“Ericsson has had a robust start to the year, benefitting from acceleration in 5G network deployment in many regions, with the bulk of its revenues based on its market strength in radio access network (RAN) products,” said Richard Webb, director of network infrastructure at CCS Insight.
Net sales were up 10% year on year when adjusted for comparable units and currency, despite a shortfall of SEK 1.6 billion in intellectual property rights licensing revenues for the same period. Four of the five market areas showed double-digit growth, bringing the total reported sales were SEK 49.8 billion.
“We saw organic sales growth of 10%, primarily driven by market share gains in Networks. Adjusting for declining IPR revenues, organic sales growth was 14%,” said Börje Ekholm (pictured), president and CEO of Ericsson.
“Gross margin improved to 42.9% (40.4%) YoY and margin increases in all segments more than offset lower IPR licensing revenues. Our EBIT margin increased to 10.7% despite significant investments in our business and headwind from currency.”
As a result, gross margin for the period 42.8%, up from 40.4% in Q4 2020 and 39.8% for the same period in 2020.
Earnings before interest and taxes excluding restructuring costs totalled SEK 5.3 billion up 10.7%, from SEK 4.6 billion in Q1 of 2020.
Networks sales increased by 15% year on year, Networks EBIT margin excluding restructuring charges was 19.9% up from 16.8% from the same period last year.
“Networks sales grew organically by 15%, despite a decline in IPR licensing revenues. This growth is reflecting continued high activity levels in all market areas, except in the Middle East and Africa,” continued Ekholm.
“Managed Services delivered a gross margin of 21.0% (20.6%) in the quarter. EBIT margin decreased to 8.1% (11.4%), including a one percentage point one-time negative impact related to an exit from a non-core business”
“Digital Services shows good momentum in contract awards primarily in our cloud native 5G Core portfolio and continues to execute on the plan, visible in the gross margin increase to 43.6% (40.1%). Growing topline for Digital Services is a key driver, and it is encouraging to see sales growing 3% organically in the quarter, despite lower IPR licensing revenues as well as continued fall in the legacy portfolio.”
“Generally, Ericsson is well positioned, in terms of portfolio and mobile operator customer base, to ride the crest of the 5G wave but it will have to continue to evolve its RAN equipment to remain competitive against the influx of virtualised RAN offerings and continue to diversify its revenue in Managed Services and Digital Services,” added Webb.
“Both segments offer exciting growth opportunities but are fiercely competitive and require Ericsson to continue investment in cloud capabilities, AI and automation, and build stronger in-roads into enterprise markets if it is to realise the potential of these markets.”
Overall, net income reached SEK 3.2 billion up from 2.3 billion in the same quarter of 2020.
