Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Ericsson plans cut in China ops on Huawei backlash, flags supply chain issues

Stock MarketsOct 19, 2021 09:56AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
2/2 © Reuters. FILE PHOTO: Ericsson logo is seen at its headquarters in Stockholm, Sweden June 14, 2018. REUTERS/Olof Swahnberg 2/2

By Supantha Mukherjee

STOCKHOLM (Reuters) - Sweden's Ericsson (BS:ERICAs) announced on Tuesday plans to reduce its operations in China after suffering a big sales drop in one of its biggest markets due to retaliation for Sweden's ban on China's Huawei from selling 5G gear in the country.

The news came as the company reported better than expected third-quarter core earnings boosted by strong sales of 5G equipment in most of the world, offsetting a loss of market share in mainland China and a hit from the global supply chain problems.

Sweden banned China's Huawei from selling 5G gear in the country a year ago and Ericsson has since lost most of its share in the latest rounds of telecom tenders in China.

The proportion of revenue Ericsson earns from China has dropped to around 3% of the total from 10-11%, Chief Financial Officer Carl Mellander said in an interview, offsetting gains made as Ericsson filled the void left by Huawei in several countries as it retreated under pressure from the U.S. government.

Mellander said the decline started in the second quarter and would show as a year-on-year loss until the same period of next year.

China sales declined by 3.6 billion Swedish crowns ($418.14 million) in the third quarter alone and the company is now planning to reduce its sales and delivery organisation in the country.

The reduction in China marks a small retreat for the company that has been in the country for over a hundred years. Chief Executive Borje Ekholm had last month vowed to double down on efforts to regain market share in China.

Ericsson, a rival of Nokia (NYSE:NOK), also said the global supply chain issues had started to bite.

"Late in Q3 we experienced some impact on sales from disturbances in the supply chain, and such issues will continue to pose a risk," CEO Börje Ekholm said in a statement.

The company was not able to deliver certain hardware to its customers due to chip shortage at suppliers, coupled with logistics problems, leading to a drop in revenue, Mellander said.

Shares of the company were down marginally and analysts said that the supply chain constraints could translate into potential upside for next year as demand stayed strong.

Quarterly adjusted operating earnings rose to 8.8 billion Swedish crowns ($1.02 billion) from 8.6 billion a year ago, beating the mean forecast of 7.85 billion, according to Refinitiv estimates.

Securing 5G contracts from all three U.S. telecom firms -- Verizon (NYSE:VZ), AT&T (NYSE:T) and T-Mobile -- has helped the company to absorb the losses in China.

Total revenue fell 2% to 56.3 billion crowns, missing the 58.14 billion crowns forecast by analysts.

($1 = 8.6258 Swedish crowns)

Ericsson plans cut in China ops on Huawei backlash, flags supply chain issues
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (2)
YC Teng
YC Teng Oct 19, 2021 10:30AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Hahaha... You really meant Ericsson will fold soon 🤣🤣China is the number #1 5G market in the world, where have you been 🤔
John Hat
John Hat Oct 19, 2021 10:20AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
China will fall soon, so it's okay. No biggie.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email