Telecoms kit vendor, Ericsson recently reported that its first quarter 2020 results saw limited impact from the COVID-19 pandemic. Sales were $4.93bn, an increase of 2% year-over-year, but sales declined 2% when adjusted for constant currency.
The company also stated in a statement that its net income was $230m, a decline of 5% year-over-year.
Börje Ekholm, CEO, Ericsson,said: “We expect our industry to show resilience throughout the pandemic, and we are well positioned with a competitive 5G product offering and cost structure.“
Unlike IBM, which suspended its guidance for the remainder of 2020, Ericsson said there is near-term uncertainty around sales volumes due to COVID-19 and the macroeconomic situation.
“With current visibility we have no reason to change our financial targets for 2020,” he said.
However, Ekholm added that the current global uncertainty requires a humble attitude towards predicting the near-term future. “We expect the second quarter is likely to be a tad softer than normal,” he said.
He explained that while Ericsson has been successful improving its position in Europe, it’s concerned that 5G investments in Europe are delayed. “This means that Europe may fall behind on a critical digital infrastructure for the future,” he observed. “The criticality of the digital infrastructure has been further evidenced during the pandemic. We believe governments should encourage 5G investments as a way to restart economies.”
Ekholm pointed out that the financial targets for 2020 take into account an increasing share of strategic contracts, including 5G in China. We expect a larger share of these contracts to weigh on profitability in Q2 rather than being evenly distributed over the year. Operational improvements will continue and are expected to partly offset the negative impact.
In October 2019, Ericsson acquired the antenna and filter technology division of Germany-based Kathrein. The Swedish vendor said adding Kathrein’s capabilities in the area of advanced active and passive antennas is increasingly important as 5G evolves.
Meanwhile, Ericsson plans to cut about 400 jobs at Kathrein in the next year. It began an “internal efficiency programme” at Kathrein recently. Restructuring charges $49.5m are expected for 2020, with anticipated annual run rate savings of $29.7m, the company said.
