Ericsson’s 3Q earnings buoyed by 5G in China

Ericsson CEO Börje Ekholm
Ericsson President and CEO Börje Ekholm said year-to-date results strengthen confidence in delivering on the 2020 group target. (Ericsson)

Ericsson reported that its gross margin improved in all segments in the third quarter and reached 43.2%, the highest since 2006.

The Swedish vendor reported a net profit of SEK 5.6 billion, or $642 million, for the quarter, compared with a loss of $791 million in the same quarter a year earlier. Its networks division grew by 13%, reflecting high activity levels in North America and China.

The underlying business fundamentals remain strong in North America driven by consolidation in the U.S. operator market, pending spectrum auctions and increased demand for 5G, the company said in its earnings statement.

Even with competition from Huawei and ZTE, Ericsson said its 5G contracts in China have developed according to plan and are expected to improve further.

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More than 80% of Ericsson’s workforce remains working from home, but so far, Covid-19 has had limited impact on its business. The company expects to close its acquisition of Cradlepoint in the fourth quarter.

“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,” said Ericsson President and CEO Börje Ekholm in a statement. “However, the pandemic negatively impacted our sales in Latin America and Africa.”

Ericsson reports that it now has 112 commercial 5G agreements and 65 live networks.

Ekholm noted that open RAN is a hot topic in the industry. Indeed, a lot of vendors are looking to shake up the market so that incumbents like Ericsson and Nokia are not the only game in town when it comes to building out networks.

Ekholm didn’t address that head on in prepared comments but alluded to 5G being the focus for the foreseeable future. He said Ericsson is a strong supporter of openness and actively engages in alliances, such as 3GPP, ONAP and the O-RAN Alliance. “In the years to come, networks will gradually evolve, as will the current open standards,” he said. “At the same time 5G is ready and happening now so focus must be on providing early access to 5G networks to enable the broader ecosystem to innovate at scale.”