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Ericsson doing well thanks to 5G

by on22 April 2020

Going a viking on the rivals

Ericsson posted better than expected quarterly earnings on strong demand for 5G network equipment even as the coronavirus made a mess of other parts of the company.

The Son of Eric warned of sales weakness ahead, but its results emphasised Ericsson’s ability to withstand pandemic-related pressures that have slammed the brakes on other industries globally.

Chief Executive Borje Ekholm said: “There is near-term uncertainty around sales volumes due to COVID-19 and the macroeconomic situation, but with current visibility we have no reason to change our financial targets for 2020 and 2022."

Sequential sales growth in the second quarter will be lower than normal because of disruption to supply chains and the global economic slowdown, Ericsson said, adding that there have been no material effects so far on demand.

Ekholm has driven a turnaround at Ericsson during his three years at the helm, improving profit margins amid growing demand for next-generation 5G equipment.

Ericsson increased its market share in China, and expects the new contracts to weigh on profitability in the second quarter rather than being evenly distributed over the year.

In China, Ericsson beat Finnish rival Nokia to 5G contracts from China Mobile, the world’s largest telecoms company.

Ericsson has been racing against Nokia and China’s Huawei Technologies to sign up telecoms customers looking to upgrade their networks to 5G.

The 5G push comes as Huawei faces a political backlash over its alleged use of networking equipment to spy for the Chinese government, which the company has denied.

Spending in the United States is likely be stronger this year as a combined Sprint/T-Mobile boosts investment along with bigger rivals AT&T and Verizon.

Ericsson’s first-quarter adjusted quarterly operating earnings rose 30 percent $455 million, beating analysts' expectations.

Ekholm said the gross margin in its Networks business rose to 44.6 percent, from 43.2 percent a year earlier, citing strong business fundamentals across multiple regions.


Last modified on 22 April 2020
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