STOCKHOLM: Sweden Ericssonin the shadow of bribery investigations, Thursday reported a rise in core revenues in the second quarter but missed expectations as higher component and logistics costs hit margins.
Rising inflation, a chip shortage and the Russian invasion of Ukraine led to increased costs, pushing gross margin down from 43.4% to 42.1%. The results were also affected by patent litigation, including one with Apple, which plunged revenues by 0.9 billion kroner.
Ericsson’s total quarterly revenue increased from 54.9 billion to 62.5 billion kronor, surpassing estimates of 61.45 billion kronor.
“The situation in the global supply chain remains challenging … resulting in cost increases that we are trying hard to reduce as far as possible,” CEO Borje Ekholm said in a statement. “When contracts expire, we aim to adjust prices.”
The company is also battling the fallout from a bribery scandal in Iraq that led to the US Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) opening investigations against the company.
Ericsson said Thursday that it is working with the DOJ and SEC regarding the Iraq investigation, and that the outcome of the cases cannot be assessed at this time.
Despite the distraction, Ericsson was able to sell more 5G equipment as telecom operators race to upgrade their networks in no time, benefiting the company and its Scandinavian rival Nokia †
Ericsson’s adjusted operating income rose to 7.3 billion Swedish kronor ($689.28 million) from 5.8 billion a year earlier, missing analysts’ average forecast of 8.01 billion, according to data from Refinitiv.
($1 = 10.5908 Swedish Krona)