Ericsson will take a 6.1 billion kronor ($685.2 million) impairment charge for the fourth quarter, with more than half of this related to restructuring charges.
The Swedish vendor will take the charge to reduce losses at its BSS business, which the company said “is not showing satisfactory progress” as part of the company's turnaround efforts.
The poor performance of the BSS unit is jeopardizing the vendor's digital services segment's overall profitability target for 2020.
Ericsson said anticipated customer demand for a full-stack pre-integrated BSS solution has not materialized, and delays in product and feature development have reduced the competitiveness of its Revenue Manger solution.
As a result, the company has embarked on a revised BSS strategy that will include increased investments in its Ericsson Digital BSS platform.
Ericsson has now decided to pursue additional measures including job cuts, and said it expects further charges of around 1.5 billion kronor in 2019.
The provisions will mainly relate to costs associated with expected changes in project scopes including customer compensation payments, provisions for project delays, and write-down of intangible assets.
Shares in Ericsson fell 3.88% yesterday to 78.30 kronor in the wake of the announcement, as the market reacted negatively to the expected impact on operating profit.