STOCKHOLM (Reuters) – The mobile device manufacturer Ericsson outperformed its third-quarter earnings guidance on Thursday, boosting sales of next-generation 5G devices in North America.
FILE PHOTO: The Ericsson logo is on June 14, 2018 in the Swedish headquarters of Ericsson. REUTERS / Olof Swahnberg
For the third consecutive year, the company made significant progress towards achieving its financial targets for 2020, rising 9 percent to 53.8 billion Swedish kroner ($ 6 billion) thanks to strong growth in the network business.
This was led by early 5G sales in North America and 4G upgrades in Europe and Latin America, contributing to a 5% increase in trading stocks early Thursday.
However, CFO Carl Mellander told Reuters that, due to this strong performance, fourth quarter revenue growth would be "a few percentage points lower" than typical growth of 1
Ericsson has committed to deliver a gross margin of 37-39 percent by 2020. In the third quarter, it would be almost reached and reached 36.9 percent (excluding restructuring costs). The forecast of the analysts was 36.2 percent.
The quarterly operating margin increased from 7.4 percent in the previous year to 6.0 percent. CEO Borje Ekholm said he was confident that Ericsson could achieve an operating margin of at least 12 percent beyond 2020.
"There is strong momentum in the global 5G market as lead markets continue to evolve," said Chief Executive Borje Ekholm. "However, there is still more work to bring all parts of the business to a satisfactory level of performance.
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Ericsson has responded to an industry-wide downturn and heavy losses since the 4G net sales hit their mid-decade Culminating with a strategy focused on profitability versus growth, replacing most of the management, and sweeping enabled cost reductions.
Operating income for the last quarter increased to $ 3.2 billion ($ 356.5 million) ) after 3.7 billion losses in the same period last year, surpassing the average forecast for a gain of 800 million kroner in a Reuters analyst survey.
Ericsson shares rose nearly 50 percent this year after the financial goals were achieved after three years of strong declines in sales.
Ericsson is now on the sc The wave of a potential new cycle of network upgrades as demand for 5G devices in the United States begins and it is expected that there will be upgrades in the North Asian markets in early 2019.
Net sales in North America, Ericsson's largest regional market, increased 10 percent on a currency-neutral basis, while Europe grew 4 percent, offsetting weakness in the markets of the Middle East and North Asia.
However, the company said it would continue to invest heavily in 5G research and development, closely managing malfunctioning service companies while cutting costs after completing a restructuring plan this year at a cost of 5 to 7 billion kroner will lead to maintain.
Many investors would therefore like to see more progress before embarking on a sustainable 5G recovery. Ten out of 15 analysts surveyed by Reuters rate the stock as "neutral" in terms of price appreciation.
Ericsson, the world's largest provider of mobile communications equipment, faces shrinking spending by telecom operators, the weakness of formerly fast-growing emerging markets, and fierce competition from its larger rivals Huawei [HWT.UL] from China and Nokia of Finland.
Reporting by Helena Söderpalm and Olof Swahnberg; Letter from Eric Achard; Edited by Jason Neely and Mark Potter