Bullish Ericsson raises its sales forecast

Ahead of its capital markets day, kit vendor Ericsson has announced it now hopes to bring in 10% more cash in 2020 than it previously did.

The company had recently set its sales target for 2020 at SEK 190-200 billion, but thanks to a more bullish outlook for its networking division, as well as the inclusion of revenue from Red Bee Media and a favourable currency adjustment, Ericsson is now aiming for SEK 210-220 billion. The overall operating margin target of 10% in the mid term and 12% in the longer term remains.

“With our focused strategy we have created a strong foundation of stability and profitability,” said Ericsson CEO Börje Ekholm (pictured). “Our strengthened portfolio and competitive cost structure have enabled us to grow in the third quarter 2018, for the first time since 2014, on a constant currency basis, despite headwind from exited contracts and businesses. As the industry moves to 5G and IoT we are now preparing to take the next step to generate profitable growth in a selective and disciplined way.”

Here are the revised sales and margin targets by business segment.

SEK b. Networks Digital Services Managed Services Emerging Business and Other Group
2020 Net sales ambition 141 – 145(128 – 134) 41 – 43 23 – 25 5 – 7 210 – 220
2020 Operating margins 15% – 17% Low single digit 5% – 8%(4% – 6%) Break-even(current business)  >10%
Operating margin by 2022, at the latest 15% – 17% 10% – 12% 8% – 10% -  >12%

The target increase for Networks is down to a more optimistic view of the underlying market, the anticipation of some market share gains and diversification into ‘adjacent markets’, which presumably means selling networking gear to industries other than telecoms. The aim for Digital Services is just to break even, while automation and AI are expected to improve the margin at Managed Services.

Nokia gets a big piece of China Mobile optical transport gig

The world’s biggest MNO – China Mobile – recently held a central bid to supply equipment for its regional optical transport network, in which it ranked Nokia top.

The gig seems to be that a bunch of vendors are going to help out with the deployment of an optical transport network for 13 city metro and two provincial backbone networks, but that China Mobile will apportion the work between them according to some arbitrary ranking system. The good news for Nokia is that it came top of that table and, as a consequence, will get more optical networking business.

The usual array of networking virtue is being ascribed to whatever Nokia is serving up for China Mobile here. It’s all about agility, flexibility, scalability and all the other -ilities. And, of course, it’s so ready for 5G you wouldn’t believe it.

“We are very pleased to work closely with China Mobile to provide the optical technology for its most advanced networks today and in the future,” said Yu Xiaohan, head of the China Mobile customer team at Nokia Shanghai Bell. “We’ll continue to fulfil our mission by making people’s life easier as we create the technologies that connect the world.”

In other Nokia Far-Eastern news it has announced the opening of its Cloud Collaboration Hub in Singapore, which is somewhat ominously described as an ‘execution centre’ where multivendor cloud services can be tried out. It joins existing ones in the US and UK, all of which exist mainly to help operators get ahead on the cloud game.

“With the launch of the Cloud Collaboration Hub in Singapore, we will help operators in Asia Pacific and Japan select the right transformation strategy and build their revenue drivers and business cases for cloud-based solutions,” said Sandeep Girotra, head of Asia Pacific and Japan at Nokia. “This will accelerate operators’ moves towards becoming digital service providers at a crucial moment when technology is undergoing a paradigm shift, anchored by trends such as 5G, the Internet of things and the cloud.”