Ericsson tanks 10% on weak Q1; looks to 5G, cloud

Ericsson is in transformation phase: CEO

Shares in Swedish network equipment maker Ericsson tanked over 10 percent on Thursday after announcing weak first quarter results and reorganization plans.

Ericsson reported a 2 percent year-on-year decline in net sales in the first quarter of 2016 of 52.2 billion Swedish crowns ($6.4 billion), below a Reuters forecast of 54.6 billion. And while operating income rose 63 percent year-on-year to 3.5 billion Swedish crowns, it was below market expectations.

The company said that the new structure will have five business units and one dedicated customer group for "Industry and Society". The changes will make it easier "for our customers to do business with us", Ericsson said in a statement.

More headwinds ahead for Ericsson?

Hans Vestberg said that the new structure is necessary to help the company's profitability.

"I think that we are of course in a big transformation, the whole industry is in a transformation. We have invested in some new areas…now we put a structure so we can accelerate strategic execution on it so we also can improve our profitability and enhance our possibility to grow. So that's a long-term plan and now we're putting that new structure in place," Vestberg told CNBC in a TV interview on Thursday.

Ericsson's earnings were hit by a weak environment in Europe and some emerging markets. The company is also facing heightened competition from Nokia after the Finnish firm merged with Alcatel-Lucent earlier this year. Sales in Ericsson's core networks business fell 2 percent year-on-year in the first quarter of 2016.

"On the network side we have gone from 15 competitors and now we are down to three…so of course, here we have seen a dramatic transformation in ten years. I don't think any industry has gone from 15 competitors down to three in such a short period," Vestberg said.