Ericsson Announces $1.1 Billion Writedown After Vonage Weakens Guidance

Ericsson said it would take a $1.1 billion writedown following a weak outlook for its Vonage business.

Ericsson, which acquired Vonage in July 2022 for $6.2 billion, said it would record a non-cash impairment charge of $1.1 billion (SEK 11.4 billion) in the second quarter of 2024. The company said the charge primarily reflects “lower anticipated market growth rates in Vonage’s current portfolio.”

Niklas Heuveldop, Head of Global Communications Platform Business Unit and CEO of Vonagesaid:

Given the deterioration in the market environment and the elective decisions we have taken to refocus our investments in strategic priority areas, we have reassessed certain growth assumptions, resulting in a non-cash impairment charge of SEK 11.4 billion.

Neuveldop, who was appointed CEO of Vonage in January, confirmed that the impact on net profit after tax will be SEK 11.4 billion and will be reported in its Enterprise segment.

This is the second writedown on its acquisition of Vonage after Ericsson took a $3 billion writedown last October.

Ericsson says it remains committed to its strategy of creating new monetization opportunities for the telecommunications sector. The company points out that Vonage is at the forefront of the digital transformation of businesses and society by developing the Global Network Platform, which it says is essential for network APIs.

Ericsson and its Vonage API strategy

This year, Ericsson and Vonage have expanded their global API partner network, with several key partnerships announced in recent months, including collaborations with Singtel and Telstra in the second quarter.

“We continue to advance our strategy to create a global network platform for network APIs, which was the strategic impetus for the Vonage acquisition,” Heuveldop explained after the cash writedown announcement, suggesting that Vonage’s long-term strategy will pay off. “We recently announced additional partnerships with leading mobile network operators, and we see continued positive momentum across the industry.”

In February, Vonage and AWS partnered on communications and networking APIs to drive innovation.

Vonage partnered with AWS to integrate Vonage’s communications and networking APIs with Ericsson’s advanced 5G network capabilities and AWS’s comprehensive suite of services. The collaboration was designed to streamline the delivery of innovative solutions to millions of developers in the AWS community through AWS Marketplace.

Meanwhile, that same month, Verizon and Vonage partnered to provide advanced 5G APIs to developers.

The two companies announced a memorandum of understanding to integrate Verizon’s network APIs into the Vonage platform, enabling developers to access advanced network services and features. The collaboration also involved the joint development of new APIs, a critical effort to create a robust network API ecosystem. These APIs will enable developers to build applications that prioritize security, reliability and innovation.

“Through this strategy, we are making advanced 5G network capabilities available to the global developer community to accelerate the innovation of value-added applications for industry and society,” added Heuveldop. “This will open up new revenue streams for our operator customers and drive growth in the telecommunications sector.”