Ericsson executives this week claimed the company’s turnaround effort is complete and many areas of the business are poised for growth amid increased 5G adoption. A few executives, including CEO Börje Ekholm and CFO Carl Mellander, got together in person for the first time in many months to share a detailed update on Ericsson’s market position and its outlook for investors.

“One critical factor, COVID, has been present in almost all discussions during the year. We’ve had 85,000 of our colleagues basically working remotely from early March and this is something we see continuing for another four to six months,” Ekholm said during the presentation.

Roughly 85% of Ericsson’s workforce has been working remotely since the COVID-19 outbreak became a global pandemic. “Like all crises, the COVID situation and the pandemic will result in accelerating already ongoing trends, in this case digitalization. So this will be a factor that will surely impact our society for decades to come,” Ekholm added. 

Well before the COVID-19 crisis hit, Ericsson initiated a turnaround phase in 2017 and during the interim it has reduced its workforce by 20% in net terms, or cut 25,000 jobs, according to Ekholm.

The company’s turnaround effort also began after a 17-year-long bribery scandal involving high-ranking government officials and the falsification of financial documents that spanned six countries. Ericsson reached a $1.06 billion settlement with the U.S. Department of Justice in December 2019, and was formally placed in a three-year monitoring period in June 2020. Current Verizon CEO Hans Vestberg led Ericsson between 2010 and mid-2016 — or six months prior to when these activities were alleged to have stopped — when he abruptly resigned following several underperforming quarters.

Ericsson’s executive team noted that the company’s most recent low period for sales, which resulted in six consecutive quarters of losses through the end of 2018, closely coincided with a decline in research and development (R&D) spending that hit a low of $3.7 billion in 2016. 

The company has since shifted a greater share of its employees to R&D, effectively growing that internal contribution from 20% to 25% of all employees during the last three years, Ekholm said. The percentage of staff working in R&D will continue to grow as Ericsson expects software to drive a greater portion of its overall revenues, but the company declined to state the projected size of those software revenues.

“Our investments in technology have positioned us as a leader in 5G with 116 commercial contracts and 69 live networks. We now have a sound, profitable, and more agile business, and this will enable us to take the next step in our chapter and focus on growth with real confidence,” Ekholm said. Ericsson invested $4.6 billion in research and development (R&D) during the last year.

The Swedish vendor also drew a straight line from those increased R&D investments to third-party research that identifies Ericsson as the largest contributor to standard essential 5G patents, followed (in order) by Samsung, Qualcomm, Nokia, Huawei, LG, ZTE, Intel, and Sharp. 

Ekholm also argued that Ericsson’s position in the U.S. market is strengthening, having recently gained market share “due to the technology position we have in our very competitive portfolio, and that traces its roots back to the investments we make in R&D.” Ericsson earned those gains on the strength and better cost position of its radio access network (RAN) equipment portfolio, he added. 

Pointing to its own estimates and research from Dell’Oro Group, Ericsson said its RAN market share in North America grew from 48% in 2018, to 53% in mid-2020, on a rolling annual basis. Executives said they are confident Ericsson will outgrow the market on a baseline sales basis by at least 1% through market share gains, growth in 5G enterprise and IoT, and merger and acquisition (M&A) activity.

The company aims to increase its footprint in its core business units — Networks, Digital Services, and Managed Services — while fueling growth in Emerging Business, which focuses on the enterprise sector, due in part to its recent $1.1 billion acquisition of Cradlepoint.

“All four business areas are really supporting the business opportunity here because enterprises need a combination most likely of the characteristics given by local or on-prem solutions as well as wide area solutions, and that’s where the strength of the broader portfolio is addressing enterprise needs across the world,” Ekholm said.  “We’re gradually building up a portfolio here. This is an investment area where we can see that we actually grow our investments over time. That will include M&A as well. … Here you will see us look for both organic as well as inorganic growth.”

Ericsson has previously valued the addressable global enterprise opportunity for mobile operators at $700 billion by 2030, and $183 billion of that value resides in North America, according to Niklas Heuveldop, Ericsson’s SVP and head of the North America market. 

Åsa Tamsons, SVP and head of business area technologies and new businesses, said Ericsson’s “strongest go-to-market channel (for enterprise) is the service providers and we see that several of our service providers are now investing to go after the enterprise market.”

However, due to the specialized nature of enterprise connectivity requirements, Ericsson needs to develop closer relationships with operators and enterprises to ensure the installation process and use of Ericsson’s gear and services deliver desired business outcomes, Tamsons said.