Telefonaktiebolaget LM Ericsson (publ) Stock

Telefonaktiebolaget LM Ericsson (publ) (Ericsson) supplies communication infrastructure, services and software to the telecom industry and other sectors.

Segments

The company operates through four segments: Networks, Digital Services, Managed Services, and Emerging Business and Other.

Networks

Networks offers a multi-technology capable Radio Access Network (RAN) solution for all network spectrum bands, including integrated high-performing hardware and software. The offering also includes a transport portfolio through own solutions and partnering, an integrated antenna solution and a complete service portfolio covering network deployment and support. In Networks, the company provides hardware, software and services for its customers to build and evolve their mobile networks.

Networks business is primarily based on a transactional model, where Ericsson develops, sells, licenses and delivers hardware, software and services. Networks business also includes recurring revenue streams, such as customer support and certain software revenues.

Digital Services

Digital Services provides software-based solutions for business support (BSS), operational support (OSS) communication services, core networks, and cloud infrastructure. The focus is on cloud native and automation solutions supporting the company’s customers’ 4G (Forth generation mobile systems, also known as Long-Term Evolution (LTE)) and growing 5G (The fifth generation of mobile systems. An evolution of 4G/LTE) consumer and enterprise business. Digital Services is a software led business supporting its customers as they move to a cloud native environment, providing solutions for its customers to operate, control and monetize their mobile networks.

Digital Services develops, sells, and delivers solutions, based on software and services. The contracts are typically software license and systems integration based. Digital Services business includes recurring revenue from software licenses and support.

Managed Services

Managed Services provides Networks and IT Managed Services, Network Design and Optimization, and Application Development and Maintenance to telecom operators. These are delivered through the AI-driven Ericsson Operations Engine, a set of capabilities that transform operations to enhance customer experience, drive agile service creation and optimize costs in multi-vendor environments. With its Managed Services offering the company operates its customers’ networks. The company’s Artificial Intelligence (AI) and data-driven Managed Services offering, proactively manages telecom operator networks.

Ericsson Operations Engine Base Pack contracts are typically multi-year outsourcing agreements. Value Pack contracts are part of an outsourcing agreement or sold stand-alone to telecom operators. Software is sold either as a license or aaS (as-a-Service).

Emerging Business and Other

Emerging Business and Other supports enterprises by providing reliable and secure cellular solutions that are easy to use, adopt and scale for global and local needs. The segment includes Emerging Business, including IoT (Internet of things, interconnection of computing things enabling them to send and receive data), iconectiv, Cradlepoint and New businesses; and Media businesses, including Red Bee Media and a 49% ownership of MediaKind. In Emerging Business and Other it explores how the company’s customers can leverage connectivity in order to create new revenue streams and new types of businesses within the enterprise segment. Emerging Business and Other is mainly a platform business with aaS (as-a-Service) as the business model.

Market Areas

The market areas are the company’s primary sales channel with the responsibility to sell and deliver customer solutions. The company operates worldwide and reports its operations divided into five geographical market areas, such as Europe and Latin America; the Middle East and Africa; North America; North East Asia; and South East Asia, Oceania and India.

In addition, Intellectual Property Rights (IPR) licensing revenues and the majority of segment Emerging Business and Other are externally reported as market area Other.

The company’s market is divided into five geographical market areas. The market areas are responsible for selling and delivering products and solutions that are developed in the company’s segments.

Major Customers

The company derives most of its sales from large, multi-year agreements with a limited number of significant customers. Out of a customer base of more than 500 customers, mainly consisting of network operators, the ten largest customers accounted for 49% of net sales. The largest customer accounted for approximately 13% and the second largest customer accounted for 9% of net sales in 2021. These customers were reported under segment Networks, Digital Services and Managed Services.

Research and Development

In 2021, the company’s research and development expenses amounted to SEK -42.1 (-39.7) billion.

Seasonality

The company’s sales, income and cash flow from operations vary between quarters, and are generally lowest in the first quarter of the year and highest in the fourth quarter (year ended December 31, 2021). This is mainly a result of the seasonal purchase patterns of telecom operators.

Acquisitions

On March 31, 2021, the company acquired assets from Axonix, a U.K. based mobile-first programmatic advertising exchange.

On November 17, 2021, the company acquired selected assets from Quortus, a U.K.-based company with expertise in enterprise 4G/5G technology. The acquisition augments the company’s offering with richer 4G/5G networking features across its portfolio of enterprise products.

History

Telefonaktiebolaget LM Ericsson (publ) was founded in 1876. The company was incorporated in 1918.