Ericsson’s profit shows readiness for new tech
The Swedish telecoms firm turns its first profit in two years, sending shares up nearly 5%
Stockholm — Shares in Swedish telecoms firm Ericsson shot up by 5% in early trades on Thursday after it posted better-than-expected third quarter earnings, turning its first net profit in more than two years.
By noon, the share price was still up by 4.72% on the Stockholm stock exchange in an overall market trading 0.6% higher.
Ericsson’s net profit soared to 2.7-billion kronor during the period July-September, compared to a net loss of 3.6-billion kronor a year ago. Analysts had expected a loss of 167-million kronor.
“We see improvements across our businesses,” CEO Borje Ekholm said in the report.
Once a market leader in the mobile phone industry, Ericsson saw its earnings slump year after year following the meteoric rise of smartphone giants in the US and Asia.
But it has fought on against the odds, adapting to the rapidly shifting market by focusing its attention on research and development of new technologies for telecoms equipment.
The company launched a major 10-billion kronor restructuring drive in July 2017 that has seen 20,500 jobs cut.
Ericsson is now finally able to see the light at the end of the tunnel, with good opportunities ahead as operators prepare for the roll-out of 5G.
“There is strong momentum in the global 5G market with lead markets moving forward,” said Ekholm, who has headed Ericsson since January 2017.
“The global radio access market is recovering from several years of negative growth and our investments in R&D have positioned us well to benefit from this development,” he said.
Sales during the third quarter rose by 8.9% to 53.8-billion kronor. Gross margin, excluding restructuring costs, meanwhile skyrocketed to 36.9%, up from 28.5% a year ago.
Ericsson’s networks division, its core operations, saw sales rose by 5% and its gross margin climb to 41.5%, up 6.7 points in one year.
Ekholm warned that “more work remains, however, to get all parts of the business to a satisfactory performance level. We remain confident in reaching our long term target of at least 12% operating margin beyond 2020”.
In the third quarter, Ericsson’s operating margin was 6%, compared to -7.4% a year ago.