Ericsson shares were down by 6 percent Tuesday afternoon after the company released a downward revision of its four-year compound annual growth rate (CAGR) forecast.
According to the new data, Ericsson expects to see a CAGR of 2 percent to 4 percent for the period of 2014 to 2018, marking a slight dip from the 3 percent to 5 percent CAGR previously forecast for the 2013 to 2017 period.
By segment, the company’s network equipment market is expected to see a one to three percent CAGR, while telecom services is forecast at three to five percent CAGR and support solutions are predicted at a seven to nine percent CAGR. A year ago the company forecast that the segments would see CAGRs of two to four percent, four to six percent and seven to nine percent, respectively.
Ericsson said it plans to target certain areas for growth – including cloud services, IP networking, TV and media equipment and OSS/BSS software – with the goal of achieving 10 percent CAGR in those markets.
“We are continuing our journey to transform Ericsson into a leading ICT player, building on our leadership in our core business and extending into targeted growth areas,” Ericsson president and CEO Hans Vestberg said in a statement.
By 2020, the company said it’s also aiming to boost its non-carrier revenue to 20 to 25 percent of its balance sheet, up from 10 percent in 2014, and services and software revenue to 75 percent, up from 66 percent in 2014.
The company said the cost-saving restructuring plan it announced last year is on track to bring an annual savings of $1.03 billion by 2017.
The news comes on the heels of Ericsson’s Monday announcement of a network development partnership with Cisco that is expected to generate $1 billion in revenue for each company by 2018.