What's Going On With Ericsson Shares Today?

Telefonaktiebolaget L M Ericsson ERIC disclosed recording a non-cash impairment charge of SEK 32 billion in Q3 2023.

The impairment charge, which accounts for 50% of the goodwill and other intangible assets related to Vonage, will be reported in the segment Enterprise as an item affecting comparability.

Related: Ericsson To Acquire Vonage At 28% Premium

The impairment is due to a strong decline in the market capitalization of Vonage's publicly traded peers, higher interest rates and a slowdown in Vonage's core markets. 

Notably, Ericsson continues to accelerate its enterprise strategy, with Vonage's network API capabilities being the core focus and developing a Global Network Platform (GNP) for exploring 5G capabilities through network APIs, with the market opportunity estimated at $20 billion by 2028. The company expects the first revenues from network APIs during 2023.

Q3 earnings: The company's Q3 performance is expected to be at par with guidance, with an EBITA margin (excluding restructuring charges) of 7.3% and EBITA of SEK 4.7 billion (-39% Y/Y). 

Group organic sales (adjusted for comparable units and currency) fell 10% Y/Y, with an organic decline of 16% Y/Y in its Networks division. This was offset by organic growth of 5% Y/Y in Cloud Software and Services and 10% Y/Y in Enterprise.

Network organic sales fell 60% Y/Y in North America (vs. record results in Q3 FY22) due to operators lowering their capital spending and modifying inventories.

The company projects an EBITA excluding restructuring charges of SEK 0.4 billion in Q3, with Cloud Software and Services attaining break-even on a four-rolling quarters basis.

Ericsson sees FCF before M&A of SEK (0.5) billion, owing to the build-up of working capital for the large roll-out projects.

Also Read: Tech Giants Ericsson And Huawei Pioneer The Future With Renewed Patent Pact In 5G Era

Ericsson will release Q3 2023 results on October 17, 2023.

Price Action: ERIC shares are trading higher by 7.45% at $5.05 premarket on the last check Thursday.