Sweden’s Ericsson core profit beats forecast, patent fight casts shadow
Ericsson (ERICb.ST) of Sweden posted first-quarter core earnings that exceeded market expectations on Wednesday, as solid 5G equipment revenues compensated a lack of licencing income owing to a patent dispute with Samsung Electronics (005930.KS).
As policymakers prioritise digital development, the coronavirus crisis has accelerated 5G adoption, boosting telecom equipment makers such as Ericsson and Finland’s Nokia (NOKIA.HE).
According to Refinitiv figures, quarterly adjusted operating profits increased to 5.3 billion Swedish crowns ($627.9 million) from 4.6 billion crowns a year earlier, above the average expectation of 5.0 billion crowns.
Total sales, which gained from prohibitions in many countries on the usage of Huawei (HWT.UL) technologies, was 49.8 billion crowns, unchanged from the previous year owing in part to currency headwinds. It fell short of forecasts of 53.42 billion crowns.
On Wednesday, a Swedish court will hear arguments in a lawsuit brought by Huawei against a prohibition in Sweden. more details
Ericsson’s networks segment increased sales by 15%, and modified gross profit increased to 42.9 percent from 40.4 percent. Revenue was harmed as a result of the dispute with Samsung about patent licence royalty.
“We are continuing both the legal track and the negotiating track,” Chief Financial Officer Carl Mellander told Reuters, adding that it was “difficult to estimate some kind of definite timetable” for a settlement.
Patent lawsuits in technology may last for years, and copyright fees can be recouped based on the outcome. After two years, the last dispute between these two companies was settled in 2014.
Patent licence sales dropped to 0.8 billion crowns in the third quarter, down from 2.5 billion crowns the previous year. Ericsson previously forecasted a drop in patent sales of 1 billion to 1.5 billion crowns per year.
In the last two months, Nokia, which reports earnings next week, has settled patent disputes with Samsung and Lenovo.
Ericsson stated that it expects the 5G equipment industry to develop positively in 2021 and that it has resolved a global semiconductor shortage impacting a variety of industries.
“Through diligent and continuous supply chain resilience strategies, we have been able to handle the global semiconductors shortage situation without affecting our consumer deliveries,” said Chief Executive Borje Ekholm.
(1 dollar = 8.4404 Swedish crowns)