Ericsson lifts long-term sales guidance
STOCKHOLM–Ericsson AB ERIC, +2.23% late Wednesday raised its long-term sales guidance, driven mainly by continued strength in its key networks business.
In a statement ahead of its capital-markets day, the telecommunications equipment company said it now expects net sales of between 210 billion and 220 billion Swedish kronor ($23.3 billion-$24.4 billion) by 2020, from an earlier estimate of SEK190 billion to SEK200 billion. It said the increase is partly explained by a SEK5 billion currency boost and SEK2 billion from the inclusion of its Red Bee Media business, previously not included in the sales ambition.
The long-term target for group operating margins of between 15% and 17% remains, and is now expected to be reached by 2022.
In its networks business, growth is expected to come from a stronger market, selective market-share gains, and expansion of the product portfolio into close adjacent markets. In 2019, investments in 5G trials will continue. The operating margin target for 2020 is unchanged at 15%-17%.
In digital services, the company said its top priority is returning to profitability. Continued cost reductions and efficiency improvements will contribute to reaching the target of a low single-digit operating margin by 2020. However, it said despite strong market demand for its new portfolio, legacy product sales are declining faster than the new portfolio uptake.
In managed services, focus is shifting to further improving profitability through investments in automation and artificial intelligence, leading to an upgrade of its 2020 operating margin target to 5%-8% from 4%-6%.
The company’s emerging business and other segment, the target of SEK5 billion to SEK7 billion in sales and a break-even operating margin by 2020 is unchanged.
Ericsson said its total addressable market is expected to grow between 2% and 3% compound annual growth rate from 2018 to 2022.
-Write to Dominic Chopping at [email protected]; Twitter: @domchopping @WSJNordics
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