Sunday, April 22, 2018

Ericsson sees better financial performance after cost cutting

Amidst a stabilizing mobile infrastructure market with initial 5G development work in North America, Ericsson reported Q1 2018 sales of SEK 43.4 billion (US$5.134 billion), down by -9% YoY. Sales, adjusted for currency, decreased by -2% YoY with lower revenues in market areas North East Asia as well as in South East Asia, Oceania and India. The other market areas showed growth. There was an operating income loss of SEK -0.3 billion (US$35.4 million), which is an improvement from the loss of SEK -11.3 billion for the same period last year. Gross margin was 34.2% (15.7%) 1). Gross margin excluding restructuring charges improved YoY, to 35.9% (18.7%) 1), supported by cost reductions and the continued ramp-up of Ericsson Radio System (ERS).


In North America, Ericsson benefitted from the First Net project underway at AT&T. LTE deployments in mainland China diminished. Ericsson also reports increasing traction for 5G – radio, core & IoT. An additional 500 R&D engineers have been recruited to help with 5G.

As of the end of Q1, Ericsson had 97,581 employees, down from 109,127  in Q2 2017.

Börje Ekholm, President and CEO of Ericsson, stated: "Our efforts to improve efficiency in service delivery and common costs are starting to pay off. The gross margin improved to 36% (19%) in the quarter, tracking well towards our Group target of 37-39% by 2020. A cornerstone in our strategy is to invest in R&D for both technology leadership and cost leadership, which will allow us to generate higher gross margins. We continue to increase our R&D investments in Networks to lead in 5G. In Digital Services we continue to increase investments into our new cloud-native portfolio as well as changing our ways of working for better R&D efficiency. In Managed Services we continue to focus on machine intelligence, automation and analytics to further enhance user experience, improve efficiency and better manage the increasingly complex networks of tomorrow."

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