Ericsson Third Quarter Highlights Tinged By COVID

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Throughout the COVID-19 pandemic, Ericsson  (NASDAQ:ERIC) had more than 80 percent of their employees working from home. Börje Ekholm, President and CEO, said in yesterday’s third quarter earnings report, that they will continue to expand their footprint in several markets leveraging their competitive 5G portfolio. 

The gross margin improved in all segments in the third quarter and reached 43.2 percent, the highest since 2006. With the acquisition of Cradlepoint, expected to close in Q4, Ekholm said they are making further progress in their strategy to build an enterprise business. 

“COVID-19 has so far had limited impact on our business,” he said, “but we are closely monitoring any signs of a change in the situation. The year to date results strengthen our confidence in delivering on the 2020 Group target.”

Other highlights include the report that networks grew organically by 13 percent and reported a gross margin of 46.7 percent, reflecting high activity levels in North East Asia and North America. Ekholm said underlying business fundamentals remain strong in North America driven by consolidation in the U.S., operator market, pending spectrum auctions, and increased demand for 5G. 

“The 5G contracts in Mainland China have developed according to plan,” he said, “contributing positively to profits in Q3 and are expected to improve further. Our business in Europe grew based on several footprint gains. While the pandemic has hurt revenues for several of our customers, and in some cases this has led to a reduction of capex, we have not seen any negative impact on our business, largely due to footprint gains,” Ekhom said. “However, the pandemic negatively impacted our sales in Latin America and Africa.”

Operating income, excluding restructuring charges and items affecting comparability in Q3 2019, improved, as did operating income by 6 percent.

The company said Q3 2019 was impacted by cost provisions related to the investigation by the United States Securities and Exchange Commission (SEC) and the United States Department of Justice (DOJ) as well as a refund of social security costs.

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