Telefonaktiebolaget LM Ericsson Inc. (ERIC) shares plunged during pre-market trading. Here is to know why?
Telefonaktiebolaget LM Ericsson Inc. (NASDAQ: ERIC) stock gained 0.15% at the last close as the ERIC stock price fell 7.85% in the trading session before trading. Telefonaktiebolaget LM Ericsson is a global networks and telecommunications company based in Stockholm. For service providers and telecommunications companies, ERIC provides infrastructure, software and services in information and communication technologies, including 3G, 4G and 5G equipment, as well as Internet Protocol systems ( IP) and optical transport.
>> 7 best choices for the post-pandemic economy
Ericsson has published its financial results for the second quarter of 2021. The highlights were noted:
- Despite a decrease in sales of -2.5 billion SEK yoy in mainland China and a decline in IPR revenue of -0.5 billion SEK yoy, the group’s organic sales increased 8% year-on-year . Sales were reported at SEK 54.9 (55.6) b.
- Excluding restructuring costs, the gross margin increased to 43.4% (38.2%), mainly thanks to the operating leverage of the Networks. Inventory write-downs and the first 5G installations in mainland China detracted from second quarter 2020 results. Gross margin was reported at 43.4 percent (37.6 percent).
- The networks led to an increase in EBIT excluding restructuring costs to SEK 5.8 billion (10.6%) year-on-year from SEK 4.5 billion (8.2%). SEK 5.8 (3.9) b was presented as EBIT.
- Organic Sales in Networks increased 11% year over year, driven by increased market share. In mainland China, sales fell by -2.0 billion SEK year-on-year. The EBIT margin was reported at 21.7% (13.2%).
- Despite a SEK -0.5 billion sales decline in mainland China, organic digital services sales remained constant year-over-year. The reported EBIT (loss) was SEK -1.6 (-0.7) billion, affected by a depreciation of SEK -0.3 billion for pre-commercial product spending in China.
- The RAN market prognosis for 2021 has been revised to a 10% year-on-year growth rate, from a previous forecast of 3%.
Börje Ekholm, President and CEO of Ericsson said:
The latest IP deal with Samsung underscores the enormous value of their patent portfolio, and they are well positioned to complete pending and upcoming patent license upgrades with this deal in place. In July, another agreement was reached. Renewal discussions are now at a high level of activity. Revenue will include retroactive payments for the unlicensed period prior to signing when new contracts are completed.
As many markets return to normal after the COVID-19 outbreak, they continue to witness an increase in the number of cases in Southeast Asia, which could hamper the recovery of affected countries.