Stock Code:300252.SZ
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For three consecutive quarters of revenue growth, Ericsson's 5G business turned losses into profit

time:2019/04/28

Ericsson's first quarterly earnings report for 2019 shows that Ericsson's net sales for the first quarter of this year were SEK 48.9 billion, up 13% year-on-year; net profit increased to SEK 2.4 billion.

 

Ericsson's President and CEO Borje Ekholm said, “This is the third consecutive quarter, and our organic sales have grown!” We are investing in plans to expand and help Ericsson to create future business growth. Driven by rising revenues, we are able to grow our company in a profitable manner this quarter.

 

Revenue increased by 13% year-on-year, net profit returned to growth

According to financial report data, in the first quarter of 2019, Ericsson's net sales amounted to 48.9 billion Swedish kronor (about 5.29 billion US dollars), an increase of 13% over the 43.4 billion Swedish kronor in the first quarter of 2018.

 

In the first quarter of 2019, Ericsson's gross profit margin increased to 38.4% (compared to 34.2% in the same period last year), which was mainly driven by the network business and management services business.

 

Operating income of 4.9 billion Swedish kronor (--300 million Swedish kronor in the same period last year); operating profit margin of 10.0% (-0.7% in the same period last year), this performance significantly exceeded analysts' expectations.

 

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It is worth mentioning that in the first quarter, Ericsson turned around and achieved a net profit. In the first quarter of 2019, Ericsson's net profit increased to 2.4 billion Swedish kronor (about 260 million US dollars), compared with a net loss of 700 million Swedish kronor in the same period last year.

 

“This is the third consecutive quarter of our organic sales growth! In the first quarter of 2019, Ericsson’s net sales increased by 13% year-on-year, and net sales adjusted by comparable units and currencies increased by 7% year-on-year.” Borje Ekholm said.

 

It is understood that in the third quarter of 2018, Ericsson achieved net sales of SEK 53.8 billion, up 9% year-on-year. This is also the second quarter of continuous decline in performance after two consecutive quarters of decline, Ericsson finally achieved quarter-on-quarter growth in quarterly revenue; In the fourth quarter of 2018, Ericsson's net sales were SEK 63.8 billion, an increase of 10% year-on-year. In the year of 2018, Ericsson's net sales amounted to SEK 210.8 billion, a year-on-year increase of 3%. This is the first time since 2013 that Ericsson has achieved organic sales growth for the whole year. The continued growth of Q1 revenue also made a good start for Ericsson's 2019.

 

Seized 18 publicly available 5G commercial contracts

According to Borje Ekholm, the continued increase in revenue was mainly due to the strong growth in North American performance and the driving of Ericsson's network business by 10% this quarter. Among them, the proportion of North America's total revenue in Ericsson increased from 27% in the same period last year to 35%, and in China it increased from 4% to 5%.

 

In the first quarter of 2019, Ericsson's network business gross margin increased from 40.4% to 43.2%, which was mainly due to higher hardware capacity sales and increased intellectual property income.

 

With national operators such as South Korea and the United States rushing to commercial 5G, Borje Ekholm said, “We continue to see the good business development momentum of the new 5G ready product portfolio and won many important contracts this quarter.”

 

“Our strategy is to work with key customers in leading markets. This will not only generate 5G services, but also generate practical experience in the launch and commercialization of 5G. So far, Ericsson has publicly announced that it has reached 18 carrier customers. 5G commercial contract, which is more than any other supplier," Borje Ekholm said.

 

At the "2019 World Mobile Congress (MWC 2019)" held in Barcelona, Spain at the end of February this year, Borje Ekholm said that with the support of a strong, secure and usable product portfolio, Ericsson will help open 5G networks worldwide in 2019.

 

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Not long ago, Ericsson announced that it has reached a publicly available commercial 5G contract with 18 operator customers and signed a 5G cooperation memorandum of understanding with 43 operators. Thomas Noren, vice president and head of 5G commercialization at Ericsson, stressed in an interview with C114 that “the 18 5G commercial contracts are commercial contracts that can announce the name of the operator. The 18 operators also announced the 5G commercialization with Ericsson. Cooperation is a truly publicly available and certifiable 5G commercial contract. As of now, other competitors have not issued a number of similar contracts that can announce the operator's name."

 

However, at this stage, the number of 5G commercial contracts is not the most valued by Ericsson. "In fact, we don't value the number of 5G commercial contracts, who is the first and who is the second. We are more concerned about how to deliver better 5G systems to our carrier customers, to help them open 5G better, pay more attention to how to enable our customers to achieve 5G commercial pace faster, achieve 5G profit return faster, I think this road is still very long, we have to go with the operator Go on. "Thomas Noren stressed.

 

Continuously increase 5G investment to drive performance growth during the harvest season

Since the beginning of this year, Ericsson has also made great progress in promoting the progress of 5G commercial use.

 

For example, Ericsson recently announced that it has signed a 5G commercial contract with Korea Telecom (KT) to help it launch 5G commercial services throughout Korea in April 2019; Danish telecom operator TDC has chosen Ericsson to deploy a nationwide 5G commercial network; Ericsson and Switzerland's largest telecommunications operator Swisscom (Swiss Telecom) announced that they have opened the first large-scale commercial 5G network in Europe to support commercial smartphones.

 

In order to help operators smoothly implement network evolution and deploy 5G services on a large scale, Based on the 5G framework map released last year and the operational experience of 5G commercial support, Ericsson has also made some system enhancements to the original 5G platform. It has just launched an enhanced 5G platform and released new products in the fields of core network, wireless access, transmission and service orchestration. It is understood that Ericsson's enhanced 5G platform has four characteristics: “comprehensive”, “easy to use”, “flexible” and “saving money”. Ericsson also put forward the concept of “opening 5G and simplifying it”, hoping to help more operators to successfully commercialize 5G.

 

Ericsson, which is trying to return to its peak in the 5G era, continues to increase its code in 5G. During this year's show, Ericsson announced its intention to acquire Kathrein's mobile network antenna and filter business to enhance Ericsson's capabilities and competitiveness in advanced active and passive antennas.

 

Ericsson predicts that by 2026, 5G's revenue for global industry digitalization is expected to reach $619 billion.

 

The industry generally believes that 2019 will be a large-scale commercial year of 5G. As more operators launch 5G commercial services, mainstream equipment vendors, including Ericsson, are expected to usher in the true harvest in the 5G market for the first time, leading to business growth for the operator market.

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