitely can't exclude the possibility that Ericsson may have to launch a new share issue before this is all over,” one unnamed analyst told financial daily Dagens Industri.

But CEO Ekholm rejected the idea.

“We have a strong balance sheet right now, we see no problem with that,” he said Tuesday, referring to 31.2 billion kronor cash flow booked at the end of December.

After the announcement, Ericsson's share price was down around 1.6 percent on the Stockholm exchange at 4pm.

The company is scheduled to present its first quarter earnings report on April 25th.

FOOD AND DRINK

OPINION: Are tips in Sweden becoming the norm?

Should you tip in Sweden? Habits are changing fast thanks to new technology and a hard-pressed restaurant trade, writes James Savage.

Published: 5 April 2024 13:59 CEST
OPINION: Are tips in Sweden becoming the norm?

The Local’s guide to tipping in Sweden is clear: tip for good service if you want to, but don’t feel the pressure: where servers in the US, for instance, rely on tips to live, waiters in Sweden have collectively bargained salaries with long vacations and generous benefits. 

But there are signs that this is changing, and the change is being accelerated by card machines. Now, many machines offer three preset gratuity percentages, usually starting with five percent and going up to fifteen or twenty. Previously they just asked the customer to fill in the total amount they wanted to pay.

This subtle change to a user interface sends a not-so-subtle message to customers: that tipping is expected and that most people are probably doing it. The button for not tipping is either a large-lettered ‘No Tip’ or a more subtle ‘Fortsätt’ or ‘Continue’ (it turns out you can continue without selecting a tip amount, but it’s not immediately clear to the user). 

I’ll confess, when I was first presented with this I was mildly irked: I usually tip if I’ve had table service, but waiting staff are treated as professionals and paid properly, guaranteed by deals with unions; menu prices are correspondingly high. The tip was a genuine token of appreciation.

But when I tweeted something to this effect (a tweet that went strangely viral), the responses I got made me think. Many people pointed out that the restaurant trade in Sweden is under enormous pressure, with rising costs, the after-effects of Covid and difficulties recruiting. And as Sweden has become more cosmopolitain, adding ten percent to the bill comes naturally to many.

Boulebar, a restaurant and bar chain with branches around Sweden and Denmark, had a longstanding policy of not accepting tips at all, reasoning that they were outdated and put diners in an uncomfortable position. But in 2021 CEO Henrik Kruse decided to change tack:

“It was a purely financial decision. We were under pressure due to Covid, and we had to keep wages down, so bringing back tips was the solution,” he said, adding that he has a collective agreement and staff also get a union bargained salary, before tips.

Yet for Kruse the new machines, with their pre-set tipping percentages, take things too far:

“We don’t use it, because it makes it even clearer that you’re asking for money. The guest should feel free not to tip. It’s more important for us that the guest feels free to tell people they’re satisfied.”

But for those restaurants that have adopted the new interfaces, the effect has been dramatic. Card processing company Kassacentralen, which was one of the first to launch this feature in Sweden, told Svenska Dagbladet this week that the feature had led to tips for the average establishment doubling, with some places seeing them rise six-fold.

Even unions are relaxed about tipping these days, perhaps understanding that they’re a significant extra income for their members. Union representatives have often in the past spoken out against tipping, arguing that the practice is demeaning to staff and that tips were spread unevenly, with staff in cafés or fast food joints getting nothing at all. But when I called the Swedish Hotel and Restaurant Union (HRF), a spokesman said that the union had no view on the practice, and it was a matter for staff, business owners and customers to decide.

So is tipping now expected in Sweden? The old advice probably still stands; waiters are still not as reliant on tips as staff in many other countries, so a lavish tip is not necessary. But as Swedes start to tip more generously, you might stick out if you leave nothing at all.

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