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Is 5G Ericsson’s Next Revenue Growth Driver?

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Part 3
Is 5G Ericsson’s Next Revenue Growth Driver? PART 3 OF 7

Here’s What Impacted Ericsson Networks’ Sales This Year

Networks’ revenue fell 8.5% in 2Q17

Ericsson (ERIC) Networks develops communication infrastructure for fixed and mobile connections. Ericsson has valued its total available market at $100.0 billion and expects a YoY (year-over-year) fall of 0.0%–2.0% over the next two years.

The Networks segment accounted for more than 73.0% of Ericsson’s revenue in 2Q17. Ericsson Networks’ revenue fell 8.5% in 2Q17 to 36.8 billion SEK (Swedish kronor) from 40.2 billion SEK in 2Q16. This fall in revenue was attributed to lower software sales. Cautious spending in mobile broadband also impacted revenue in 2Q17. In 1Q17, revenue fell 9.3% YoY to 36.2 billion SEK.

Here&#8217;s What Impacted Ericsson Networks&#8217; Sales This Year

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Ericsson Radio Systems expected to drive Networks’ performance

During Ericsson’s 2Q17 earnings call, the company stated that it has been ranked number one in radio by a leading operator. Ericsson expects a ramp-up of Ericsson Radio Systems (or ERS) to drive performance improvement in Ericsson Networks. The company also expects to reduce costs in this segment through service delivery.

According to Ericsson’s press release, ERS is “An innovative, modular system that enables mobile operators to address growth opportunities and transform their radio networks by leveraging a multi-standard, multi-band and multi-layer architecture (3xMulti), delivering industry-leading performance on the smallest site footprint with the lowest energy consumption.”

ERS accounted for 49.0% of total radio unit deliveries in 2Q17. Ericsson announced that it will support Vodafone (VOD) in the evolution of 4G (fourth-generation) technology as well as provide 5G (fifth-generation) radio technology.

To focus on maintaining a leading product portfolio, Ericsson increased its R&D (research and development) investments in its Networks business by 200.0 million SEK for the quarter ended June 30, 2017.

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