The outfit posted a second-quarter profit in line with expectations. Some analysts had expected the company to upgrade its 2020 targets after showing profitability improvements in 2018 and 2019 on rising 5G demands.
The company, which counts China’s Huawei and Finland’s Nokia as its main rivals, has pledged to deliver an operating margin, excluding restructuring costs, of over 10 percent in 2020.
Chief Executive Borje Ekholm said: “We see strong momentum in our 5G business with both new contracts and new commercial launches as well as live networks. To date, we have provided solutions for almost two-thirds of all commercially launched 5G networks.”
Quarterly gross margin in Networks fell to 41.4 percent from 43.2 percent in the previous quarter, mainly due to litigation settlement costs, strategic contracts and lower intellectual property rights licensing revenues.
Ericsson said the strategic contracts would boost margins in the long run but would hurt profitability in the near term. Overall, gross margin was 36.6 percent compared to 34.8 per cent a year ago.
“In the quarter we harmed gross margin and expect this impact to increase during the second half of the year”, it said in the report.