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Ericsson (ERIC) to Pay $206M Fine for Corruption Violations

Ericsson ERIC has brokered a truce with the U.S. Department of Justice (“DoJ”) over alleged charges of bribery and falsifying records in countries from China to Kuwait by agreeing to pay a fine of $206 million. In addition, the company has agreed to plead guilty to U.S. foreign corruption violations.

The U.S. DoJ and the Securities and Exchange Commission (“SEC”) conducted separate investigations against Ericsson, with the former pursuing criminal charges and the latter civil charges related to violations of the Foreign Corrupt Practices Act (FCPA). The charges, pertaining to a period spanning 2000-2016, relate to offering bribes, falsifying books and records through sophisticated schemes and failing to implement reasonable internal accounting controls to safeguard the ethical business policies of the company.

The recent fine pertains to the charges that Ericsson has failed to “truthfully disclose" all information and evidence in the Djibouti and China cases and in other potential bribery or accounting violations.

This follows a separate news a few days earlier that revealed that Ericsson has decided to trim its global workforce by about 8% to reduce costs. The company intends to lay off about 8,500 employees to reduce operating costs by 9 billion Swedish kronor ($857 million) by the end of this year.

It appears that the company is burdened with problems as it expects a substantially lower market share in China. It had warned that Sweden’s decision to exclude Chinese vendors from Swedish 5G networks might adversely impact its business in the East Asian country. The company is witnessing a sales decline in China in the Networks and Digital Services segments.

Ericsson expects some impact on sales from disturbances in the supply chain as well. It expects a negative impact from IPR renewals and investments to strengthen its business in the long term. Ericsson’s business is also likely to be hurt by the political and economic uncertainties in its operating countries.

Other notable players in the industry include Juniper Networks, Inc. JNPR, InterDigital, Inc. IDCC and Motorola Solutions, Inc. MSI.

Juniper has a long-term earnings growth expectation of 7% and delivered an earnings surprise of 1.6%, on average, in the trailing four quarters. The company is leveraging the 400-gig cycle to capture hyperscale switching opportunities inside the data center. Juniper is set to capitalize on the increasing demand for data center virtualization, cloud computing and mobile traffic packet/optical convergence.

InterDigital is focused on pursuing agreements with unlicensed customers in the handset and consumer electronics markets. The company aims to become a leading designer and developer of technology solutions and innovation for the mobile industry, IoT and allied technology areas by leveraging its research and development capabilities, technological know-how and rich industry experience. At the same time, InterDigital intends to enhance its licensing revenue base by adding licensees and expanding into adjacent technology areas that align with its intellectual property position.

As a leading provider of mission-critical communication products and services worldwide, Motorola has ensured a steady revenue stream from this niche market. The communications equipment maker intends to boost its position in the public safety domain by entering into strategic alliances with other players in the ecosystem. Motorola expects to record strong demand across video security and services, land mobile radio products and related software while benefiting from a solid foundation. The buyout of 911 Datamaster, Inc. is likely to reinforce its position as a leading provider of mission-critical communication products and services worldwide.

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