Ericsson’s cost slashing over the last 18 months and 5G becoming a commercial reality in North America helped the company turn a Q3 profit, though the vendor warned it may face punishment from US authorities after uncovering historical breaches in business ethics.
Speaking to Mobile World Live, Ericsson SVP and CMO Helena Norrman (pictured) said the company’s strategy to cut costs and increase R&D was beginning to pay dividends with strong performances in its network division, especially for 5G-related products in the US.
“We have a good foundation to work with,” she added. “The main growth driver is North America, it’s going at a really high pace on the lead-up to 5G but we also see improvements in certain parts of Europe, which has been slow for quite some time.”
Dismissing the impact of China-based rivals’ rows with authorities in the US, she noted the competitive environment “really hasn’t changed” in the country except for the emergence of Samsung in the network business.
While highlighting the positives in its latest financial statement, Ericsson also flagged potential action by US authorities at the conclusion of a long-running investigation into the company’s business ethics.
The probe concerns elements of Ericsson’s business dating back to 2007 with the US Department of Justice and SEC investigation opened in 2013. Earlier this year, the company concluded its own examination of its business practices from the period and reported breaches to authorities.
Norrman told Mobile World Live the company had performed “extensive work internally and shared with authorities. It is our assessment that based on the facts we have shared there will be financial and possibly other measures taken, because we have found breaches in our business code of ethics.”
Details on the issue are vague, though CEO Borje Ekholm confirmed around 50 people have left the organisation as a direct result of the problem.
In its Q3, for the three months to the end of September, the company turned a net profit of SEK2.7 billion ($301 million), compared to a loss of SEK3.5 billion in the same quarter of 2017.
Total revenue was up 9 per cent year-on-year to SEK53.8 billion.
Adjusted sales in its networks division were up 5 per cent year-on-year, while its digital services unit continued to struggle as restructuring costs took their toll.
“Sales have stabilised,” he said. “We have returned to growth despite headwinds from contract exits.” He added it was “critical” the company continued to be disciplined and profitable.
Ekholm added strong demand for 5G in the US and North East Asia was driven by the need for operators in these regions to deal with the explosion in mobile data usage and – in the case of the US – desire to provide fixed wireless access products.
In most of Europe, he added, consumer mobile data usage lagged many of the markets, reducing the need to bring 5G to market quickly.
The only region singled out by Ericsson as a cause for concern was the Middle East and Africa segment where the company has faced headwinds due to political uncertainty in the Middle East.Subscribe to our daily newsletter Back