Ericsson reported 9 percent dip in revenue to SEK 43.4 billion or $5.15 billion in the first quarter of 2018 – due to poor performance in all business divisions.
The Sweden-based telecom equipment maker reported lower revenues in market areas North East Asia (–39 percent) as well as in South East Asia, Oceania and India (–24 percent) and North America (–6 percent). The market areas showed growth include Europe and Latin America (+7 percent) and the Middle East and Africa (+8 percent).
Ericsson achieved revenue of SEK 28.6 billion (–10 percent) or $3.4 billion from networks business, SEK 7.7 billion (–9 percent) or $915 million from digital business and SEK 5.5 billion (–8 percent) or $653 million in managed services unit in Q1 2018.
“Our efforts to improve efficiency in service delivery and common costs are starting to pay off. The gross margin improved to 36 percent (19 percent) in the first quarter, tracking well towards our Group target of 37-39 percent by 2020,” Borje Ekholm, president and CEO of Ericsson, said.
Ericsson is making investment in R&D for both technology leadership and cost leadership, which will allow the company to generate higher gross margins.
Networks – 5G
Digital Services — cloud-native portfolio
Managed Services — machine intelligence, automation and analytics
Ericsson reduced the workforce by 3,154 in Q1 2018. Ericsson reduced almost 18,000 jobs since July last year. Ericsson has 97,581 employees on March 31, 2018, a net reduction of 3,154 employees in the quarter and of 13,317 employees compared with March 31, 2017. The decrease is mainly a result of cost and efficiency activities, Ericsson said.
Performance of main units
Ericsson’s sales from Networks business fell 10 percent due to lower LTE investments in Mainland China and completion of larger projects in market area South East Asia, Oceania and India.
Ericsson’s Networks business achieved strong growth in Europe and Latin America as well as in the Middle East and Africa. Investments in network expansions and 5G readiness in North America continued.
Ericsson said its Digital services revenue fell 9 percent. Ericsson said ongoing digitalization drives opportunities for mobile operators to reduce costs and be more agile by: automating operations, serving and engaging with customers digitally and building programmable core networks.
Ericsson’s sales from Managed services dipped 8 percent as a result of contract reviews and reduced variable sales in certain large Managed Services Networks contracts.
Performance in regions
South East Asia, Oceania and India sales fell due to completion of major telecom projects in Networks. Ericsson does not reveal specific performance in China and India, two leading telecom markets for the company.
North East Asia sales dropped due to lower Networks sales in Mainland China due to reduced LTE investments. Operators in Mainland China and Japan were awaiting results of spectrum allocations, which impacted sales.
North America currency-adjusted sales rose 6 percent driven by Networks due to investments in network expansions and in 5G readiness.
Europe and Latin America sales increased driven by higher Networks sales primarily in Latin America. Parts of Europe contributed to Networks sales growth.
Middle East and Africa sales grew driven by deployment of network modernization and LTE contracts in parts of the Middle East.