Ericsson profits boosted by India, expects ‘choppy’ 2023

Ericsson profits boosted by India, expects ‘choppy’ 2023

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Ericsson posted earnings that beat expectations, supported by sales in its second-largest market, India.

Although the firm said it expected a “choppy environment during 2023 with poor visibility”.

Ericsson’s reported gross margin for the quarter fell from 42.3% to 38.6% - mainly due to fiercely priced competitive markets such as India rather than its main market in the US.

Yet while India boosted its equipment sales, with overall net sales rising by 14%, it is expected that the US6.2 billion acquisition of Vonage was the biggest reason for this rise.

In Q2, Ericsson expects operators to remain cautious with CAPEX investments, with this dynamic to largely be offset by growth from large roll-out projects.

Group organic sales were flat, as the expected decline in networks was offset by growth in other business segments, including a 19% organic growth in enterprise.

It was revealed in February that the telecoms equipment maker would lay off 8,500 employees globally as part of a plan to cut costs, saving around US$193 million.

Cost efficiency, the company says, is crucial for its “long-term competitiveness”.

Its yearly estimate, given the increased scope and more costly programmes in Europe, indicates that restructuring charges will normalise to about 0.5% of sales next year.

“We are on a journey to shape the future industry landscape and extend our addressable market by leveraging our 5G capabilities.

“We continue to execute on our strategy to strengthen our leadership in mobile networks, grow our enterprise business, and drive continued cultural transformation.”

CFO transition

The company announced that Carl Mellander, Ericsson's chief financial officer will step down from his role at the end of the first quarter of 2024.

Mellander has been with Ericsson for over 25 years and has been a member of its executive team since 2016. A recruitment process will be initiated to appoint a successor.

Ekholm said: For almost 7 years Carl has been a valued member of the Executive Team and instrumental in the turnaround of Ericsson.

"We have come to a mutual agreement that this is a good time for a change, as the turnaround phase is completed and the foundation for the next chapter of Ericsson's strategy has been laid. During his tenure as CFO, Ericsson regained its technology leadership and significantly strengthened its financial position.

Canadian investment

Elsewhere, the firm has entered into a major five-year R&D deal worth around C$470 million with the government of Canada.

Ericsson will step up its research into 5G, 6G, artificial intelligence (AI), Cloud RAN and core network technologies.

The investment, at Ericsson’s Ottawa, Ontario and Montreal, Quebec facilities, is expected to create and upskill hundreds of jobs.

“We are already seeing the benefits of next-generation technologies such as 5G and AI, yet we are still in the early days of their potential to transform our work, leisure, and social lives,” Ekholm added.

“Ericsson’s R&D investment partnership with the Canadian government, supported by world-class talent in Ottawa and Montreal, will boost innovation and ultimately help to improve the lives of millions of people. We are determined to lead our industry through continued R&D investment.”

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