Saturday, 01 August 2020 08:03

Ericsson has flat second quarter despite nearly 100 5G deals Featured

Ericsson has flat second quarter despite nearly 100 5G deals Image by Free-Photos from Pixabay

Clinching 99 commercial 5G agreements or contracts with unique operators appears to have done little for the bottom line of Swedish telecommunications equipment vendor Ericsson in the second quarter of 2020, with the company just about managing to match its revenue in the corresponding quarter of 2019.

In a statement, the firm said its sales for the second quarter had yielded 55.6 billion Swedish krona (US$6.33 billion, A$8.86 billion).

By way of comparison, the leader in the 5G market, Chinese telecommunications equipment vendor Huawei technologies, which announced its half-year results earlier this month, raked in 451.7 billion Chinese yuan (US$65.1 billion, A$91.1 billion) in revenue, an increase of 13.1% year-on-year with the net profit margin being 9.25%.

Huawei, however, is lagging behind Ericsson in 5G contracts with 91 reported so far.

Operating income was reported to have improved by 4%, while the net profit was 2.6 billion krona, an improvement from the 1.8 billion krona in the second quarter of 2019.

Ericsson is listed on the American NASDAQ index while Huawei is a private company owned by its employees.

There was no external factor that could be blamed for the poor performance either, with the company saying that the coronavirus pandemic had a limited effect on operating income and cash flow in the quarter.

Börje Ekholm, president and chief executive of Ericsson, said: "Despite the difficult environment we delivered a solid result. Q2 organic sales were flat and gross margin improved to 38.2% compared to 36.7% year-on-year, including negative effects from strategic contracts.

"Free cash flow before M&A improved to 3.2 billion krona compared to 1.6 billion krona in the corresponding quarter of 2019. While the effects of COVID-19 create uncertainties, with current visibility we maintain the full-year targets for the group.

Networks grew by 4% organically and the gross margin was 40.5% against 41.4% a year ago, absorbing a larger share of strategic contracts including 5G volumes in mainland China where we also took an inventory write-down.

"The strengthened market position in mainland China is strategically important as this market is expected to be a driver of critical future requirements and provide us with important scale.

"The Chinese 5G contracts are expected to be profitable over the life cycle, but had a negative contribution to gross margin in Q2."

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Sam Varghese

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Sam Varghese has been writing for iTWire since 2006, a year after the site came into existence. For nearly a decade thereafter, he wrote mostly about free and open source software, based on his own use of this genre of software. Since May 2016, he has been writing across many areas of technology. He has been a journalist for nearly 40 years in India (Indian Express and Deccan Herald), the UAE (Khaleej Times) and Australia (Daily Commercial News (now defunct) and The Age). His personal blog is titled Irregular Expression.





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