By
Steve Muchoki
April 19th, 2024
In its Q1 2023 report, Swedish telecom giant Ericsson described India as a viable market that drove sales up fivefold.
Ericsson (NASDAQ: ERIC) recently reported its Q1 2023 earnings which beat expectations and revealed a boost in quarterly profit. On Tuesday, the Swedish telecom giant first-quarter core earnings benefited from increased sales of 5G equipment in countries like India. Ericsson’s net sales grew 14% in the first three months of 2023, surpassing the consensus estimate of 60.43 billion. However, the company experienced a sales slump in more established territories such as the US, which eroded margins.
Ericsson Chief Financial Officer Carl Mellander described India as a “strong and a good example where our sales are up five times”. He also added that the Southern Asian nation is the telecom company’s second-largest market after the US. Although India was responsible for increased Ericsson equipment sales, analysts opined that net growth primarily benefited from a massive company acquisition. Ericsson completed its takeover of US-based cloud communications provider Vonage Holdings Corp in July last year in a deal worth $6.2 billion. At the time, the Swedish multinational networking powerhouse said the partnership would strengthen its offerings to businesses across the globe. Furthermore, Ericsson President and Chief Executive Officer Börje Ekholm added then:
“We will continue to create new, enhanced applications and services for enterprises while driving continued innovation on Vonage’s UCaaS and CCaaS applications, helping businesses create new digital experiences for better communications, connections, and engagement.”
Ericsson Cut Costs & Downsized in Q1 2023 to Remain Profitable
During its Q1 2023 outing, Ericsson cut costs to negate lower customer spending in several regions. However, the Stockholm-based company expects this slower-paced customer spending to last until the third quarter. Furthermore, after its significant layoff announcement in February, Ericsson hopes to save an additional 2 billion crowns ($193 million) in costs.
Although Ericsson experienced pronounced sales growth in the first quarter, the company’s gross margin slumped to 38.6% from 42.3%. Furthermore, Ericsson’s adjusted operating earnings for the quarter, minus restructuring, slipped to 4 billion Swedish crowns from 4.8 billion crowns year-over-year (YoY). Nonetheless, Ekholm remains focused on its long-term operational agenda. In a statement, Ekholm explained:
“We are on a journey to shape the future industry landscape and extend our addressable market by leveraging our 5G capabilities. We continue to execute on our strategy to strengthen our leadership in Mobile Networks, grow our enterprise business, and drive continued cultural transformation.”
Previously, Ericsson stated that inflationary pressure remained high despite the abatement of supply-chain-related challenges. However, the company plans to remain competitive and profitable by navigating near-term headwinds via commercial initiatives.
Ericsson Settlement
Last month, Ericsson agreed to pay $206.7 million as a settlement with the US Justice Department for allegedly breaching a 2019 deferred prosecution agreement. Despite the payment, the Swedish company remains under investigation by the Justice Department and Securities and Exchange Commission (SEC) for corruption-related offenses. Both government agencies are investigating Ericsson for alleged corruption and terrorist financing in Iraq. The outcome of the investigation could invoke additional penalties.