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Ericsson (BS: ERICAs) of Sweden beat analysts’ expectations for third-quarter core earnings on Tuesday, as robust sales of 5G equipment in most of the world offset a loss of market share in mainland China and an impact from global supply chain issues.
Sweden barred Huawei from selling 5G equipment in the country a year ago, and Ericsson has subsequently lost the majority of its market share in China’s most recent rounds of telecom auctions.
According to Chief Financial Officer Carl Mellander, the proportion of revenue Ericsson earns from China has dropped to around 3% of total revenue from 10-11 percent, offsetting savings achieved as Ericsson filled empty spaces left by Huawei in several countries as it retreated under stress from the US government.
According to Mellander, the reduction began in the second quarter and will continue to show as a year-over-year loss until the same time next year. Sales in China fell by 3.6 billion Swedish crowns ($418.14 million) in the third quarter alone, prompting the company to restructure its sales and delivery operations there.
Ericsson, a rival of Nokia (NYSE:NOK), also said the global supply chain issues had started to bite. “Late in Q3 we experienced some impact on sales from disturbances in the supply chain, and such issues will continue to pose a risk,” CEO Börje Ekholm said in a statement.
Due to chip shortages at suppliers and transportation issues, the company was unable to supply certain gear to clients, resulting in a revenue loss, according to Mellander.
According to Refinitiv estimates, quarterly adjusted operating earnings increased to 8.8 billion Swedish crowns ($1.02 billion) from 8.6 billion a year ago, exceeding the mean projection of 7.85 billion. Securing 5G contracts from all three US telecom companies — Verizon (NYSE: VZ), AT&T (NYSE: T), and T-Mobile — has aided the company in absorbing losses in China.
Total revenue declined 2% to 56.3 billion crowns, missing analysts’ expectations of 58.14 billion crowns.
Story by : Norvisi Mawunyegah