Ericsson AB raised its sales target for next year on signs that spending on new 5G networks is speeding up, as it reported third-quarter results that beat analysts’ expectations.
The Swedish equipment vendor is now targeting sales of 230 billion Swedish kronor to 240 billion Swedish kronor (US$23.5 billion to US$24.5 billion) next year, buoyed by currency effects and a stronger market for 5G, compared with a previous aim of 210 billion kronor to 220 billion kronor.
Chief executive officer Borje Ekholm is focused on taking a bigger piece of the market for telecom networks as part of his turnaround of the Stockholm-based company, and winning contracts from telecoms upgrading to 5G mobile services will be critical.
Ericsson now expects the radio access network market to grow by 5 percent this year, citing an estimate by consultant Dell’Oro, and highlighted China as the largest market for 5G infrastructure.
“Our strategy is to strengthen our market position,” Ekholm said in a telephone interview.
“5G is happening faster than we had expected,” he said.
The more robust sales target and better-than-expected third-quarter results are a dose of good news for shareholders after Ericsson took a US$1 billion provision this month in anticipation of a fine by US authorities investigating business ethics breaches. ‘
The provision erased Ericsson’s quarterly profit and the firm posted a 6.9 billion kronor net loss.
Third-quarter sales were 57.1 billion kronor, beating the average analyst estimate of 56.5 billion kronor, and Ericsson’s adjusted gross margin rose to 37.8 percent, compared with the 36.6 percent expected by analysts.
The successful turnaround of the main networks business that Ekholm has overseen since becoming CEO in 2017 has given Ericsson the confidence to be more aggressive, sacrificing profitability on some contracts to expand market share.
“Some of these contracts have a dilutive effect on the margin,” Ekholm said. “We will continue to take contracts like that and that has had a limited effect in the quarter. We are talking about an 80 basis point effect on the networks margin, so we are managing that.”
As US authorities seek to limit Huawei Technologies Co’s (華為) influence over global 5G infrastructure, the Swedish firm has picked up contracts from operators that had previously been supplied by the Chinese company, including Telia Co in Norway and TDC A/S in Denmark.
Ericsson would continue to invest heavily in research and development to expand its footprint in 5G, Ekholm said.
He added that costs are usually higher in the early phase of a rollout, but he was confident Ericsson could manage them.
In China, Ericsson wants to have a stronger position with 5G than where it is at with 4G, which was less than 10 percent of the market, he said.
“We are trying to invest to position ourselves to strengthen our footprint in China,” he said.
STEPPING UP: The firm has also asked employees to work in split shifts from this week and to halt all but essential overseas business travel from next month Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) has implemented a remote work policy for employees not on production lines in an attempt to curb the spread of COVID-19, the world’s largest contract chipmaker said yesterday. This is the first time in the Hsinchu-based company’s history that it has launched a large-scale remote work policy, joining global technology companies, such as Apple Inc and Google, that encourage employees to work from home. The chipmaker has also asked employees to work in split shifts from this week, it said. As the number of virus infections continues to climb worldwide, TSMC has urged employees to halt unnecessary
A two-hour drive south of Amsterdam in Veldhoven, workers decked out head-to-toe in protective gear toil in vast assembly halls. Before entering the inner sanctuary of the facilities, they meticulously layer on masks, gloves and special socks. A single speck of dust or a hair can have devastating effects on production. The result of all this painstaking process is an environment that is 10,000 times more purified than outside. As COVID-19 grips the world, it might just be the safest place to work right now. The teams belong to ASML Holding NV, which holds a de facto monopoly on the industry of
DBS Bank Ltd yesterday hacked its GDP growth forecast for Taiwan this year to 0.9 percent, down from its estimate of 2.3 percent two months earlier, in light of the COVID-19 pandemic and increasing financial market volatility. The bank’s latest forecast was even lower than London-based IHS Markit Ltd’s estimate of 1 percent, while other research institutes’ projections range from 1.6 percent to 2.6 percent. Taiwan’s economic momentum is being negatively affected by the pandemic, DBS said. The rapid spread of the disease from Asia to Europe and the US has dampened the bank’s previous expectation of a “V-shaped” global rebound in the
DOWNSIDE RISKS: Firms have a ‘very low’ chance of boosting investment returns in the next two years, making it hard for them to improve their capitalization, an analyst said Taiwanese life insurers wanting to improve their capital structure face strong headwinds this year, given prolonged low interest rates and economic impacts derived from trade protectionism and the COVID-19 pandemic, Taiwan Ratings Corp (中華信評) said on Friday. The local life insurance sector also still has high asset risks and such risks are susceptible to market volatility, the local arm of Standard & Poor’s Global Ratings said. Since last year, major financial holding companies — including CTBC Financial Holding Co (中信金控), Cathay Financial Holding Co (國泰金控) and Shin Kong Financial Holding Co (新光金控) — have announced plans to raise fresh capital to