Ericsson has reported revenue of SEK 63.8 billion (+10 percent) or $7.04 billion in the fourth quarter and SEK 210.8 billion (+3 percent) or $23.26 billion in 2018 – fuelled by its network business deals.
Ericsson generated revenue of SEK 8.2 billion (+5 percent) from South East Asia, Oceania and India, SEK 8.4 billion (+30 percent) from North East Asia including Japan and China, SEK 18 billion (+23 percent) from North America, SEK 18.2 billion (+8 percent) from Europe and Latin America and SEK 6.5 billion (–14 percent) from Middle East and Africa in Q4 2018.
Ericsson said the number of employees increased by 860 to reach 95,359 on Dec 31, 2018 – mainly due to its hiring in R&D.
Ericsson’ Networks business revenue increased 12 percent mainly due to strong growth in North America, Europe and Latin America as well as in North East Asia, driven by investments in 5G readiness and LTE networks.
Ericsson reported lower sales in India. Sales in North America were higher than anticipated and driven by large hardware deliveries.
Ericsson achieved increase in gross margin of Networks business to 41 percent against 35 percent, due to improved hardware margins driven by the shift to Ericsson Radio System (ERS). Its 5G deals and 5G field trials had a negative impact on operating margin in the quarter.
Digital Services revenue rose 5 percent mainly due to increased sales in North East Asia and North America. The company noted demand for its 5G-ready and cloud-native products and OSS in North East Asia and North America.
Ericsson will be renegotiating or exiting 45 critical and non-strategic customer contracts in the Digital Services business. The networking company has already addressed 23 contracts and will complete an additional 25 percent of the 45 contracts in 2019. Managed Services sales fell 5 percent as a result of exit from non-strategic managed services contracts.
Ericsson aims to improve operating margin of Managed Services business to 5-8 percent in 2020. Ericsson has identified 42 managed services contracts for exit, renegotiation or transformation — resulting in an annualized profit improvement of approximately SEK 0.9 billion. But Ericsson is expecting sales drop of SEK 4 billion in 2019 due to exits from its Managed Services contracts.