Ericsson’s most recent earnings did not surprise as the telecommunications equipment vendor posted modest results to start the year and forecasted continued headwinds through at least mid-year.

CEO Börje Ekholm told investors that the first quarter was “challenging” for the vendor due to “slower deployment pace in some early 5G markets,” which was further impacted by catching up on past supply chain bottlenecks. This impact is expected to continue through the next couple of quarters.

“This has, of course, been compounded with the fact that customers in those markets are lowering their inventories,” Ekholm explained. “So that's the reason the impact on our sales is bigger than the slowdown in the underlying deployment phase. We will continue to see inventory adjustments during Q2, but we expect less impact after that, but there could be some smaller effect during Q3.”

More broadly, Ekholm noted that operators were balancing the need to bolster their network capacity to deal with growing demand against “macroeconomic uncertainty facing our customers, energy cost, it's inflation, it's a lot of different issues.”

It should be added that Ericsson has been warning of this challenge, dating back to a broad corporate restructuring initiated early last year and reiterated during its Capital Markets Day late last year.

The vendor during the most recent quarter also announced plans to slash 10% of its workforce in its home country of Sweden, which was followed by an announced 8,500 job cuts across its global operation. The vendor counted approximately 105,000 employees worldwide before the cuts.

Ericsson during the quarter also pled guilty and agreed to pay more than $206 million in fines to settle on a long-standing investigation by the U.S. Department of Justice (DoJ) tied to bribery allegations across its operations in a number of countries that may have involved payment to a terrorist organization in Iraq.

Ericsson is also waiting to see a return on its enterprise focus. Ekholm noted the vendor was still in investment mode, specifically citing its Enterprise Wireless Solutions and Cradlepoint businesses.

The executive explained that Cradlepoint’s current subscription model results in deferred profits reported on a monthly basis, which leads to an initial “negative impact” on earnings. As that business grows it will continue to “generate a loss for accounting reasons,” but long term Ekholm said it has a “very attractive profitability profile.”

Ericsson’s private wireless business is working through a similar investment period that is impacting profitability.

“We are starting to see some very interesting use cases for our dedicated networks in manufacturing, but I would still say that's a rather early market and not particularly big yet,” Ekholm said.

Ericsson rival Nokia is more bullish on that opportunity, with its CEO Pekka Lundmark recently stating he expects the enterprise market to grow at an overall 8% compound annual growth rate (CAGR) through 2027, with a more significant 27% growth CAGR tied to the private wireless space.

The Nokia exec said the vendor wants to increase its enterprise-derived revenues from around $2 billion last year, or just 8% of Nokia’s total revenue haul, to “double-digits as quickly as possible. And that double-digits I see as a floor rather than a ceiling,” Lundmark clarified.

Ekholm said the vendor remained on track with its revised Cloud Software and Services strategy. Ericsson during its Capital Markets Day announced a new strategy for its cloud business that will see the vendor limit “subscale software development, accelerating automation to lower deployment and maintenance efforts, and changing focus from market share gains to profitable business.”

“So while results would vary between quarters, we are on track to reach our target of breakeven in 2023,” Ekholm stated during the most recent earnings call.

Ekholm also said he expects Ericsson will start seeing revenues later this year from its network API efforts, noting that topic gained significant momentum coming out of the recent MWC Barcelona 2023 event.

The vendor has repeatedly noted that potential was behind Ericsson’s controversial $6.2 billion purchase of Vonage Holdings.

“Like all new markets, it will take some time to build this new market as well, but we believe it can actually develop faster and grow bigger than the market for traditional communication APIs, and it will position Ericsson for a long-term growth and profitability,” Ekholm said.

Ericsson added that it will have a different person overseeing that long-term financial opportunity as CFO Carl Mellander is set to leave the company by this time next year. Mellander has been at the company for seven years, with Ekholm describing the move as a “mutual agreement.”

“It's a good time or as good as any for a change at Ericsson as we continue. I'll call it a next chapter in our strategic journey,” Ekholm said. “I'm, of course, very happy that he will stay on in his role until the end of Q1 next year. And, of course, that will ensure that we can execute on our cost savings but also a smooth transition.”