Ericsson reported generally positive financial results for the first quarter of 2021, and hinted that it was seeing a potential windfall from 5G and enterprise applications.

The vendor reported that net income jumped 39% year over year to $380 million during its most recent quarter. The company’s radio access network (RAN) business, which pulled in almost 73% of all sales during the quarter, increased by 3% to $4.3 billion.

Sales slid 6% in Ericsson’s Digital Services unit to $820 million and declined 15% in Managed Services to $582 million. The company’s Emerging Business unit, which includes the recently acquired Cradlepoint business, reported revenue growth of 11% to $202 million during the quarter. Total Q1 revenue was flat year over year and landed at $5.92 billion.

Ericsson, which continues to invest heavily in 5G research and development and a more diversified supply chain, has inked 136 commercial 5G contracts and has its equipment and services running in 85 live 5G networks in 42 countries, according to CEO Börje Ekholm.

“2021 is overall an investment year for us, possibly more so in Digital Services, so here we’re increasing the investments we do in [research and development] to have a competitive 5G cloud-native portfolio,” Ekholm told investors during the earnings call, according to Seeking Alpha transcript. 

“We're also seeing a very strong development, strong demand for 5G and enterprise applications. We're convinced here that the 5G cycle is going to be a different cycle than the traditional, or more call it consumer-driven cycle, that we've seen in the past,” he said. “We believe the 5G cycle will be both longer and bigger due to entering a complete new application area with enterprise applications.”

In the enterprise sector, Ekholm noted progress in 5G IoT and continued integration with Cradlepoint, which sells edge devices to enterprises for private wireless networks. 

North America remained Ericsson’s largest market, but sales in the region declined 5% year over year to $2 billion. The vendor did ink a five-year 5G RAN deal with T-Mobile US early in the quarter. 

Sales in Europe and Latin America, which the vendor groups together, were up 3% to almost $1.5 billion. Sales in Southeast Asia, Oceana, and India increased 13% to $796 million, jumped 66% in Northeast Asia to $772 million, and slid 25% in the Middle East and Africa to almost $532 million.

“We see a very strong market development overall,” Ekholm said, adding that Ericsson expects the market to grow at a higher rate than recent analysts reports suggest. Most of Ericsson’s growth of late can be attributed to market share gains in multiple regions, he said. 

Competition will be tough in the short term, but the industry dynamics will improve down the line, according to Ekholm. “It’s interesting to look at the consolidation in the market. That was clearly the case with other vendors that have reached way beyond 50% market share in many countries, for example in Europe and around the world,” he said. “I don’t see where that limit really is on market share. I don’t think we’re there yet, but at some point in time it will be there for sure.”

Gartner’s latest magic quadrant for 5G network infrastructure and communications service providers placed Ericsson at the top of the pack, beating out Huawei and Nokia, with the highest marks for its execution ability and completeness of its vision. 

Ericsson, during the quarter, released network slicing software for 5G operators and revealed a trio of massive multiple-input, multiple-output (MIMO) 5G radios for mid-band spectrum that will start shipping later this year. 

Ekholm also noted that “there is substantial human suffering in the wake of the pandemic” and “societies have closed down impacting the economy,” but the COVID-19 crisis has also accelerated digitalization activities globally. “We’re, of course, very encouraged to see the process here of building out strong coverage in the world where we are a key contributor,” he said, adding that Ericsson is hopeful that recovery programs will further hasten investment in mobile broadband upgrades.

Ericsson’s leaders also hinted at yet-to-be-realized opportunities to permanently reduce costs as a result of the pandemic. The company’s office spaces have been mostly empty for more than a year and in-person work will likely be lower after the pandemic ends, Ekholm said. “When you think about cost structures and cost levels, there are many opportunities and lessons learned from this period that we can actually reduce the run rate going forward. That’s not happened yet.”

CFO Carl Mellander said it’s still unclear when or how quickly travel activities will resume in stride, but Ericsson’s employees will “continue to work from home during the rest of the year and we will not be resuming traveling as it looks right now.”

Ericsson last month announced that it would not be attending the upcoming MWC Barcelona event scheduled for late June due to ongoing health concerns tied to the COVID-19 pandemic. The move is similar to its decision last year that eventually saw event organizer GSMA pull the plug on the mega-event. This year's event is still pressing ahead using a hybrid attendance model.

Even when in-person business activities resume, travel will be lower than it was prior to the pandemic, Mellander explained. “We have learned so much in how to interact both with customers and internally,” he said. 

Ericsson ended Q1 with 101,113 employees.