Ericsson aims for margin jump beyond 2022 as it sets new targets

STOCKHOLM: Sweden's Ericsson is targeting an operating margin (EBITA) excluding restructuring charges of between 15% and 18% beyond 2022, it said ahead of Tuesday's capital markets day.

The telecom equipment maker has benefited from the global deployment of 5G technology just as diplomatic pressure from the United States is pushing out market leader Huawei from more countries in regions such as Europe.

"Growth as well as gross margin improvements, driven by software sales and operational leverage, will be the cornerstones in reaching the long-term targets," the telecoms gear maker said in a statement.


The company, which maintained its 2022 operating margin target of 12-14%, excluding charges, boosted its margin forecast from its networks business as telecom operators across the world upgrade to next-generation 5G technology.

Ericsson had "offered what appears to be very strong margin progression" with its new long-term guidance, analysts at Cowen Equity Research said.

The 2022 operating margin target for Networks was raised to 16-18% from 15-17%. On the flip side, it reduced its margin target for its digital services business to 4-7% from 10-12% in 2022.

The firm, which had an operating margin (EBIT) of 11.1% for the January-September period - on track to reach its previous margin target of at least 10% in 2020 - also set a new target of long-term free cash-flow of 9% to 12% of sales.