Ericsson’s North American sales were down 60% YoY and 2% sequentially as 5G investments continue a downward trend
Ericsson saw a 10% drop in group organic net sales during the most recent quarter, continuing a streak of softening in the network equipment market.
The company saw a particularly steep year-over-year drop in the North American market, where sales were down 60% from a record third quarter last year. However, sales were only down 2% from the second quarter of this year and “in line with previous trends,” Ericsson noted in a release. In this year’s third quarter, Ericsson said that the decline in North America was partially offset by growth in India and a return to investment in some markets which had been early 5G adopters.
Within specific segments, its organic network sales were down 16%, while its enterprise and cloud software and services sales grew. Enterprise was a particular bright spot, with sales up 11% year-on-year.
Ericsson reported a loss for the quarter, with impacts coming from its recent write-down of Vonage’s value as well as restructuring-related charges. CEO Börje Ekholm noted that the results were in line with guidance amid a “challenging operating environment”—which he expects to stick around for awhile.
“Consistent with the rest of our industry, we expect the macroeconomic uncertainty to persist into 2024, which impacts our customers’ investment ability,” Ekholm said. “We are addressing these challenges with a focus on elements within our control, namely cost management and operational efficiency.”
Ericsson is also working through a strategy to increase its business resiliency and reduce its sensitivity to market fluctuations. The company said that it saw “strong growth” in its Enterprise Wireless Solutions segment, solid performance from the Global Communications Platform business and noted that its cloud software and services business is turning around and heading for a break-even point for the full-year 2023, with improvements expected from there.
Still, it’s a transition period with some bumps. Ericsson recently made investors aware that it was taking a major write-down on its 2021 acquisition of Vonage. But Ericsson said that it still sees Vonage as “key to our expansion in Enterprise where we are enabling the next wave of innovation in our industry”, and it anticipates a $20 billion market opportunity by 2028. It continued: “By offering communication and network APIs to developers and enterprises, we are opening up new ways for operators to monetize their investments in mobile networks, and for developers to leverage network capabilities to create exciting new applications. We are seeing significant inbound interest from operators to further develop this market.”
