Ericsson and rivals grappled with a weak telecom equipment market as operators postponed expensive network upgrades. This prompted companies like Ericsson to adopt cost-cutting measures and pivot to markets like the U.S. and India.
Below are key drivers of Ericsson's value that present opportunities for upside or downside to the current Trefis price estimate:
For additional details, select a driver above or select a division from the interactive Trefis split for Ericsson at the top of the page.
Sweden-based Ericsson provides communication infrastructure, services, and software solutions to the telecom and other sectors. It operates through four segments: Networks, Cloud Software and Services, Enterprise, and Other.
Accounting for over 65% of Ericsson's overall revenues, Networks is the dominant division for the company. It is dominated by the Wireless division offering mobile communication equipment, including 3G and 4G/LTE solutions. Ericsson occupies the top spot in the global Wireless equipment market with about a 30% market share. It is positioned well to benefit from this $40 billion market over the short- to medium-term. The other products offered under this division are the fixed-line products for copper and fiber, microwave backhaul systems, and modems.
Cellular Internet of Things connections running on 5G have surpassed 4 billion by the end of 2024, representing approximately 22% of global overall IoT connections. Ericsson is betting on next-generation technology to drive growth after posting mixed results over the last few years amid intense competition from Chinese equipment manufacturers and weaker spending by wireless carriers.
Ericsson's mobile equipment modernization drive in Europe is likely to improve profitability due to increased efficiency and lower costs. Also, a gradual shift from coverage projects to capacity-building projects is being done by the company. Increasing coverage in Asia, Europe, and Latin America has come at the cost of margins in the past couple of years, but as it reaches completion in the near term, profitability is expected to rise, which will help counter the stiff competition being provided by Chinese manufacturers such as Huawei and ZTE.
There has been an industry-wide shift in demand from hardware networking solutions to software-based ones in the long run. This poses an interesting challenge to traditional hardware-based players such as Ericsson, Cisco, and Juniper. However, Ericsson is showing adaptability with its increased focus on software and support solutions, where it is competing with many small and local service providers.
