Ericsson, the Swedish telecommunications-equipment company, anticipates ongoing challenges in the mobile-network industry throughout this year. Customers’ cautious spending habits and the normalization of investment pace in the key Indian market contribute to these challenges.
Sales in Ericsson’s key networks unit witnessed a significant decline of 23% in the fourth quarter. The sales momentum in India slowed down, and North America experienced a sharp 50% drop in sales.
Ericsson has observed a shift in its business mix that will persist until 2023. While early-mover markets like North America held higher-margin 5G work, the company is now focusing on lower-margin developing markets such as India. This strategy has helped maintain sales levels but has resulted in restrained margins.
The rapid deployment of 5G technology in India has started to moderate, with year-on-year sales growth of 14%. However, compared to the third quarter, sales have declined by almost 40%.
Ericsson acknowledged that a reduction in capital expenditure investments in India was expected in early 2024 but occurred earlier than anticipated.
In terms of financial performance, Ericsson reported a net profit attributable to shareholders of SEK 3.39 billion ($324 million), compared with SEK 6.07 billion in the previous year. Sales also experienced a decline of 16%, amounting to SEK 71.88 billion.
Analysts surveyed by FactSet had predicted a net profit of SEK 3.29 billion on sales of SEK 76.64 billion.
Despite the challenges, Ericsson’s earnings before interest, tax, and amortization margin (excluding restructuring charges) stood at an impressive 11.4%, surpassing the company’s guidance of around 10%.
Ericsson Expects Market Recovery as CEO Expresses Confidence in Future Outlook
Ericsson, a leading provider of network technology, predicts a decrease in the overall network market in 2024. The company attributes this forecast to the current decline in India and hesitant customer investments. Despite this uncertainty, Ericsson remains optimistic about its prospects in North America, thanks to a recent contract win from AT&T. The deal, valued at up to $14 billion, solidifies Ericsson’s position in the region and is expected to contribute to market share growth in the latter part of 2024.
Chief Executive Borje Ekholm acknowledges the unsustainably low investment levels among many operators, which he believes will drive a future market recovery. While Ericsson is confident in the eventual rebound, Ekholm emphasizes that the timing of this recovery is ultimately determined by the company’s customers.
In other news, Lars Sandstrom has been appointed as Ericsson’s new Chief Financial Officer, replacing Carl Mellander who served the company for over 25 years. Sandstrom brings a wealth of experience from his previous role as CFO at Swedish medical technology company Getinge, as well as his senior positions at Volvo, Scania, and Swedish Orphan Biovitrum. He is set to join Ericsson on April 1.
Despite the challenges in the current network market, Ericsson remains steadfast in its commitment to innovation and growth. With a new CFO and strategic contract wins, the company is poised to navigate these uncertain times while maintaining its position as a global leader in network technology.