Tech

Ericsson shares fall as inflation and supply problems weigh on margins

Ericsson shares fell as much as 10 percent on Thursday after the telecoms equipment maker missed expectations for the second quarter.

The Swedish group reported a 1.3 percentage point decline in gross margin to 42.1 percent in the second quarter, which it attributed to high inflation and a shortage of chips due to supply chain issues.

“The global supply chain situation remains challenging and inflationary pressures are strong,” said Börje Ekholm, ericsson President and CEO. “Combined, this leads to cost increases that we are working hard to limit.”

He said the geopolitical situation has required “proactive investments” to mitigate supply chain risks, noting the group would adjust its prices when contracts expire.

“The best way to offset cost increases is to continuously invest in technology to increase the cadence of bringing new innovative solutions to market,” added Ekholm.

Net revenue for the quarter of SKr 62.5 billion (US$5.9 billion) beat analysts’ expectations of SKr 61.5 billion as 5G network rollouts and market share gains pushed organic revenue down 5 percent in the quarter pushed up.

However, Ericsson’s figures were burdened by expiring license agreements and a patent dispute with Apple.

The group’s Stockholm-listed shares recovered modestly by mid-morning, trading 8.5 percent lower at SKr 72.

Ericsson, which is under investigation by US regulators over the allegations he has made Payments to the terrorist group Isis in Iraq reiterated that it was “fully committed to working with the US authorities.”

Ericsson shares fall as inflation and supply problems weigh on margins Source link Ericsson shares fall as inflation and supply problems weigh on margins

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