China growth in Ericsson’s 2015 fourth quarter and full year results

Telecom giant Ericsson has reported on the results for 2015, including the full year, where they had good progress in all our targeted growth areas and we continued to invest in order to establish leadership. Sales grew by more than 20% YoY, reaching SEK 45 b., corresponding to 18% of group sales.

Ericsson head quaters

Ericsson head quaters

 

The strategic partnership with Cisco, announced in the quarter, will give Ericsson strong end-to-end network solutions with a complete IP portfolio. As a result of the partnership, Ericsson will extend their addressable market and expect to generate USD 1 b. or more of additional sales by 2018. Additional sales are expected to be accretive to operating income in 2016.
In the fourth quarter 4G deployments in Mainland China recovered after a weak third quarter.

The global cost and efficiency program is progressing according to plan, contributing to lower operating expenses YoY. The target to achieve net annual savings of SEK 9 b. during 2017 compared with 2014. Operating expenses, excluding restructuring charges, for the second half of 2015, declined by almost 10% compared with same period last year. Ericsson will continue to address operating expenses and increase efforts to further reduce cost of sales in order to improve the gross margin.

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A global patent license agreement was signed with Apple, contributing to growth in IPR revenues both YoY and QoQ.

Cash flow from operating activities was SEK 21.9 (8.6) b.

For the full year sales increased by 8%, including sales growth in China.

Focus 2016
Although company performance improved in the quarter, there is still a need for further improvements. Focus in 2016 will be on:

Core business – While market conditions are challenging in certain parts of the world, Ericsson continue their work to capture business opportunities as more markets shift to 4G. At the same time they will work to extend their technology leadership also in the emerging 5G market.

Targeted growth areas – After a period of investing, in order to create growth, they also need to improve earnings. This will involve stronger focus on software sales and recurring business as a complement to the already strong Professional Services business.

Cost and efficiency – They are closely monitoring market and business development and will take all necessary actions to remain competitive across the entire business.

As Ericsson deliver in these areas, in combination with their other ongoing strategic initiatives, they believe they are well positioned to create future shareholder value. The Board of Directors proposed a dividend of SEK 3.70 (3.40) per share for 2015, an increase of 9% compared with last year.

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