Ericsson reports rising income, vowing to build 5G leadership

Ericssons CEO Hans Vestberg presents the company's sales report?at a press conference in Stockholm, Sweden, Jan 27, 2016. [Photo/IC]

Telecommunications giant Ericsson beats market expectations in 2015, with rising revenues in newly developed business lines, much lowered operational costs, and stable income streams from patents licensing deals.

Meanwhile, the major telecom vendor sustained sales in its core business of networks, services and support solutions, although Ericsson has seen increasingly fiercer competition from China's Huawei Technologies and Nokia, which has just acquired and merged with Alcatel-Lucent.

Hans Vestberg, chief executive officer and president of Ericsson, told reporters in Sweden on Wednesday: "Our focus in 2016 will be put on the core business, targeted growth areas and cost and efficiency program. While market conditions remain challenging in parts of the world, Ericsson will work to capture business opportunities as more markets shift to 4G. At the same time Ericsson will work to extend our technology leadership in the emerging 5G market.”

Rising profits in 2015

Releasing its fourth quarter financial results report, Ericsson raked in 13.7 billion Swedish crowns of net profit in 2015, which rose 23.5 percent year-on-year, on a gross business turnover of 246.9 billion crowns. Net sales for the previous year were 228 billion crowns. The performance beats most analysts' expectations.

Operating income, excluding restructuring charges, increased to 26.8 billion crowns, with improvements in all business segments, the company said in a statement.

The vendor reported a particularly rosy fourth quarter numbers, with operating margin hitting 15.1 percent compared to 9.3 percent a year ago. Its fourth quarter net income reached 7.0 billion crowns, rising 68 percent year on year, mainly thanks to the settling of a major patents dispute with Apple following long negotiations, and the resigning of an IPR cross-licensing deal with Huawei in late 2015.

Commenting on its IPR policy, CEO Hans Vestberg said: "Ericsson's IPR strategy, to generate value from our investments in research and development, has been successful, and over the past five years, we have more than tripled our IPR licensing revenues. After the recent announcements of two important patent license agreements, we now have agreements with the majority of handset suppliers."

Focuses for the new year

Ericsson's 4G networks have been broadly deployed on a global scale, in North and South America, Asia Pacific, the Middle East and Europe. To capture the next-generation ultra-faster 5G market, the vendor has rammed up research and development investments, and has come out with a few technology breakthroughs.

Lately, Ericsson's 5G wireless prototypes have taken shape, and the vendor has cooperated with major operators in Sweden, the United States, Japan, Korea and Brazil, to test its 5G technology.

Planning for 2016, Hans Vestberg said the company will focus on its core business, targeted new growth points and cost reduction and efficiency enhancement. The vendor has earlier worked out a plan to save 9 billion Swedish crowns in cost reduction by 2017.

Ericsson said it had good progress in all its targeted growth areas – in IP, cloud, operating and business support systems, TV and media and emerging opportunities in industry and society -- and vowed to invest more in order to establish leadership. Its sales in the targeted areas grew to 45 billion crowns, rising more than 20 percentyear on year, making up 18 percent of its gross sales in 2015.

The company also said that its strategic partnership with Cisco, announced in the fourth quarter of 2015, will give it strong end-to-end network solutions in the market place. It expects to generate US$1 billion or more of additional sales by 2018.