Ericsson CEO Borje Ekholm cautioned of persistent macroeconomic uncertainty into 2024 which it expects will impact customers’ investment ability, as the vendor slipped into the red mainly due to a charge related to an impairment of goodwill announced last week.
An earnings statement showed a year-on-year net loss of SEK30.5 billion ($2.8 billion) from net income of SEK5.4 billion in Q2 2022, due to a SEK32 billion charge related to the acquisition of cloud company Vonage in 2022.
Without the charge, net income would have stood at SEK1.4 billion.
The Swedish vendor said it expects Q4 trends to be similar to Q3, with underlying uncertainty impacting its mobile networks business to continue into next year.
“We are addressing these challenges with a focus on elements within our control, namely cost management and operational efficiency,” said Ekholm, while adding it was on a journey to reposition its business by focusing on continued network leadership and enterprise growth.
Consistent with a preliminary forecast released last week, the company stated revenue dropped 5 per cent to SEK64.5 billion, with a 14 per cent decline in its Networks division, offset by 10 per cent growth in Cloud Software and Services and a 34 per cent increase in Enterprise.
Network organic sales in North America dropped 60 per cent from a record quarter in Q3 2022, due to inventory adjustments and a slower deployment pace. This was offset by India and some early 5G markets resuming investment.
Ericsson EVP and Head of Networks, Fredrik Jejdling
The company’s EVP and head of Networks, Fredrik Jejdling, told Mobile World Live the company was reluctant to “crystal ball” a timeframe to recovery, but added it was committed to its long-term EBITDA margin target of 15 per cent to 18 per cent and it was seeing some “underlying drivers that it will come”, dependent on market mix recovery.
For Jedjling, recovery lies in data growth and the need for customers to increase capacity, as well as the creation of a revenue platform or revenue economy with network APIs for a “long-term sustainable 5G business model”.
Ekholm also said in the statement the industry was relatively early in the 5G cycle with 75 per cent of all radio base station sites outside of China not updated with 5G mid-band.