Ericsson core profit beats forecast, patent fight casts shadow

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Sweden’s Ericsson on Wednesday reported first-quarter core earnings above market estimates as strong sales of 5G equipment offset a loss of royalty income due to a patent fight with Samsung Electronics .

The company’s quarterly adjusted operating earnings rose to 5.3 billion Swedish crowns ($627.9 million) from 4.6 billion a year ago, beating the mean forecast of 5.0 billion crowns, according to Refinitiv estimates.

Total revenue for the telecom equipment maker, a rival of China’s Huawei Technologies Co Ltd and Finland’s Nokia , stood at 49.8 billion, unchanged from last year.

The company’s revenue took a hit in the quarter due to the fight with Samsung Electronics over royalty payments and patent licenses.

“Networks sales grew organically by 15%, despite a decline in IPR licensing revenues,” CEO Borje Ekholm said in a statement. “This growth is reflecting continued high activity levels in all market areas, except in the Middle East and Africa.”

Intellectual Property rights (IPR) or patent licensing revenue fell to 0.8 billion crowns in the quarter from 2.5 billion a year earlier.

Ericsson had earlier warned that delayed royalty payments and potential legal costs could reduce its operating income by 1-1.5 billion crowns ($118-$177 million) per quarter, beginning in the first quarter.

KPN NV, the largest Dutch telecommunications company, and an Ericsson customer has also filed a patent-infringement complaint against the company.

Patent disputes are common technology companies and can go on for years but any halt in payments could be recouped once the dispute is resolved.

Nordic rival Nokia, however, has settled patent disputes with Samsung and PC maker Lenovo Group in the past two months. 

Photo: Ericsson’s flag at the company headquarters in Stockholm, Sweden . EPA-EFE/JONAS EKSTROMER

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