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Ericsson to reach lower end of margin goal range by 2024

Swedish telecom equipment maker Ericsson said on Thursday it was committed to reaching the lower end of its long-term target of a profit (EBITA) margin of 15-18% by 2024 as it outlined strategy to investors.

The company, one of the world’s biggest suppliers of 5G technology, also said it was accelerating initiatives to cut costs by 9 billion crowns ($880 million) by the end of 2023 as it planned for a flat overall networks market.

Ericsson reported an EBITA margin of 11.2% for the third quarter as higher investment in technology, selling expenses and one-off costs weighed on profitability. Shares in the company were down 1.6% by 1413 GMT.

Last week, the Stockholm-based company announced it had struck a global deal with Apple to end a long-running legal battle over royalty payments over the use of 5G patents in iPhones that has dented profits and shares this year.

While demand for 5G equipment has been strong, the early stages of a rollouts tend to have lower margins, meaning telecom groups such as Ericsson and Finnish rival Nokia (NOKIA.HE) rely on patent royalties to boost profits.

Both of the Nordic companies have also been seeking to cut costs as they contend with lingering chip shortages and disruptions due to the war in Ukraine war, including their planned exits from the Russian market.

Ericsson forecast the 5G radio access network (RAN) market would see annual growth of 11% over the next three years while the overall market was seen flat.

“Ericsson is planning for a flat RAN market and is structuring its cost base and operations accordingly,” it said. Reuters

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