Swedish telecom-equipment giant
Ericsson
ERIC -9.21%
AB said its sales and profit rose in the second quarter as wireless carriers snapped up its 5G gear, but warned of higher costs stemming from geopolitical tensions and inflation.
Ericsson, one of the world’s three large makers of 5G cellular equipment alongside China’s Huawei Technologies Co. and Finland’s
Nokia Corp.
, said Thursday that sales increased 14% to 62.5 billion Swedish kronor, equivalent to about $5.9 billion, in the quarter ended June 30 compared with the same period last year. Profit rose 19% to 4.7 billion kronor in the quarter.
The Stockholm-based company said demand for 5G gear was particularly strong in North America, where its sales rose 27% and accounted for more than a third of the company’s overall revenue. Ericsson said it expected the North American market for cellular antennas and related equipment to grow faster than the rest of the world in 2022.
Ericsson said that global adoption of 5G is still in its early stages, and predicted that the buildout of this next-generation, superfast cellular technology would be larger and last longer than previous generations of wireless infrastructure.
However, the company is also contending with higher costs as it rejiggers supply chains in response to broad geopolitical challenges, including Russia’s invasion of Ukraine. And while tensions between Western countries and China have benefited Ericsson by steering wireless carriers away from Huawei over cybersecurity concerns, they have also prompted Ericsson to move resources away from China.
“The geopolitical situation has also required proactive investments to de-risk our supply chain,” Ericsson Chief Executive
Börje Ekholm
said Thursday.
Those investments, combined with higher costs for logistics and components, ate into Ericsson’s gross margin, which at 42.1% was below analysts’ expectations. Ericsson shares were down 8% in morning trading in Stockholm.
Ericsson is still working toward completing its $6.2 billion acquisition of
Vonage Holdings Corp.
, an internet-based communications provider, by the end of July, Mr. Ekholm said. The deal is under review by the Committee on Foreign Investment in the U.S., a government panel that determines how foreign deals for American assets could affect national security.
Mr. Ekholm also said Ericsson was continuing to cooperate with the U.S. Justice Department and the Securities and Exchange Commission over their probes into the company for allegedly paying bribes for access to terrorist-controlled areas in Iraq, but didn’t provide any further update. Ericsson has previously said that a 2019 internal investigation didn’t identify any company employee directly involved in financing terrorist organizations, and that the probe resulted in disciplinary and remedial steps.
Write to Stu Woo at [email protected]
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Appeared in the July 15, 2022, print edition as ‘Ericsson Gets Boost From 5G Equipment.’
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