Ericsson first quarter results for 2018 were a good news, bad news scenario. The bad news was sales decreased by 2 percent year over year, adjusted for currency FX. The good news was the company’s gross margin grew to 34.2 percent compared with 15.7 YoY.
In the quarter, Ericsson reduced its total workforce by more than 3,000, bringing the total reduction to 18,000 since July of last year. At the same time, it has hired more than 500 engineers.
“But at least we have reestablished growth, showing the competitive product portfolio we have,” Börje Ekholm, president and CEO of Ericsson said according to a SeekingAlpha transcript. “We see very good demand from customers, which I would say shows the strength of our product portfolio. We see good traction on our 4G products that supports our operators to transition from 4G into 5G.”
Although the Q1 numbers were weighed down by restructuring charges, Eklholm said the gross margin numbers are a sign the OEM has turned the corner.
“A cornerstone in our strategy is to invest in R&D for both technology leadership and cost leadership, which will allow us to generate higher gross margins. We continue to increase our R&D investments in networks to lead in 5G,” Ekholm said.
Ericsson Radio System is penetration is up to 84 percent, according to Ekholm, and the company plans to continue the transitioning into ERS .
“So clearly, it is a sign that the investments in R&D are paying off now,” he said. “We continue here, of course, to invest in R&D for a leading portfolio. The objective is to fully transition into ERS during 2018 for additional competitiveness.”