It's a loss for Huawei, no doubt about it. The current telecom equipment market environment in Europe has been highly politicized. So you have to take it. But see the market share reports in the two posts above yours. Huawei continues to do well. Besides, China's 5G equipment market is the largest in the world at least from the mobile base station standpoint. It continues to dominate the Chinese market, and I expect Nokia and Ericsson will shed some market shares there.
It's unfortunate we have to live through this. It all started because the US felt its tech dominance was under threat and Huawei became its target, without any evidence. Many European countries, despite repeated resistance from telecom companies and even some government officials, had to succumb to the pressure from the US government. European countries are just not strong enough to stand on their own. That's the reality. Otherwise, how do you explain that Huawei has been operating in Europe for over two decades now with telecom customers in pretty much every country there and, all of a sudden, Huawei's equipment aren't accepted now because China is a one-party country?!
I'm assuming you have a pretty good understanding of this Huawei situation, and we don't need to get into more discussions/arguments. Suffice it to say, no one emerges out of it as a clear winner now, but Huawei will survive this and come out stronger in a couple of years. We will see.
stock jumped close to 7% on Wednesday, as the
company beat sales and profit expectations in the third quarter, helped by 5G contracts in China.
The company’s gross margins also reached their highest level since 2006, while the Covid-19 pandemic continued to have a “limited impact” on performance.
Total revenue rose 1% to 57.5 billion Swedish krona ($6.6 billion), while underlying sales—adjusted for comparable sales and currency—grew 7%, driven by 5G sales in China, where the company is a partner of the top three service providers.
to SEK5.35 billion from a loss of SEK6.23 billion, beating the FactSet consensus of SEK4.15 billion.
Ericsson further strengthened its position in the third quarter and has now secured 112 global 5G contracts, up from 99 at the
. Chief Executive Börje Ekholm said: “The 5G contracts in mainland China have developed according to plan, contributing positively to profits in Q3 and are expected to improve further.” Sales from its Networks unit grew by 13% on an underlying basis, as 5G momentum also continued in the U.S. and the Middle East.
It comes as
, including the U.S., have blocked Chinese company Huawei from next-generation 5G wireless networks. Sweden became the
to block Huawei earlier this week, citing security concerns.
But the move may impact Ericsson’s success in China. The country’s foreign ministry said on Wednesday that Sweden should reverse the ban to avoid a “negative impact” on Swedish companies in China.
When it comes to the Covid-19 pandemic, the telecommunications industry has been largely sheltered from it, as increased working from home has led to a surge in demand.
The Stockholm-listed company said its year-to-date performance strengthened its confidence in meeting 2020 targets. It added that the pandemic had so far had limited impact on the business. “While the pandemic has hurt revenues for several of our customers, and in some cases this has led to a reduction of capex, we have not seen any negative impact on our business, largely due to footprint gains,” Ekholm said in a statement.
Looking ahead. “Ericsson looks to be well positioned to benefit from the 5G cycle,” said Kepler Cheuvreux analysts, adding that its “valuation looks reasonably attractive.” They retained a buy rating on the stock with a target price of SEK110, up from SEK105.80 in early trading on Wednesday.
UBS analysts said adjusted earnings in the third quarter came in 31% above the market consensus as gross margins rose on the back of software sales, and that the consensus for full-year earnings would be likely to rise by mid-single digits.
Security concerns and moves to block Huawei have helped Ericsson pick up more 5G contracts. At the same time it has had success in China, unlike its rival
, which has
from Chinese telecom companies. Tensions between Sweden and China may be of concern, but Ericsson expects further improvement in China and is well placed to capitalize on the global 5G rollout.
