A Good Quarter for Ericsson Affected by U.S. Penalty

Swedish vendor Ericsson earned 6% more in the third quarter than in the same period last year, but the operating income and margin went to red because of over $1 billion penalties in the U.S. Without the SEC and DOJ penalties, both would have a significant rise.

Ericsson CEO Borje Ekholm said on the analyst call that the company remained on track to deliver on long-term growth targets. He has noted that Ericsson continued to execute on a 2017 strategy, ending Q3 with a strong net cash position of SEK37 billion ($3.8 billion) despite headwinds associated with provisions made for a settlement with the U.S. and global political uncertainty.

Net sales rose to SEK 57.1 billion in the third quarter, an improvement of 6% compared with 3Q18. In the first nine months of 2019, income was SEK 160.8 billion, or 9.4% rise on a yearly basis. Operating income was SEK 6.5 billion when excluding restructuring charges and items affecting comparability. Reported operating income was SEK -4.2 billion. Net income was SEK -6.9 billion, negatively impacted by items affecting comparability.

"We continue to see strong momentum in our business, based on the strategy to increase our investments for technology leadership. We saw organic sales growth of 3% in the quarter, driven by the early adopters of 5G, in North America and North East Asia. 5G is taking off faster than earlier anticipated, and we see initial buildout as a capacity enhancer in metropolitan areas. However, over time, new exciting innovations for 5G will come with industrial and IoT use cases. This provides opportunities for our customers to capture new revenues as they provide additional benefits to consumers and businesses," Ekholm said in an official press release.