CEO Börje Ekholm and CFO Carl Mellander had done everything in their power to keep down expectations for Ericsson’s second quarter. It wasn’t enough. Because despite the fact that almost all performance measures came in slightly above analysts’ estimates, the stock market took note of the lack of positive surprises and the announcement that the promised recovery will take another quarter. According to Börje Ekholm, nothing has really changed in the messages that have been drummed out since the capital market day on 15 December .”We have tried to say, from last year, what we see to happen: that the pace of expansion is slowed down a bit and there are major inventory adjustments. That it will recover in the second half of the year is actually what we continue to say. Is it a week wrong here or there – that we have to predict it exactly in a twelve-month lead time is somehow not that simple,” he tells Dagens industri. Why the customers’ bunkered telecom equipment takes so long to flush through was a recurring question theme at the report conference. In 2022, should you have flagged up that some of the strong sales were not linked to immediate rollouts?“I don’t think we fully understood how the entire supply chain was affected by inventory build-up at many levels either. It’s easy to tell afterwards that you could see a development. When we were in the middle of it, we didn’t understand it, and we saw the speed of the rollout in China. So we saw comparisons with other markets, and perhaps didn’t fully reflect on it,” says Börje Ekholm. Overall, the “challenging business mix” will persist during the third quarter, profitability should only pick up in the final quarter. In addition to high customer inventories, sales in US halved, organic sales in the market were twice as high in the comparative quarter. The segment Networks gross margin falls from 45 percent to 38 percent, and the operating profit recedes from 8.9 billion to 4.8 billion. The Indian 5g deployment that replaces the gold-plated contracts in the USA is very costly for Ericsson in the beginning. But what margins an Indian contract has over time, Börje Ekholm absolutely does not want to say. “It is a very competitively sensitive issue. It is our relationships directly with a customer that I start to comment on, I will never want to do that,” he says.Will the initial cost in future waves of contracts in India be lower for you?“What we know from history, globally, is that the most expensive phase initially. It has to do with the service margin, which is lower. When you later add capacity and densify, it’s a smaller service content. If you look over a customer’s lifetime, the most difficult thing is exactly when you have won,” says Börje Ekholm. Another difficult task is to regain the trust of the analysts, which has clearly been chipped away. “Our strategy really works,” Börje declared. Ekholm at the report conference, when he explained in detail why the operators simply have to start trading soon in order not to lose customers in congested networks. , one of the analysts asked, in apparent questioning of management’s forecast certainty.
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