• Ericsson has reported its first-quarter financials
• Revenues are down by 14% year on year as network operators continue to hold back on investments
• The Swedish vendor’s networks division was worst hit, with sales down by 19% year on year
• But investors liked its improved margins

When Ericsson reported its grim 2023 financials, the company’s management said they expected the telco capex crunch that affected sales during 2023 to stretch into 2024 – and they were right. The Swedish vendor has reported a 14% year-on-year decline in organic revenues (adjusted for comparable units and currency exchange fluctuations) to 53.3bn Swedish krona (SEK) ($4.88bn), due mainly to a 19% slump in sales by its Networks division to SEK33.7bn ($3.1bn). 

And the company isn’t expecting the market to recover any time soon. “We expect a further decline in the RAN [radio access network] market, at least through [to] the end of this year, as customers remain cautious with their investments and the pace of investment in India continues to normalise,” the vendor noted in its quarterly earnings announcement. It added that research house Dell’Oro estimates the global RAN equipment market will decline by 4% in 2024, but Ericsson believes that “may prove optimistic. If current trends persist, we expect our sales to stabilise during the second half of the year, benefitting from recent contract wins and the normalisation of customer inventory levels in North America.”

CEO Börje Ekholm noted: “In Q1, we continued to execute on our strategy to strengthen our leadership in mobile networks, drive a focused expansion in enterprise, and pursue cultural transformation. We maintained our leading market position but, as expected, our customers continued to exercise caution with their investments. Against this tough market backdrop, we delivered solid expansion in gross margins. This underscores the competitiveness of our solutions, our commercial discipline, and our actions on costs. We will continue to proactively optimise the business, including through strategic cost-saving measures, to ensure Ericsson is best positioned to increase shareholder value.”

And it was the margin improvement, despite lower sales, that saved Ericsson in the eyes of those shareholders. Its gross margin (excluding restructuring costs) improved to 42.7% from 39.8% a year earlier and its earnings before interest, tax and amortisation (EBITA) improved by more than 6% to SEK5.1bn. That was enough to send Ericsson’s share price up by 2.2% to SEK54.78 on the Stockholm exchange in Tuesday trading. 

- Ray Le Maistre, Editorial Director, TelecomTV