Ericsson registered another quarter of gradual recovery but revealed it expects to receive sanctions from a US corruption investigation.
Telecoms.com spoke to Ericsson marketing head Helena Norman and she seemed to be pretty satisfied with the Q3 numbers. She flagged up its 1% annual revenue growth (when adjusted for adjustments), which might not seem like much but is apparently the first time Ericsson has managed that since 2014. At least as important to Norman was the fact that Ericsson managed some profit (net income) for the first time in a couple of years.
A lot of this positive stuff is down to the core networks division, especially in North America. As you can see from the tables below, networks grew organically by 5% in the quarter. Furthermore the division’s operating margin has doubled over the past year, which will have been a big reason for the profit column heading in the right direction.
Among the other divisions Managed Services seems to also be headed in the right direction, thanks mainly to bailing out of a bunch of rubbish contracts and some pretty serious streamlining. Digital Services seems to still be a work in progress, with the sequential picture moving slightly in the wrong direction, and the relatively small emerging business division is moving slowly in the right direction.
Set against these largely positive numbers is the admission that the US corruption investigation, which has been ongoing for a few years, seems likely to result in fines for Ericsson and possibly other sanctions too. Ericsson doesn’t seem to know specific numbers, or even when the process is likely to conclude, but it felt compelled to offer some kind of update.
“While the length of these discussions cannot be determined, based on the facts that we have shared with the authorities, we believe that the resolution of these matters will likely result in monetary and other measures, the magnitude of which cannot be estimated currently but may be material,” said Ericsson CEO Börje Ekholm in his comments accompanying the numbers.
Norman cautioned that the traditional sequential jump in Q4 might not be as big as usual thanks to the US 5G ramp already being well underway. We asked Norman about the financial effect of 5G and she conceded that it’s hard to specifically attribute spend on 5G, as opposed to just general network improvement.
On the whole this seems to be another positive, if unspectacular quarter for Ericsson, and maintaining that momentum is strategically the most important thing. Norman sounded pretty upbeat and it wasn’t a bad quarter to offer an update on the corruption situation. It’s still early days in Ericsson’s turnaround and the cautious guidance about Q4 reveals this newfound confidence is still tinged with fragility.
Ericsson Q3 financials
Ericsson Q3 networks
Ericsson Q3 managed services
Ericsson Q3 digital services
Ericsson Q3 other
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Tags: earnings, Ericsson, featured, Networks, Q3 2018
