Ericsson Takes $76 Million Hit in Cloud and Services Division

Ericsson announced a SEK800 million ($76 million) charge in its upcoming results for the final quarter of 2022. The company said it would be an effect of a decision to quit certain subscale agreements in its cloud software and services division and drop some related product offerings.

In a stock market statement, the vendor announced the one-off charge followed by a review of its portfolio and customer contracts. The changes are part of a strategy designed to turn around the fortunes of its cloud software and services division. Ericsson indicated the charge would have an impact of SEK800 million from pre-tax earnings in the quarter and would represent a SEK700 million cashflow impact, mainly felt in 2023.

Ericsson outlined a revised strategy for the unit at its Capital Markets Day in December, alongside explaining measures and ambitions impacting other parts of the business. Its key priorities for the cloud software and services segment are to limit subscale software development while accelerating automation to lower deployment and maintenance efforts. It is also aiming to switch focus from chasing market share to profitability.

The vendor is targeting EBIT/EBITDA break even for the unit in 2023 with the eventual aim of long-term profitability. In Ericsson’s latest published EBIT figures, covering the first nine months of 2022, its cloud software and services division lost SEK2.4 billion. This marked a slight improvement on the SEK2.8 billion lost in the first three quarters of 2021.