Published in Network

Ericsson beats Wall Street predictions

by on21 October 2020

Higher margins and lots of Chinese work

Telecoms equipment supplier Ericsson is doing better than the cocaine nose jobs of Wall Street predicted thanks to higher margins and China’s 5G rollout.

Ericsson said its gross margins reached their best level since 2006 and revenues rose at the Swedish company’s mainstay networks business despite disruptions caused by the COVID-19 pandemic.

The company has now won 112 5G contracts, up from 99 at the end of the second quarter, as more telecoms operators build next-generation networks and US diplomatic pressure pushes out market leader Huawei from more countries.

Relations with China could become more fraught after Swedish authorities shut China’s Huawei and ZTE out of its 5G network, citing security concerns.

Unlike Nordic rival Nokia, Ericsson has won contracts from all three major operators in China to supply radio equipment for 5G networks.

Ericsson finance chief Carl Mellander said: “The 5G roll out in China was the big driver in this quarter,” 

China’s foreign ministry said Sweden should address its incorrect decision to ban Huawei and ZTE to avoid a negative impact on Swedish companies in China.

Ericsson’s gross margin, excluding restructuring charges, rose to 43.2 percent in the third quarter from 37.8 percent a year earlier, reaching a level last seen in 2006.

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

Third-quarter gains came mainly from the Networks division, which reported an adjusted operating margin of 22.7 percent, well above the forecast of 17.8 percent, Liberum analyst Janardan Menon said.

Adjusted operating earnings rose to $1.0 billion from 6.5 billion a year earlier. Total revenue rose a percent.

The adjusted operating margin now stands at 11.1 percent for January-September, compared with Ericsson’s 2020 target of more than 10 percent and its goal of 12-14 percent for 2022.


Last modified on 21 October 2020
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