Ericsson's stock is plummeting for weak earnings

Overall, the company saw good development, according to Börje Ekholm, but to some extent the company was affected by market uncertainty in North America.

-We saw above all a good gross margin for the fourth quarter. I think that is one of the most important signals for our competitiveness, says CEO Börje Ekholm to TT.

"We saw a fourth quarter where we continued to deliver on our focused strategy from 2017," he says.

Profit before tax of SEK 6.05 billion for the fourth quarter of last year can be compared with the loss before tax of SEK 2.57 billion for the same period a year earlier.

Sales amounted to SEK 66.3 billion, compared with SEK 63.8 billion a year earlier.

Analysts had, on average, estimated that profit before tax for the fourth quarter of last year would reach SEK 6.4 billion, according to a compilation of forecasts made by Refinitiv.

-The investments we have made in the product portfolio are starting to bear fruit, says Börje Ekholm.

Ericsson's sales in North America dropped to SEK 17.4 billion, compared to SEK 18 billion a year earlier. Sales in Europe and Latin America decreased to SEK 17.5 billion, compared to SEK 18.2 billion.

Maria Landeborn, senior strategist at Danske Bank, points to developments in North America as a cloud of concern.

-Sales growth is primarily slowed by the drive of developments in North America. In terms of sales, the big question is whether it is temporary or not. North America is a very important region and it is a development that is continuing, it is not good, she says.

5G development there is fast and North American operators are fast and the competition is high, according to Landeborn.

Another question mark around Ericsson is cost increases in research and development and for sales that are rising faster than expected.

Börje Ekholm feels secure with Ericsson's position in the 5G market. Among other things, the company expects to start large 5G expansions in China in 2020.

TT: Do you take market shares on 5G?

-We think we are growing faster than the market on 5G, says Börje Ekholm.

He is not particularly concerned about signals of a slowing economy, for Ericsson's part.

-We see continued strong demand. We are a little disconnected from the general business cycle. We are driven by two things, one is the growth in traffic which is still high and then we are in a technology shift between 4G and 5G.

Operating profit excluding restructuring costs was SEK 6.5 billion, compared with SEK 2.6 billion a year earlier.

Sales for the Networks business area rose to SEK 44.4 billion, from SEK 41.6 billion a year earlier. Analysts on average had expected an increase to SEK 44.7 billion.

The Board of Directors proposes a dividend to the shareholders of SEK 1:50 per share, which can be compared with last year's dividend of SEK 1 per share.

-The signal value in it is positive. But Ericsson is not a dividend company really. It would have been a stronger signal if it had been one of the banks that raised the dividend, says Maria Landeborn.