Ericsson says witnessing growth opportunities in 5G enterprise segment, to further invest in R&D this year

Swedish telecom equipment maker Ericsson said that the company will continue to invest in R&D in 2021 and is witnessing good growth opportunities in 5G, especially in the growing enterprise sector.

“Our strategy remains in place, but we see great growth opportunities in the enterprise segment, which is why we have expanded our strategy with investments in enterprise applications. In the same way that 4G made it possible to digitalize the consumer market, 5G will digitalize the enterprise sector,” said Börje Ekholm, President, and CEO, Ericsson at the Shareholder Dialogue 2021 event.

In 2020, Ericsson forayed into the enterprise market by acquiring Cradlepoint Cradlepoint’s solutions enable companies to connect sites, vehicles, remote workforces, and IoT devices using cellular networks.

For the full year 2020, Ericsson logged an organic growth of 5.1%, a gross margin of 40.3%, an operating margin of 12%, and FCF before M&A amounting to SEK 22.3 billion, marking 2020 the strongest free cash flow in the company’s history.

Ekholm noted that the company’s focus will be on driving growth, investments in market share to ensure scale, but it will also be eyeing emerging opportunities in the enterprise segment.

He further said that Ericsson will be investing in 2021 to strengthen its position in the market but expects margins to be hit by lower patent licensing revenues due to important contract renewals, the acquisition of Cradlepoint, and investments in the business.

Over the past years, Ericsson has increased its R&D investments by almost SEK 10 billion, and today more than a quarter of Ericsson’s employees work within the R&D.

“However, these are not costs, but rather investments to strengthen our position. We’re taking half a step back in order to be able to accelerate,” he said.

Ekholm highlighted that the year 2021 will continue to see strong 5G rollouts, carrying the momentum created during the last year.

Based on assessments made by Ericsson, there were around 220 million 5G subscribers at the end of 2020 compared to 12 million in 2019.

The chief executive said Ericsson announced 44 5G contracts and closed the year with 122 commercial agreements and 79 live 5G networks globally, while it had more than 57,000 granted patents for cellular technology.

However, he raised concerns that Europe lags far behind both the U.S. and China when it comes to the 5G rollout.

Despite the challenges posed by the COVID-19 pandemic in 2020, Ekholm said the company recruited 10,000 new employees. “Despite these challenges, we managed to execute on our strategy and deliver to our customers!” he said.

He further said sustainability continues to be an integral part of Ericsson’s strategy and the company aims to become carbon neutral in 2030.