Sunday, July 16, 2023

Ericsson’s Q2 revenue drops 9% on weak N America sales

Citing a sharp decline in sales in North America, Ericsson reported Q2 revenue SEK 64.4 billion (US$6.286 billion), down 9% compared to a year earlier. Segment Networks sales declined by -13%, while segment Enterprise sales grew by 20%. 

Gross income excluding restructuring charges decreased to SEK 24.7 (26.3) b. as a result of lower sales and margins in Networks. Gross income increased in Enterprise, mainly driven by the consolidation of Vonage. Reported gross income was SEK 24.1 (26.3) b.  Gross margin excluding restructuring charges was 38.3% (42.2%) primarily impacted by changed business mix in Networks. Reported gross margin was 37.4% (42.1%). 

A summary of commentary provided by Börje Ekholm, President and CEO of Ericsson, in the Q2 investor brief: 

  • Q2 performance was in line with expectations despite market changes and macro uncertainty.
  • Networks had a gross margin of over 39% with strong execution in India, offsetting softening in other markets.
  • Cloud Software and Services are on track for at least break-even EBITA for the full year 2023.
  • Enterprise saw strong growth in Enterprise Wireless Solutions and positive EBITA in the Global Communications Platform business.
  • Another 5G licensing agreement was secured with a device vendor, strengthening the IPR portfolio.
  • Plans to reduce annual run rate by at least SEK 11 billion by year-end to positively impact the P&L.
  • Free cash flow before M&A was SEK -5.0 billion primarily due to lower EBIT and increased working capital.
  • The focus remains on bolstering leadership in mobile networks, growing the enterprise business, and driving cultural transformation.
  • Ericsson's market-leading position in mobile networks enables expansion into the enterprise segment through 5G capabilities and network APIs.
  • Ethical and compliance programs have been enhanced, and testing ensures effectiveness across the company.
  • Q3 is expected to have a similar market mix as Q2, with the EBITA margin in line with or slightly higher than Q2.
  • Continued rapid data traffic growth, 5G subscriptions, and migration to 5G standalone drive investments and market recovery.
  • Average smartphone usage is expected to exceed 20 GB/month in 2023 with strong growth. 
  • 240 operators have launched 5G, bringing new revenue growth with pricing model innovation. 
  • 5G subscriptions are expected to top 1.5 billion by end-2023 and reach 4.6 billion by 2028. 
  • Fixed Wireless Access (FWA) also grows quickly, driving further traffic growth. 
  • An estimated 75% of all base station sites outside China are not yet updated with 5G mid-band, and migration to 5G standalone will continue in order to deliver on 5G’s full potential.

Citing lower demand, Nokia lowers net sales outlook

Citing weaker demand due tp both the macro-economic environment and customers’ inventory digestion, Nokia lowered its financial outlook based on preliminary Q2 results, saying its now expects to report net sales of approximately EUR 5.7 billion, flat year-on-year on a constant currency basis with a comparable operating margin of approximately 11%. Nokia’s operating profit in Q2 benefitted from approximately EUR 80 million related to catch-up net sales in Nokia Technologies.

Nokia is lowering its full year net sales outlook to a range of EUR 23.2 billion to EUR 24.6 billion (previously EUR 24.6 billion to 26.2 billion) and narrowing its comparable operating margin range outlook to 11.5% to 13% (previously 11.5% to 14%). The changes are related to Nokia’s Network Infrastructure and Mobile Networks business groups.

Nokia said its customer spending plans are increasingly impacted by high inflation and rising interest rates along with some projects now slipping to 2024 – notably in North America. There is also inventory normalization happening at customers after the supply chain challenges of the past two years.

Nokia will release its second quarter and half year 2023 financial results on Thursday 20 July 2023.

Dell'Oro: RAN market is done expanding

The Radio Access Network (RAN) market is done expanding for now and will enter a period of slow contractions, according to Dell'Oro Group. Following the 40 percent to 50 percent ascent between 2017 and 2021, RAN revenues flattened out in 2022 and these trends extended to 1Q 2023.

