Updated January 23rd, 2024 at 14:21 IST
Sweden's Ericsson anticipates 5G gear demand dip in Q4
Telecom equipment suppliers anticipate headwinds in 2024 as the pace of 5G gear sales slows.
5G gear demand: In the wake of beating fourth-quarter operating profit expectations, Ericsson, the Swedish telecommunications company, has forewarned of a potential further decline in 5G gear demand from mobile operators in 2024. The company's Q4 performance was bolstered by software sales, yet it acknowledges the challenging landscape for 5G equipment sales, a crucial revenue source, particularly in North America.
Telecom equipment suppliers, including Ericsson and Nokia, anticipate headwinds in 2024 as the pace of 5G equipment sales slows, especially in North America. Even growth markets may witness a deceleration in demand. Following years of heightened 5G equipment demand, telecom providers scaled back their purchases in the previous year, leading to cost-saving measures such as layoffs by industry players.
Additional cost cuts
Ericsson's Chief Financial Officer, Carl Mellander, revealed in an interview that the company could explore additional cost-cutting measures this year, potentially including layoffs. He emphasised the need to align with market trends and demand. However, specific figures regarding headcount reductions or financial targets have not been disclosed.
In the fourth quarter, Ericsson reported a 16 per cent decline in net sales to 71.9 billion Swedish crowns ($6.89 billion), falling short of estimates. Ericsson shares experienced a 2 per cent dip following the results. Operating profit (EBIT), excluding restructuring charges, for the October-December quarter dropped to 7.37 billion crowns from the previous year's 8.08 billion, although it exceeded analysts' expectations.
High-margin software sales
The improvement in Ericsson's EBIT margin, rising to 10.3 per cent from 9.4 per cent, was attributed to higher-margin software sales and reduced sales of 5G equipment to countries with lower margins.
Ericsson's CEO, Börje Ekholm, acknowledged the prevailing market uncertainties, predicting a further decline in the Radio Access Network (RAN) market outside China in 2024.
Despite these challenges, Ericsson is optimistic about a boost in the second half of the year from a $14 billion telecom deal with AT&T, winning over rival Nokia. The company also announced the appointment of Lars Sandstrom as the new Chief Financial Officer, succeeding long-time company veteran Carl Mellander.
(with Reuters inputs)
Published January 23rd, 2024 at 14:21 IST