Ericsson turns first net profit in more than two years

Ericsson turns first net profit in more than two years
Ericsson CEO Börje Ekholm presented the results on Thursday. Photo: Claudio Bresciani/TT
Ericsson's better-than-expected third quarter earnings sent shares shooting up by five percent in early trading.

By Thursday noon, the share price was still up by 4.72 percent on the Stockholm stock exchange in an overall market trading 0.6 percent higher.

Ericsson's net profit soared to 2.7 billion kronor ($301 million) during the period July-September, compared to a net loss of 3.6 billion a year ago. Analysts had expected a loss of 167 million kronor.

“We see improvements across our businesses,” chief executive Börje Ekholm said in the report.

Once a market leader in the mobile phone industry, Ericsson saw its earnings slump year after year following the meteoric rise of smartphone giants in the United States and Asia.

But it has fought on against the odds, adapting to the rapidly shifting market by focusing its attention on research and development of new technologies for telecoms equipment.

The company launched a major 10 billion kronor restructuring drive in July 2017 that has seen 20,500 jobs cut.

Ericsson is now finally able to see the light at the end of the tunnel, with good opportunities ahead as operators prepare for the roll-out of 5G.

“There is strong momentum in the global 5G market with lead markets moving forward,” Ekholm, who has headed Ericsson since January 2017.

“The global radio access market is recovering from several years of negative growth and our investments in R&D have positioned us well to benefit from this development,” he added.

Sales during the third quarter rose by 8.9 percent to 53.8 billion. Gross margin, excluding restructuring costs, meanwhile skyrocketed to 36.9 percent, up from 28.5 percent a year ago.

Ericsson's networks division, its core operations, saw sales rise by five percent and its gross margin climb to 41.5 percent, up 6.7 points in one year.

Ekholm warned that “more work remains, however, to get all parts of the business to a satisfactory performance level. We remain confident in reaching our long-term target of at least 12 percent operating margin beyond 2020.”

In the third quarter, Ericsson's operating margin was six percent, compared to -7.4 percent a year ago.

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