Ericsson’s years-long turnaround is effectively complete, but its growing business in China could be in peril, CEO Börje Ekholm said today on the company’s fourth quarter of 2020 earnings call. 

“From 2017 at the start of our turnaround to today, if you do a like-for-like comparison, our gross margin has increased from 29% to 42%,” he said, according to a Seeking Alpha transcript. “We continue to execute on the turnaround plan and our operating income for Q4 was positive and that actually is the best result we've seen to date, which we view as an indication that our turnaround is on track.”

The company’s revival, which it pinned largely on the rise of 5G and increased investment in research and development, has made Ericsson’s portfolio more competitive and cost efficient, according to Ekholm. “This has allowed us to gain market share in many markets, and we actually see market share gains from all competitors today,” he said. “We exceeded our year-end financial targets for 2020 as well as our targets for 2022 about two years ago.”

Ekholm pointed to gains in China, North America, Southeast Asia, and India as a measure of its performance and attractiveness with global operators. He also addressed Ericsson’s potential exposure in China, the company’s fastest-growing market, warning that retaliation against non-Chinese vendors could limit or outright ban Ericsson’s business in the world’s largest 5G market.

The company also gained market share in Europe, but 5G rollouts in Europe have been limited and “we are a bit concerned that Europe is falling behind the frontrunners in China, Australia, North America, and the Middle East,” he said. 

“There are a number of countries around the world where we have strengthened our position and that makes us see that we gain that footprint,” Ekholm said, adding that the radio access network (RAN) market is still competitive. “It’s no way granted that everything will go to us, but we can see that we are having a disproportionate win ratio.”

The Swedish vendor’s Cloud RAN portfolio, which it revealed in October 2020, is also gaining traction with operators and is expected to start generating revenues in the next 12 to 18 months, according to Ekholm. 

Ericsson has now inked commercial 5G contracts with 127 operators and its 5G technology is actively deployed in 79 live networks. That’s a 9% increase in 5G contracts and 14% jump in live 5G deployments since the company provided its latest update in early November.

The vendor’s approach to open RAN, or the disaggregation of hardware and software, is more mixed than some of its competitors, and Ekholm reiterated that Ericsson views it as a relatively narrow and more long-term opportunity. Factors including speed to market and price-to-performance considerations reinforce the vendor’s belief that integrated offerings will continue to comprise the majority of network deployment activities, he explained. 

“We don’t see it really ready for prime time except for some low-performance applications or segments in the market,” Ekholm said. 

Ericsson banked net income of $863.6 million, up 60% year over year, on $8.34 billion in revenue, which was up 5% from the year-ago period. It also closed on its $1.1 billion acquisition of Cradlepoint during the quarter. 

Networks sales jumped 11% year over year to $5.92 billion, generating about 71% of Ericsson’s total revenue during the quarter. Digital Services revenue slid 4% to $1.52 billion, Managed Services declined 17% to $695.7 million, and Emerging Business revenues were flat at $203.9 million.

Ericsson ended 2020 with 100,824 employees, including 709 employees that joined the company through the Cradlepoint acquisition. The company’s total workforce, most of which Ericsson expects to work remotely through at least March, grew by 1,407 employees during 2020.