Ericsson, the Swedish telecommunications-equipment company, has issued a warning regarding the uncertainty in its mobile networks business. The company expects this uncertainty to persist into 2024, impacting its customers’ investment ability. As a result of this ongoing uncertainty, Ericsson has removed its previous margin guidance.
Margin Target Retained but Timelines Adjusted
Ericsson clarified that while the margin target remains unchanged, the aim is to reach it as soon as possible, subject to market mix recovery. The company had previously targeted an earnings before interest, tax, and amortization (EBITA) margin range of 15%-18% by 2024. However, due to the current market conditions, Ericsson has removed this specific timeline.
Third-Quarter Performance and Fourth-Quarter Outlook
In addition to its updated margin guidance, Ericsson also announced its third-quarter performance. The net loss attributable to shareholders for the quarter was 30.67 billion Swedish kronor ($2.81 billion), compared to a profit of SEK5.21 billion in the same period last year. This loss was primarily due to a non-cash impairment of SEK32 billion related to the impairment of goodwill attributed to its Vonage business.
Looking ahead to the fourth quarter, Ericsson expects similar market trends as in the third quarter. The company anticipates SEK12 billion in run rate savings by year-end, representing an increase of SEK1 billion from previous estimates. It also expects a group EBITA margin before restructuring of around 10% in the fourth quarter.
Future Guidance and CEO Statement
Due to the current uncertainty in the market, Chief Executive Borje Ekholm stated that Ericsson will not provide guidance beyond the fourth quarter of 2023. He emphasized that the company is prudently planning for current market conditions to prevail into 2024.