Ericsson warns of 2024 market decline despite fourth-quarter earnings beat

Ericsson said it expects further decline in 5G gear demand from mobile operators this year after beating fourth-quarter operating profit expectations on Tuesday helped by software sales.

Telecoms equipment suppliers are expecting a challenging 2024 as 5G equipment sales – a key source of revenue – are slowing in North America, while India, a growth market, may also see a slowdown.

After a few years of high demand for 5G equipment, buying by telecom providers slowed last year, prompting firms such as Ericsson and Nokia to lay off thousands of employees to save costs.

Ericsson could look at further cost cuts this year and that could potentially include layoffs, Chief Financial Officer Carl Mellander said in an interview.

“We will scrutinise all costs and continue to dimension ourselves according to where the market is going and demand,” Mellander said, adding that the company has not yet identified a specific number of headcount or billions set to be taken out.

Ericsson’s fourth-quarter net sales fell 16% to 71.9 billion Swedish crowns ($6.89 billion), missing estimates of 76.64 billion.

Ericsson shares were down 2% at 0813 GMT following the results.

Operating profit (EBIT) excluding restructuring charges for the October-December quarter fell to 7.37 billion crowns from 8.08 billion a year earlier, but topped the 6.92 billion expected by analysts in an LSEG poll.

Ericsson’s EBIT margin excluding restructuring charges rose to 10.3% from 9.4%.

That was mostly due to higher-margin software sales and lower sales of 5G equipment to lower-margin countries such as India.

“We expect the current market uncertainties to prevail into 2024 with a further decline of the RAN (Radio Access Network) market outside China as our customers remain cautious and the investment pace is normalising in India,” CEO Börje Ekholm said in a statement.

Worldwide revenue from RAN is projected to decline by 1% per year over the next five years, according to a report from research firm Dell’Oro.

Ericsson said it would get a boost in the second half of the year from a $14 billion telecom deal with AT&T that it won over rival Nokia.

The company on Tuesday also appointed Lars Sandstrom as chief financial officer, replacing long-time company veteran Carl Mellander.