Thursday, January 23, 2020

Ericsson: flat sales, improving margins, impact from Sprint/T-Mobile

Ericsson reported 4Q2019 sales of SEK 66.4 billion (US$6.96 billion), up 1% adjusted for comparable units and currency. Revenue dipped in North America but was compensated by growth in other markets, primarily in the Middle East and North East Asia. Reported sales grew by 4%. Gross margin was 37.1% (32.0%) excluding restructuring charges.

Full-year 2019 sales increased by 4%, adjusted for comparable units and currency, with Networks growing by 6%. Reported sales increased by 8%.

Börje Ekholm, President and CEO of Ericsson, states:

"Our performance during 2019 puts us on track to reach our targets for 2020 and 2022. Our focused strategy with increased investments in R&D combined with operational efficiency is paying off. We have regained technology leadership, recovered previously lost ground in several markets and improved the financial results. Today, we are a leader in 5G with 78 commercial 5G agreements with unique operators and 24 live 5G networks on four continents. Operating margin[1] excluding costs related to the resolution of the US SEC and DOJ investigations and restructuring charges was 9.7% for full-year 2019, almost reaching the target of more than 10% one year early..."

"Due to the uncertainty related to an announced operator merger, we saw a slowdown in our North American business in Q4, resulting in North America having the lowest share of total sales for some time. However, the underlying business fundamentals in North America remain strong. The negative growth in North America was more than offset by growth in Asia and the Middle East. It is still too early to assess possible volumes and price levels for the expected deployment of 5G in China, and we expect that the initial challenging margins will shift to positive margins over the lifespan of the contracts."