Ericsson Capital Markets Day Part Two:
Networks summary: When asked how it took market share (North American has 53% share 2Q20, up 5% vs 2018), management pointed to having made more significant R&D investments in radio than competitors. It cited Dynamic spectrum Sharing and its cost-efficient radio-related ASICs as examples of valuable features to customers.
The company expects O-RAN will continue to evolve, with limited uptake starting in 2023. Cited IPR challenges as one challenge. Elsewhere in the presentation, it said it is #1 contributor to 5G standards; we take it that this IPR gives Ericsson leverage to slow ‘O-RAN’ down.
The team said the split of Digital services for T4Q 3Q20 as (excluding IPR, consulting, and learning services):
• BSS 20%
• OSS 25%
• Comm services 15%
• Packet core 20%
• Cloud and NFV infra 10%
The Digital Services team has:
• addressed 37 of the 45 ‘critical and non-strategic’ projects
• revised its BSS strategy, and it is now 5G focused
• 75% of its portfolio exposed to growth as of 3Q20 sales
• Cloud infrastructure has 200 customers
• 5G Cloud core has 80 customers (includes “5G” EPC and 5GC SA contracts). Packet core should grow faster than the others
• 5G SA count is now at 30. 5G SA revenues should begin in 2021 from most of these contracts.
• BSS has 120 contracts, 9 of which were competitor swap-outs
• Orchestration has 100 customers
Dig Services software + support in T4Q 3Q20 was about 55% of total revenues, and it expects 60% by 2022. It has about 40% recurring revenue T4Q 3Q20 and expects it to be about 55% by 2022. Expects Japanese and Korean operators to deploy SA by the end of 2021; expects Japanese 5G market to ramp very soon because it is a heavy user of iPhones. It expects 600K 5G base stations in China in 2020 and the same number in 2021.
Emerging Markets Summary:
Recently acquired Cradlepoint has > 60% GM and a recurring revenue SaaS model. 200K enterprises, 3,000 public agencies, 1,500 channel partners. It has won 30 dedicated network deals.
Huawei had record European revenue in 2Q19 for the Ethernet Switch market.
Both Data Center Switching and Campus Switching showed strong performance in Europe in the quarter despite the ongoing trade war. On an overall basis, Huawei’s Ethernet Switch results were flat Y/Y. China results for the company were down slightly Y/Y, but we note significant competition in China from local companies like H3C, Ruijie, Sundray, as well as several others.
With over a dozen vendors reporting results already, Europe has performed inconsistently. A little more half of the vendors grew Y/Y while the rest had Y/Y declines. While we expect Europe to fluctuate, especially with vendors have unique country and deal exposure, the results are unique and imply interesting share results for the region when we publish the 2Q19 report.