Ericsson reported a strong third quarter for 2020, beating analysts’ expectations with adjusted sales up 7% year-over-year and driven mainly by 5G sales in mainland China. The company’s CEO said that the $1.1 billion acquisition of Cradlepoint, which is expected to close in the coming weeks, will be a “key building block” for its strategy to capture new business and revenue from the enterprise space.
On a call with investors, CEO Börje Ekholm said that Ericsson is gaining market share due to its technology investments, and he said that most of the market-share gains “come from non-Chinese competitors. So we’re not winning here due to geopolitical situation.” He also credited Ericsson’s research and development for fueling its strength in the Chinese market.
“It is very important for us and strategically important for us to be in China, and that’s because that’s a global powerhouse for innovation and technological change and driven by many great entrepreneurs,” he said, adding that “5G is being built out very fast in China with good coverage. … Building out 5G will allow Chinese entrepreneurs as well as American and whoever is first on building the network to innovate in this new space.” He went on to add that Europe ought to “take some impressions here from the fast buildout pace we’re seeing in China,” which he said will lead to new companies and an ecosystem developing. “Ror us to be part of seeing the emergence of that ecosystem and realizing what will that drive for feature requirements in the future will be critical,” Ekholm added.
Ericsson reported net sales of about $6.5 billion for the quarter, with net income for the quarter of about $0.64 billion.
Ekholm noted that around 80% of Ericsson’s workforce is working from home due to the global pandemic, and that “Covid-19 has so far had limited impact on our business, but we are closely monitoring any signs of a change in the situation.” He also said that while the pandemic has “hurt revenues for several of our customers, and in some cases this has led to a reduction of capex, we have not seen any negative impact on our business, largely due to footprint gains. However, the pandemic negatively impacted our sales in Latin America and Africa.”
He also added that Ericsson’s recent acquisition of Cradlepoint represents progress in Ericsson’s strategy to build an enterprise business. On the call, Ekholm called the Cradlepoint buy “one key building block for our enterprise ambitions.”
“We see the third quarter as another solid stepping stone, and we are well-positioned now to take the next steps,” Ekholm concluded on the call. He went on to say that Ericsson sees “a clear link between our earnings performance and the financial performance of the company and, actually, our continued investments in R&D towards technology leadership. … Where we see a big opportunity going forward is in the enterprise segment. We think that will help drive the demand for network equipment, and it will drive demand for — or traffic into the operator’s network. That’s going to benefit us, but we also look for stand-alone opportunities in there with good economics like Cradlepoint acquisition that we think is a typical example of the type of use cases that we will focus on that both drive traffic as well as a good stand-alone economics.
