Yahoo Finance Ericsson (ERIC) Spins Off Customer Support Business in Russia
Ericsson ERIC recently announced that it has divested its local customer support business in Russia owing to the unprovoked invasion by the Russian army in Ukraine. The company has taken this decision in view of the Western sanctions against Russia, keeping in mind the gravity of the situation and the difficulties in operating in the country.
The wholly-owned subsidiary of the company operating in Russia has entered into an asset transfer agreement with a local entity to spin off its customer support business in the country. This follows an orderly exit by the company as it winds down its operations in the wake of economic sanctions against the Putin regime. Consequently, Ericsson was forced to lay off about 400 local employees earlier. The recent divestment will lead to an additional transfer of approximately 40 Ericsson employees along with certain assets and contracts related to the business to the unnamed acquiree.
With the emergence of the smartphone market and subsequent usage of mobile broadband, user demand for coverage speed and quality has increased in recent times. Further, to maintain superior performance as traffic increases, there is also a continuous need for network tuning and optimization. Ericsson is much in demand among operators to expand network coverage and upgrade networks for higher speed and capacity. It is the world’s largest supplier of LTE technology with a significant market share and has established a large number of LTE networks worldwide.
Ericsson is focusing on 5G system development and has undertaken many notable endeavors to position itself for market leadership on 5G. The company believes that the standardization of 5G is the cornerstone for digitizing industries and broadband. The deployment of 5G networks is likely to boost the adoption of IoT (Internet of Things) devices, with technologies like network slicing gaining more prominence. Ericsson currently has 137 live 5G networks across the globe spanning 61 countries.
The company is focused on structural changes that will generate lasting efficiency gains and boost cost competitiveness. Courtesy of investing in R&D combined with operational efficiency, Ericsson has the world’s leading patent portfolio in cellular technology, with 60,000 granted patents and more than 100 signed licensing agreements. It is also focused on stabilizing its IT, cloud and project portfolio, and re-establishing profitability in Managed Services by handling existing contracts as well as investing in automation and artificial intelligence.
The stock has lost 42.3% over the past year compared with the industry’s decline of 25.1%.
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Ericsson currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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