A summary of all the essential financial news in the telecoms world
Ericsson’s Q2 sales drop
In a recent financial report, Swedish telecoms equipment vendor Ericsson noted that while the company’s net sales were up 3% from last year, to SEK 64.4 billion $6.3 billion, the company’s Q2 sales had fallen. The company’s organic sales fell by 9% in Q2 and EBITA halved from SEK 7.5 billion ($730 million) to SEK 3.7 billion ($360 million).
Network sales fell by 13%, despite vast sales improvements in Oceania, Southeast Asia, and India, where the company now has a leading market share. The steep fall in North American sales was not offset by the improvements in Eastern markets.
The tech giant cited the knock-on effects of high inflation and rising interest rates for their falling sales.
Indeed, Börje Ekholm, President and CEO of Ericsson, noted the challenging market conditions, stating “performance in Q2 was in line with our expectations, despite the uncertain macro backdrop and significant changes in market mix.”
“The firm forecasts similar outcomes for Q3 and hopes for improvements by the end of the financial year: Q3 will benefit from an early impact of our strong focus on cost-out execution. Overall, we thus expect Q3 EBITA margin to be in line with or slightly higher than Q2, followed by a seasonally stronger Q4,” he added.
“Based on the expected recovery of the mobile networks market towards the end of the year, we remain focused on reaching the lower end of the 15-18% EBITA margin long-term target range in 2024.”
After the report’s release this morning, Ericsson’s shares were down 8%.
Nokia reduces annual sales forecast
Nokia is one of many companies feeling the effects of slower consumer spending and a reduction of consumer inventory levels, because of rising interest rates and high inflation.
In an effort to combat this, the firm has lowered their net sales forecast from €24.26–26.2 billion to €23.2–24.6 billion. They have also narrowed their operating margin from 11.5–14% to 11.5–13%.
The company commented that that “Nokia will continue to take measures to ensure it remains on track towards its long-term targets of growing faster than the market and delivering a comparable operating margin of at least 14%.”
Despite the announcement, the firm still expects net sales of £4.8 billion this quarter.
Since the news, Nokia’s shares were down 9.6%, the lowest since April 2021.
Cisco suffers from Bank of America downgrade
This week, Bank of America analysts lowered Cisco Systems share rating from ‘buy’ to ‘neutral’.
“Street estimates are looking for a soft landing to Cisco’s product revenue growth, expecting it to grow 3% year-over-year in fiscal 2024 and 2% in fiscal 2025, after (estimated) growth of 13% in 2023 and 6% in 2022,” noted Bank of America analyst Tal Liani, who is responsible for the stock’s downgrade.
He added: “However, these estimates lead to fiscal 2024/2025 product revenues that are much higher than historical levels. Since fiscal 2012, Cisco’s product revenue has remained at around a $36 billion to $39 billion range, mostly attributed to the timid growth of Cisco’s legacy products. It appears that the analysts deem the expected revenue too high, and therefore too much of a risk. The downgrading of the stock is a reflection of these concerns.
Cisco shares dropped by 18% on the news.
Huawei seeks to increase intellectual property revenue
The firm, which made $560 million from licensing last year, is looking to increase total in 2023, this week releasing new royalty rates.
Huawei’s smartphone revenue has taken a huge hit since US sanctions began in 2019, thus increasing revenue from other streams is now increasingly important.
The new rates will apply to a number of Wi-Fi 6 devices, IoT products, and 4G and 5G handsets. The royalties for Wi-Fi 6 consumer devices is $0.5 per unit, while the rate caps for 4G and 5G handsets are $1.5 and $2.5 per unit, respectively. For IoT, the standard rate is 1% of the net selling price, capped at $0.75, while ‘IoT-Enhanced devices’ range from $0.3 to $1 per unit.
Huawei currently has nearly 200 patent licensing deals, which it hopes to increase in the future. The company is the one of the largest patent holders in the world, with only IBM, Samsung, and Taiwan Semiconductor Manufacturing Company (TSMC) holding more patents as of 2022.