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Ericsson Q3 earnings: Strong 5G sales offset setbacks in China and from chip shortage

Ericsson has secured 5G contracts from all three top U.S. carriers, helping the company absorb losses in China

Ericsson has reported third-quarter profit of $665.2 million. The company’s loss of market share in mainland China — due to tensions resulting from Sweden’s ban on Huawei equipment — and global supply chain challenges were offset by strong sales of 5G equipment in much of the world.

“We continue to win footprint across our business by leveraging our competitive 5G portfolio. The 5G contracts now awarded by all three tier-1 US carriers are the largest in Ericsson’s history,” commented Börje Ekholm, president and CEO of Ericsson.

He further summarized: “Through continuous measures for global supply chain resilience, we avoided customer impact during the first half of the year. However, late in Q3 we saw some impact on sales from disturbances in the supply chain, and such issues will continue to pose a risk. While we continued to gain share in a growing market, the expected sales reduction in Mainland China, lower variable sales in Managed Services and some supply chain disturbances, led to a negative organic sales development of -1%.”

Ericsson, though, has secured 5G contracts from all three U.S. telecom firms — Verizon, AT&T and T-Mobile US — which has helped the company to absorb its losses in China.

However, despite these successes, the company’s total revenue fell 2% to 56.3 billion crowns, missing the 58.14 billion crowns forecast by analysts. Its profits, however, generally exceeded analysts’ expectations.

Ekholm reported stable network sales year-over-year, with an increase of 8% in the third quarter compared to the same period last year. He also spoke of a 1% growth in digital services sales, saying that excluding sales in Mainland China, these sales increased by 6% in the third quarter compared to the same period last year.

“We are starting to see initial revenues from 5G contracts, driving growth in our Core business,” he continued. The company’s gross margin saw a minor drop, “impacted mainly by initial deployment costs in cloud native 5G Core projects,” Ekholm said, adding, “We continue to increase our R&D investments in the 5G portfolio, including Core and orchestration, further strengthening our competitive position.”

Ekholm also said that due to the reduced market share in mainland China, Ericsson will “resize” its sales and delivery delivery organization in the country, starting in the fourth quarter, which would result in restructuring charges.

ABOUT AUTHOR

Catherine Sbeglia
Catherine is a Technology Editor for RCR Wireless News, Enterprise IoT Insights, and In-Building Technology. Before joining Arden Media, she served as an Associate Editor in Advantage Business Marketing's Manufacturing and Research & Development Groups. She studied English and Film & Media Studies at The University of Rochester. She currently lives in Madison, WI. Having already lived on both coasts, she thought she’d give the middle a try. So far, she likes it very much.

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