Ericsson AB weathered the start of the COVID-19 crisis better than expected after telecoms kept spending to support networks strained by the surge in home working and streaming.
The Stockholm-based company yesterday reported second-quarter sales of 55.6 billion kronor (US$6.14 billion), compared with the average analyst estimate of 54.8 billion kronor. Its adjusted gross margin was higher than expected, at 38.2 percent.
“Despite the difficult environment we delivered a solid result,” chief executive officer Borje Ekholm said in a statement. “Some customers are accelerating their investments while others are temporarily cautious.”
Photo: Reuters
The numbers confirm that the COVID-19 pandemic is revealing shortcomings in global network capacity that are helping prop up demand for Ericsson’s antennas, routers and switching gear.
Redoubled investments are partly driven by competition between carriers on new 5G mobile networks in some markets, chief financial officer Carl Mellander said.
Ericsson’s position could also be strengthened if more countries follow the UK and ban its Chinese rival Huawei Technologies Co (華為) from 5G.
Mellander said Ericsson is ready to deliver larger volumes of equipment if Huawei bans spread. Ericsson’s profitability would still be held back in the near-term because it is expanding its presence in China, where carriers are building 5G networks set to yield billions of dollars of revenue down the line.
Ericsson shares jumped 6.1 percent after the results. They recently returned to their level before the COVID-19 crisis sent stock markets tumbling in March.
Sixteen of the 30 analysts tracked by Bloomberg have buy recommendations for the stock, and none of them advise clients to sell.
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