Ericsson reported a modest improvement in its results for the third quarter, with the decline in sales slowing to just 4 percent thanks to a pickup in North America. Cost savings and increased IP income helped lift margins, and the company is hoping for a further improvement in market conditions in Q4.
Total revenues fell 4 percent year-on-year to SEK 61.8 billion and were down just 1 percent on an organic basis. That’s better than the 7 percent fall in Q2 and 15 per cent drop in revenues in Q1 this year. Ericsson said sales at the main Networks division should stabilize year-on-year during Q4, driven by the growth in North America.
Quarterly adjusted EBITA jumped 64 percent to SEK 7.8 billion, pushing the margin up to 12.6 percent from 7.3 per cent a year ago. The net result was a profit of SEK 3.9 billion compared to a loss of SEK 30.5 billion last year.
Only North America growing
The main growth driver in the quarter was North America, where sales rose 55 per cent year-on-year to SEK 20.4 billion. At Networks alone sales jumped 80 percent, helped by recent contract wins like AT&T and selective network investments by some large customers. Ericsson is hoping the pick-up in spending there is the first wave of a wider recovery in investment by telecom operators around the world.
However, the company cautioned that Q4 sales at Networks are unlikely to show significant growth yet after the above-average performance in Q3. Sales growth in Q4 is expected to be below the average seasonality of the past three years, Ericsson forecast.
Sales were otherwise down in all regions in Q3, and also fell 5 percent in the Enterprise division. Enterprise remained in the red, with an adjusted EBITA loss of SEK 0.8 billion compared to a loss of SEK 0.6 billion as Ericsson continues to work on a better product portfolio and delivery strategy. The company sees more pain ahead here as it withdraws from less profitable markets and segments, but expects the recently launched private networks offering and APIs joint venture to support growth in future.