“Even if it is early days in the broader 5G journey, the challenge now is the comparisons are becoming more challenging in the more mature 5G markets and the upside with the slower-to-adopt 5G regions is not enough to extend the growth streak,” said Stefan Pongratz, Vice President at Dell’Oro Group. “Meanwhile, growth from new revenue streams including Fixed Wireless Access and enterprise LTE/5G is not ramping fast enough to change the trajectory. With 5G-Advanced not expected to trigger a new capex cycle, the question now is no longer whether RAN will grow. The question now is, rather, how much will the RAN market decline before 6G comes along?” continued Pongratz.

Additional highlights from the Mobile RAN 5-Year July 2023 Forecast Report:

  • Global RAN is projected to decline at a 1 percent CAGR over the next five years.
  • The less advanced 5G regions are expected to perform better while the more developed 5G regions, such as North America and China, are projected to record steeper declines.
  • LTE is still handling the majority of the mobile data traffic, but the focus when it comes to new RAN investments is clearly on 5G. Even with the more challenging comparisons, 5G is projected to grow another 20 percent to 30 percent by 2027, which will not be enough to offset steep declines in LTE.
  • With mmWave comprising a low single-digit share of the RAN market and skepticism growing about the MBB business case, it is worth noting that our position has not changed. We still envision that the mmWave spectrum will play a pivotal role in the long-term capacity roadmap. 

Ericsson and MediaTek hit 565 Mbps with SU-MIMO + Aggregation

Ericsson and MediaTek achieved 565 Mbps performance by combining two Ericsson software features – uplink single user multiple input multiple output (SU-MIMO) and Uplink Carrier Aggregation – on MediaTek T830 CPE platform with three transmit (3Tx) antennas.  The test focused on optimizations for fixed wireless access applications (FWA).

For this demo, a 2.1GHz FDD (frequency division duplex) band was combined with a 3.5GHz TDD (time division duplex) band.

Ericsson said FWA would benefit greatly from combining Uplink SU-MIMO with Uplink Carrier Aggregation in FR1 spectrum, where FR1 stands for Frequency Range 1, the most commonly deployed 5G spectrum globally.

Dr Sibel Tombaz, Head of Product Line 5G RAN, Ericsson, says: “This latest milestone with MediaTek proves that we at Ericsson are continuously innovating and leveraging new technologies to deliver the best possible 5G user experience. With this latest solution offering, fixed wireless access subscribers, consumers and businesses alike, can benefit from higher upload speeds for data-heavy applications such as cloud gaming and extended reality. We are offering high-performing solutions for the evolving fixed wireless access market.”

HC Hwang, General Manager of Wireless Communication System and Partnership at MediaTek, says: “Enhancing uplink performance is an essential advantage for 5G FWA devices used by businesses, and this technology breakthrough will further extend the advantage of 5G CPE versus line-based broadband services.

Ericsson predicts FWA connections will reach 300 million in 2028 from 107 million in 2022. By 2028, 5G is estimated to account for almost 80 percent of all FWA connections.

BAE Systems tests PHASA-35 drone in the stratosphere

BAE Systems conducted a successful trial of its High Altitude Pseudo Satellite (HAPS) Uncrewed Aerial System (UAS), called PHASA-35, reaching an altitude of over 20,000 meters (66,000 feet) during a 24-hour flight over White Sands, New Mexico.  

Designed by BAE Systems' subsidiary Prismatic Ltd, the PHASA-35 drone operates above weather and air traffic, offering potential applications in intelligence, surveillance, reconnaissance, disaster relief, border protection, and the delivery of communication networks including 4G and 5G. 

With a 35-meter wingspan and a 15kg payload, PHASA-35 utilizes advanced technologies such as solar electric cells, composites, and energy management systems. The recent trial was sponsored by the US Army Space and Missile Defense Command Technical Center.