Ericsson touted its first full-year organic sales growth since 2013, driven both by an improvement in the market as a whole and market share gains in its key Networks unit.
In a statement, it said its focused strategy had “yielded clear results” in 2018.
With one of its key rivals in the infrastructure market, Huawei, currently feeling the heat, Ericsson chief marketing and communications officer Helena Norrman told Mobile World Live the recovery has been years in the making: “The improvements that we have seen in market position have come gradually over the last two years or so. Increased investments in R&D and strengthened competitiveness have made us more attractive, and also made it possible to increase our gross margin.”
Fourth quarter 2018 Networks unit sales increased 12 per cent year-on-year to SEK41.6 billion ($4.6 billion), or 6 per cent when adjusted for comparable units and currency. This was attributed mainly to “strong growth in North America, Europe and Latin America as well as in North East Asia, driven by investments in 5G readiness and LTE networks”.
Norrman said: “What is 4G and what is 5G is a very academic question. Everything that we’ve sold since 2015 has been 5G ready, and then whether or not you can switch on 5G depends on the licences country-by-country and, of course, the strategy that the operators deploy. For us the primary importance is not how we label it: the primary importance is the interest, and the market demand and the momentum in the market.”
The company ended the year on a high in all geographies except Middle East and Africa, which was attributed to factors including geopolitics and monetary restrictions.
While Ericsson gained market share as a result of “a more competitive radio product portfolio”, it also noted that costs related to “strategic contracts” and 5G field trials had a short-term impact on margins.
Norrman noted: “Grabbing market share normally comes at an initially lower margin profile, that’s the way the industry works. We have taken market share during 2018, it’s in the numbers already and we will see a bit more going into 2019 because we are stronger as a company and can afford to take more. And that of course is creating a bigger footprint as we move toward 5G and strengthens our position.”
By the numbers
Operating income at the Networks unit of SEK6.9 billion compared with SEK1.9 billion in Q4 2017, driven by higher gross margin and sales. Provisions and adjustments related to certain customer projects and the write-down of assets also had a negative impact on the prior year.
Ericsson had already revealed provisions and restructuring charges of SEK6.1 billion, taken during the quarter, related to its Business Support Systems unit, which had “not shown satisfactory progress”. Operating loss in the Digital Services unit (which includes BSS) of SEK7.1 billion was down from SEK12.3 billion, on revenue of SEK13 billion, up 10 per cent, with reductions in cost of sales and operating expenses having a positive impact.
An operating profit of SEK0.3 billion at the Managed Services unit compared with a prior-year loss of SEK1.3 billion, on revenue which was flat at SEK6.9 billion.
On a group level, the company reported a net loss of SEK6.5 billion in Q4 2018, down from SEK18.5 billion in the prior year, on revenue of SEK63.8 billion, up 10 per cent from SEK57.9 billion.
For the full year, a SEK6.3 billion loss was down from SEK32.4 billion: sales of SEK210.8 billion were up 3 per cent from SEK205.4 billion.
Norrman is set to leave Ericsson after 21 years, including seven on the executive committee, to become a partner at strategic communications consultancy Kekst CNC.
“It was important for me when I got the chance to be part of the turnaround and to bring Ericsson back on its feet, and I’m very, very happy and proud I got the chance to do that. But I need to do something different and my new job is something very different,” she said.Subscribe to our daily newsletter Back