Ericsson sees limited impact from Covid-19, sales steady, margin rises

Ericsson reported Q11 2020 sales of SEK 49.8 billion compared with SEK 48.9 billion a year ago, representing a decline of 2% adjusted for comparable units and currency. Gross margin excluding restructuring charges improved to 40.4% (38.5%). Gross margin improved QoQ in all segments.

Börje Ekholm, President and CEO of Ericsson, states: “Ericsson delivered a solid result during the first quarter, with limited impact from the Covid-19 pandemic. An important indicator of our strategy execution is the improvement in gross margin. The Q1 gross margin[1] increased to 40.4% (38.5%) YoY, driven by improvements across segments. We expect our industry to show resilience throughout the pandemic and we are well positioned with a competitive 5G product offering and cost structure. There is near-term uncertainty around sales volumes due to Covid-19 and the macroeconomic situation, but with current visibility we have no reason to change our financial targets for 2020 and 2022.”

Some highlights:

• In segment Networks, the gross margin increased to 44.6% (43.2%). The operating margin[1] reached 16.8%.
• In segment Digital Services, Ericsson is confident about its offering and market position. Leading operators have awarded us several 5G Core contracts, which are expected to start generating material revenues from 2021. 
• Ericsson is increasing R&D investments in our 5G and cloud-native portfolio to capture the new opportunities.
• In the first quarter, currency adjusted sales declined by -9% due to fewer project completions and a somewhat negative impact from Covid-19 as access to some customer networks was limited. 
• Ericsson 5G equipment is used in 29 live networks across four continents. The company has 86
• commercial agreements for 5G.
• Ericsson is concerned that 5G investments in Europe are delayed, and is encouraging governments to see 5G investments as a way to restart economies.
• Ericsson has 85,000 employees working from home.