Ericsson Completed its Turnaround Plans
Ericsson CEO Borje Ekholm said that the vendor has successfully completed its turnaround plan. The company raised 2022 targets for its networks division but severely cut expectations for its digital services business.
Following the completion of its recovery, Ericsson is now in a strong position to accelerate growth and up investment in 5G enterprise applications. Swedish company upgraded its 2022 financial targets for managed services and networks, though slashed its digital services goal. The numbers are expected to roughly offset each other leaving its group-wide profitability target unchanged.
The vendor attributed the rise in expected earnings from its networks division to gains in the global market, with improvements in managed services margin the result of R&D investments in AI and automation. Within digital services, the company had previously predicted an EBIT margin, excluding restructuring, of between 10 and 12 percent. This has now been cut to 4 to 7 percent. In the segment, Ericsson noted the priority was restoring profitability adding it was being hit with a combination of increased R&D spend and a decline in legacy sales.
In addition to revising its expected performance for 2022, it provided outlines of long-term aims. Ericsson expects to achieve a 15 to 18 per cent EBITDA margin in the years beyond 2022 through various improvement activities including upped software sales. Its 2022 group target is 12 to 14 percent.
“The execution on our focused strategy has delivered a turnaround which creates a robust base for the future and delivered global leadership in 5G today,” Ekholm said. “Our future value is inextricably linked to wider economic growth and we are well-positioned to play a lead role in the ecosystem of operators, businesses, and decision-makers on whose combined shoulders 5G’s full success rests.”