There was a mix of good news and alarmingly bad news in Ericsson’s Q4 2022 results, as the Swedish telecom’s revenues were up significantly from 2021, yet net profits on the quarter were down a stunning 39 per cent compared to Q4 2021.
Moments after the financials were released on Friday, Reuters reported that the lower than expected earnings were largely due to the fact that sales of 5G equipment had slowed in high-margin markets such as the U.S.
“Ericsson has already announced plans to cut cost by SDK 9 billion (US$880 billion) by the end of 2023,” the article stated. “Chief financial officer Carl Mellander told Reuters that would involve reducing consultants, real estate and also employee headcount.”
In the quarter, Ericsson reported a net profit of SEK 6.2 billion, which equates to US$601.7 million, while revenue was up to SEK 86 billion (an estimated US$806 million).
There was also upwards of SEK 4 billion in one-off charges during the quarter, which involved several items, including the divestiture of the company’s IoT division, and upwards of SEK 2.3 billion, the equivalent of US$220 million, related to an investigation by the U.S. Department of Justice (DOJ) over allegations of corruption in Iraq.
Ericsson president and chief executive officer Börje Ekholm said the company remains focused on “reaching a resolution with the U.S. authorities regarding the previously announced Deferred Prosecution Agreement (DPA) breach notices received by the company.
“In this regard, we have this quarter booked a SEK 2.3 billion provision as we are now in a position to make a sufficiently reliable estimate of the financial penalty (and additional monitoring costs) associated with a breach resolution.
“Separately, and with respect to the past matters described in the company’s 2019 Iraq investigation report, we continue to thoroughly investigate the facts in full cooperation with the DOJ and the SEC (Securities and Exchange Commission) to determine if there is any merit to the allegations.”
Of the latest financial results, he said the company is confident that it has the “right team and strategy in place to extend our leadership in mobile networks; achieve profitability in cloud software and services, execute in our high growth enterprise segment; shape the industry landscape by becoming a platform company leveraging the 5G innovation platform; and continue our unwavering commitment to a culture of integrity.”
Building a culture of ethics and integrity, said Ekholm, remains a top priority, and “I am convinced that best-in-class compliance will give our company a competitive advantage. Both the company’s resolution with the DOJ and the SEC in 2019 and the ongoing investigation into past conduct in Iraq clearly highlight the importance of intelligent decision-making and effective risk management.”
