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Ericsson is struggling in China, but thriving in other markets

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Ericsson, Sweden’s flagship, posted a net profit of $450 million in the second quarter, an increase of 51% over the same period last year.

ericsson headquarters

On Friday, Ericsson announced a sharp rise in second-quarter net profit, but the company expects to suffer losses in China following Huawei’s recent ban from 5G tenders.

The Swedish group, which is number two in the world behind Huawei, also announced a contract with Verizon for $ 8.3 billion, calling it “the largest individual contract in Ericsson’s history.”

According to its financial report, the Swedish flagship earned 3.9 billion kronor (414 million francs) in the second quarter, up 51 percent year over year.

Despite this, sales fell slightly (-1%) to 54.9 billion kroner, primarily due to a sharp decline in sales in the important Chinese market, which were 2.5 billion below last year.

Factset and Bloomberg predicted a lower net profit, around 350 million euros, but significantly higher sales, over 57.2 billion kroner.

China is a crucial market for Ericsson in its battle with Huawei and Finland’s Nokia to build 5G networks worldwide.

Börje Ekholm, Ericsson CEO, noted in the quarterly report that “it is prudent to expect a significantly lower market share in China for Networks and Digital Services following the recent decision to exclude Chinese OEMs from 5G networks in Sweden, which may influence contract awards.”

In the fall of 2020, when the Swedish telecom authority banned Chinese Huawei and ZTE from 5G networks in the Nordic country, Ericsson was forced into the paradoxical position of defending Huawei against the Swedish government for fear of retaliation in China.

Sweden’s courts have upheld the ban in the first instance, following similar decisions in the United States and the United Kingdom.

For MetaNews.

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Jonathan Hobbs is an Australian investor and author that trades on a variety of asset classes, including currencies, equities, and commodities. Jonathan’s experience as a macro trader leverages his unique writing style to combine important elements, such as technical analysis and news. The other elements that he brings into his unique writing styles are foundation analysis aimed at rational equilibrium values, evaluating the sizes and motivations of buyers and sellers, as well as identifying the needs of the buyers and sellers in the individual markets. Jonathan is committed to quality writing for new traders as well as veterans.

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