Ericsson improves performance in second quarter

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Ericsson has improved performance in terms of its revenue, profit and operating margin during the second quarter of 2018.
Ericsson CEO Börje Ekholm at MWC 2018
The Sweden-based telecom equipment maker has posted revenue of SEK 49.8 billion (–1 percent) or $5.62 billion and operating income of SEK 0.2 billion against SEK 0.5 billion operating loss with gross margin of 34.8 percent against 29.1 percent.

Ericsson achieved 15 percent quarter-quarter growth in revenue, reflecting on its execution of strategies and innovation in 4G and 5G products for telecom operators.

Ericsson generated revenue of SEK 14.3 billion (+11 percent) from North America, SEK 14.2 billion from Europe and Latin America, SEK 7 billion (–3 percent) from South East Asia, Oceania and India, SEK 5.6 billion (–2 percent) from Middle East and Africa, SEK 4.8 billion (–19 percent) from North East Asia and SEK 3.9 billion (–7 percent) from other regions.

Ericsson generated SEK 32.4 billion (+2 percent) from networks business, SEK 8.8 billion (–11 percent) from digital services and SEK 6.5 billion (–2 percent) from managed services in Q2 2018.

Gross margin excluding restructuring charges improved to 36.7 percent from 30.9 percent, driven mainly by cost reductions and the continued ramp-up of Ericsson Radio System, the company said during its earnings report.

Ericsson said operating expenses were SEK 17.2 billion from SEK 15.4 billion due to hike in investments in R&D, higher provision for variable compensation and an increase in provision for overdue trade receivables.

“We continue to execute on our focused business strategy and are tracking well towards our 2020 target of an operating margin of at least 10 percent. The investments in technology leadership have resulted in increased gross margin to 37 percent (31 percent) and growth in segment Networks,” Ericsson CEO Borje Ekholm said.

Main focus area for Ericsson will be winning customers for supplying technology for fixed wireless access and 5G-ready 4G portfolio.

“We will extend our footprint as operators prepare for 5G. We provide solutions for all frequency bands for 5G, which strengthens our global competitiveness. We will continue to invest in securing leadership in 5G,” Borje Ekholm said.

Ericsson achieved two percent growth in Networks revenue with strong performance in North America where all major operators are preparing for 5G. Networks gross margin improved to 40 percent from 36 percent.

Ericsson reduced workforce by 2,321 in the quarter and by 20,500 in total as part of the SEK 10 billion cost reduction program, launched in Q2 2017. Ericsson said its total employee base reached 95,260 – a reduction of 2,321 in June, 2018 and 13,867 from June, 2017.

Ericsson said the Radio Access Network (RAN) equipment market is estimated to drop by 2 percent in 2018 with 2 percent CAGR for 2017-2022. China market is expected to dip due to reduced LTE investments, while there is positive momentum in North America.

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