Published in Network

Ericsson sees strong US growth

by on17 April 2019

Better than expected profits

Ericsson posted a first-quarter profit that was much better than the cocaine nose jobs of Wall Stree predicted.

The forecasts were thanks to strong growth in North America and cost cuts. Its shares rose more than three three percent to a four year high.

Profit beat expectations for a fifth straight quarter, as the Swedish company slashes costs following an industry-wide downturn in the middle of the decade and demand for 5G equipment increases.

Ericsson is one of the major rivals to Huawei, and some analysts see potential benefits from Western suspicions of the Chinese group after Washington alleged its gear could be used by Beijing for spying.

Ericsson Chief Financial Officer Carl Mellander said the Huawei situation had not yet affected orders but acknowledged security concerns could play a role in customer decisions.

“We said earlier that we don’t see it in the order books, but generally speaking the competitiveness we now have in our radio portfolio, through all technology investment we have done, matters”, Mellander said.

Excluding restructuring charges related to a revamp of its Business Support System unit and one-off items, the operating margin was 7.2 percent. The company has pledged to hit an underlying target of more than 10 percent in 2020.

Sales of 5G equipment in North America, the company’s biggest market, drove growth, while Europe lagged due partly to a lack of spectrum access, a poor investment climate, and uncertainties related to future vendor market access.

Ericsson said it now expects the Radio Access Network (RAN) equipment market to grow by three per cent this year, up from a previous forecast for two per cent growth.

Ericsson also warned that probes by the US Securities and Exchange Commission (SEC) and Department of Justice (DOJ) could result in “material financial and other measures”.

It had received questions from US authorities in March 2013, and there are ongoing investigations into its Romanian and Chinese business practices. In October it had dismissed 50 people due to the probe.

“We can see now that it is out of the question that we will come out of this with no consequences”, Mellander said. “How much and of which nature and when we really cannot say.”

Ericsson swung to a quarterly operating profit of 4.9 billion crowns from a 312 million loss a year ago, well above a mean forecast for a 2.8 billion profit. Sales rose to 48.9 billion versus a forecast of 48.2 billion.

Last modified on 17 April 2019
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