Ericsson’s Q3 sales declined 6% yoy

Amid what it describes as generally “tough” market conditions, Ericsson reported Q3 2017 net sales of SEK 47.8 billion, down 6% year-over-year on a reported basis and down 3% when adjusted for comparable units and currency.

Gross margin was 25.4%, a decline from 28.3% a year earlier. There was an operating loss of SEK -4.8 billion, also a decline from a year earlier.

Börje Ekholm, President and CEO of Ericsson, stated: “The general market conditions continue to be tough. Sales adjusted for comparable units and currency declined by -3% YoY. Sales in North America, adjusted for comparable units, currency and the rescoped managed services contract were stable. We also saw growth returning in several countries as operators are increasing their investments in network capacity. Sales in Mainland China declined as the market is normalizing following a period of significant 4G deployments, representing more than 60% of global 4G volumes in the industry. We have managed to increase our LTE market shares in Mainland China to position Ericsson in 5G. However, this will have a dilutive effect on gross margin in Mainland China in Q4 2017, but the ambition is to continue to deliver double-digit adjusted operating margin in Networks in Q4 2017.”

Some notable items from the quarterly report:

Restructuring charges in the quarter were SEK -2.8 b. including a write-down of SEK -1.6 b. related to one of a global ICT center.

Networks sales declined by -4% YoY. Sales adjusted for comparable units, currency and the rescoped managed services contract in North America, increased slightly.

During Q3, there was a net reduction of 3,000 employees despite 1,100 new recruitments in R&D.

One area of strength is the Ericsson Radio System portfolio, which accounts for 55% of total radio volumes year to date.

In IT & Cloud, sales declined and losses increased, but the company describes the business as strategically important as carriers prepare for 5G.

Ericsson continues to hold SEK 24 billion in cash, providing a stable foundation for the company.