Ericsson boss Borje Ekholm (pictured) pointed to momentum in its 5G business as a driver behind a strong Q2 performance, as the company said it remained on track to meet its long-term turnaround targets for 2020.
Ekholm said in a statement that 5G momentum was increasing, and the company was benefitting from sales in North America and North East Asia.
“We see strong momentum in our 5G business with both new contracts and new commercial launches as well as live networks. To date, we have provided solutions for almost two-thirds of all commercially launched 5G networks.”
Indeed, 5G was expected to be a major boon for the vendor, which had experienced struggles in the years before the 5G era dawned.
After Ekholm took the helm in January 2017, he implemented a turnaround plan of cutting costs, dropping unprofitable business lines and ensuring the company can cash-in on 5G, with aims to deliver a number of targets by 2020.
The company stated it maintains the 2020 target to deliver an operating margin, excluding restructuring costs, of more than 10 per cent.
Net sales grew 10 per cent year-on-year, hitting SEK54.8 billion ($5.8 billion) from SEK49.8 billion in Q2 2018 and the company also swung to a profit of SEK1.8 billion, from a prior-year loss of SEK1.8 billion.
The Networks division drove the growth, with revenue rising 17 per cent to SEK37.8 billion. Quarterly gross margin in the unit dropped to 41.4 per cent, from 43.2 per cent, due to a number of factors including litigation settlement costs and lower IP licensing revenue.
Ericsson warned that while strategic contracts would boost margins in the long run, the negative impact felt in the second quarter would “increase during the second half of the year”.
Its other units did not fare so well. Digital Services struggled, with organic sales up 2 per cent year on year, but down 3 per cent on an reported basis, as a result of a “rapid decline in legacy products”, primarily in India.
Managed Services dropped 3 per cent due to customer contract exits, and Emerging Business and Other took an 18 per cent hit, largely due to the 51 per cent divestment of its media business MediaKind.Subscribe to our daily newsletter Back