Ericsson ends run of earnings beats with Asia warning

  • Business
  • Thursday, 18 Jul 2019

STOCKHOLM: Ericsson AB posted earnings that missed analyst estimates for the first time in six quarters and warned its rollout of 5G mobile networks in Asia would weigh on profits, in a rare setback to chief executive officer Borje Ekholm’s turnaround efforts.

With Ericsson battling Finland’s Nokia Oyj and China’s Huawei Technologies Co for pole position in 5G, Ericsson said the first big deployments in Asia will gradually pull down profit margins, although not enough to jeopardize profitability targets for 2020.

Wireless operators are preparing for heavy spending on the new networks that offer super-fast download speeds, minimal delay and capacity for more simultaneous connections. Their suppliers are likely to sacrifice short-term profits to win the first big contracts as that gives them a better chance of winning longer-term business.

With Huawei targeted by a US campaign to have it blocked on security grounds, its Nordic rivals may have an opportunity to win more business. In an interview on Bloomberg TV, Ekholm said Ericsson was not benefiting from Huawei’s troubles, although it was gaining market share.

“We’re trying to strengthen our footprint in front of the 5G rollout,” he said in an interview on Bloomberg TV. “Of course that is going to impact the margins, but as you see on networks, we can really manage that within the guidance we have given.’’

The Swedish vendor’s adjusted operating profit rose to 3.9 billion kronor (US$415mil) from 2.0 billion kronor a year earlier. That compared with the average estimate of 4.4 billion kronor in a Bloomberg survey of analysts.

All of Ericsson’s businesses units except its networks division posted results below estimates, showing Ekholm has more work to do after a successful turnaround of the company’s biggest unit. The CEO suggested that analysts may have been overestimating results in the Digital Services and Managed Services units.— Bloomberg

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