Ericsson enhances sales target after several 5G wins

Ericsson said its sales rose 6 percent to SEK 57.1 billion in the third quarter of 2019 — driven by strong growth in North America and North East Asia.
Ericsson CEO Borje Ekholm at MWC 2018Nokia, one of the main rivals of Ericsson, will publish its third-quarter and January-September 2019 results on 24 October 2019.

Borje Ekholm, president and CEO of Ericsson, said: “We continue to see strong momentum in our business, based on the strategy to increase our investments for technology leadership, including 5G. We saw organic sales growth of 3 percent in the quarter, driven by the early adopters of 5G, in North America and North East Asia.”

Ericsson said its operating income was impacted by cost provisions of $1.2 billion or SEK 11.5 billion related to a resolution of the investigations by SEC and DOJ in the US and a refund of social security costs of SEK 0.9 billion in the report.

Ericsson posted operating income of SEK 6.5 billion with 11.4 percent operating margin.

Gross margin excluding restructuring charges was 37.8 percent with improvements in its managed services, digital services and networks business.

Ericsson is expecting to achieve sales of SEK 230-240 billion in 2020 against the previous target of SEK 210-220 billion.

The largest market for 5G infrastructure will be China where deployments are expected to start near term.

“We have invested to increase our market share. It is still too early to assess possible volumes and price levels. Based on historic experience we expect to have challenging margins initially but positive margins over the lifespan of a contract,” Borje Ekholm said.

Ericsson said 5G is taking off faster than earlier anticipated and 5G network investment is happening as a capacity enhancer in metropolitan areas.

Ericsson said its IoT business is growing almost twice as fast as the estimated market growth of 20-25 percent per year. Ericsson has more than 4,500 enterprises on the IoT platform and the number of connected devices on the platform has more than doubled year to date.

Operating margin target for 2020, excluding restructuring charges, remains unchanged at >10 percent of sales. This incorporates higher cost level for newly introduced 5G products and a target adjustment for segment Emerging Business.