Ericsson has revealed that it will record a non-cash impairment charge of SEK 11.4 billion or $1.1 billion in the second quarter of 2024, primarily reflecting lower anticipated growth rates in Vonage’s current portfolio.
The net income impact after tax will be SEK 11.4 billion and reported in segment Enterprise.
In 2023, Ericsson had already recorded a non-cash impairment charge of SEK 32 billion attributed to the acquisition of Vonage – due to macroeconomic headwinds, including rising interest rates and changing demand trends.
“Given deterioration in the market environment and elective decisions we have made to refocus our investments in strategically prioritized areas, we have reassessed certain growth assumptions, resulting in a non-cash impairment of SEK 11.4 billion,” Niklas Heuveldop, Head of Business Area Global Communications Platform and CEO of Vonage, said.
Ericsson said it will advance its strategy to build a Global Network Platform for network APIs, which was the strategic impetus for the Vonage acquisition.
Ericsson recently announced partnerships with mobile network operators. Through this strategy, Ericsson is making advanced 5G network capabilities available to the world’s developer community to accelerate the innovation of value-added applications for industry.
Enterprise focus
Ericsson’s annual report 2023 says the second pillar of its enterprise strategy is powered by the acquisition of Vonage and the formation of business area Global Communications Platform.
The Global Communications Platform (Vonage) has a go-to-market channel with more than 120,000 businesses and a large developer community.
In 2023, Ericsson reported sales of SEK 263 billion and an EBITA margin excluding restructuring charges of 8.1 percent.
Enterprise sales of Ericsson increased by 76 percent to SEK 25.7 (14.6) billion, driven by the acquired Vonage business.
Enterprise Segment of Ericsson represented 10 percent (5 percent) of Ericsson Group sales in 2023.
Ericsson Enterprise segment comprises three business areas offering solutions primarily to enterprise customers: Global Communications Platform (Vonage), including cloud-based Unified Communications as a Service (UCaaS), Contact Center as a Service (CCaaS) and Communications Platform as a Service (CPaaS); Enterprise Wireless Solutions, including private wireless networks and wireless WAN (Cradlepoint) pre-packaged solutions; and Technologies and New Businesses including mobile financial services, security solutions and advertising services.
Baburajan Kizhakedath
