Ericsson earnings miss as slowing U.S. market hits margins
Sweden’s Ericsson (ERICb.ST) on Friday missed fourth-quarter core earnings expectations as sales of 5G equipment slowed in high-margin markets such as the United States.
With U.S. customers such as Verizon (VZ.N) tightening their purse strings, Ericsson is hoping newer markets such as India provide some growth.
It has also announced plans to cut costs by 9 billion crowns ($880 million) by the end of 2023.
That will involve reducing consultants, real estate and also employee headcount, Chief Financial Officer Carl Mellander said in an interview.
“It’s different from geography to geography, some are starting now, and we’ll take it unit by unit, considering the labour laws of different countries,” Mellander said.
He declined to say if the headcount reduction would be similar to 2017 when Ericsson laid off thousands of employees and focused on research to return the company to profitability.
The company’s fourth-quarter adjusted operating earnings excluding restructuring charges fell to 9.3 billion Swedish crowns ($902 million) from 12.8 billion a year earlier.
That was short of the 11.22 billion expected by analysts, Refinitiv Eikon data showed.
Net sales rose 21% to 86 billion crowns, beating estimates of 84.2 billion.
A settlement of a patent deal with Apple (AAPL.O) last month resulted in revenue of 6 billion crowns, but Ericsson also took 4 billion crowns in charges, including a provision for a potential fine from U.S. regulators and divestments.
Ericsson said it expects significant patent revenue growth over the coming 18-24 months.