Ericsson reports Q3 net loss of $2.81 billion amid North American sales decline

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Ericsson reports Q3 net loss of $2.81 billion amid North American sales decline
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Swedish telecommunications giant Ericsson (BS: ERICAs ) reported a net loss of SEK 30.67 billion ($2.81 billion) in Q3, a stark contrast to the profit of SEK 5.21 billion recorded in the same period last year. The loss was primarily due to a SEK 32 billion non-cash impairment at Vonage.

Sales for the quarter declined by 5.2% to SEK 64.5 billion, down from SEK 68.04 billion in the previous year. The company's Networks unit experienced a significant fall in sales, dropping to SEK 41.5 billion from SEK 48.1 billion, largely due to a 60% decrease in North American organic sales.

Ericsson's challenges were offset by growth in lower margin markets such as India and early 5G markets resuming investments. This is in line with Ericsson's known status as a prominent player in the Communications Equipment industry, as highlighted by InvestingPro Tips. The company's Q3 EBITA margin dropped to 7.3% from 11.3%, and the Networks unit's EBITA margin fell to 12.6% from 20%, which is reflected in the Operating Income Margin of 8.21% as reported by InvestingPro Data.

In response to these challenges, Ericsson announced plans for cost reductions, including an additional cut of SEK 1 billion. The company is targeting total savings of SEK 12 billion by year-end amid continued uncertainty for its mobile networks business until 2024.

CEO Börje Ekholm has removed the company's target of achieving a 15-18% EBITA margin by 2024 due to predicted macroeconomic uncertainty impacting customer investment ability. Ericsson's decision aligns with the InvestingPro Tip that net income is expected to drop this year.

Ericsson expects the global radio access network equipment market to fall 3% in 2023, with North America expected to decline by a significant 37%. As for Q4, Ericsson expects similar market trends as Q3 and refrains from giving guidance beyond that due to current uncertainties.

Despite the current challenges, InvestingPro Data indicates that Ericsson has a market cap of $15.262 billion and a P/E ratio of 13.68. The company is also known for its commitment to shareholders, having raised its dividend for four consecutive years and maintaining dividend payments for 19 consecutive years. For more insights like these, consider checking out the InvestingPro product that includes additional valuable tips.

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