There’s a First for Everything

Ericsson Finally Joins the Buyback Club

So Ericsson just crushed their fourth quarter numbers and decided to celebrate by doing something they've literally never done before - buying back their own stock. The Swedish telecom gear company made 12.7 billion kronor (about $1.4 billion) in adjusted EBITDA, which was way better than the 10.5 billion kronor that analysts were expecting and a solid 24% jump from last year. Pretty impressive considering the whole telecom equipment industry has been having a rough time because everyone thought 5G would be this huge money maker, but operators just haven't been spending like crazy on network upgrades.

The thing is, Ericsson has been playing some serious hardball with costs to make these numbers work. They've been laying people off left and right - about 5,000 jobs were slashed globally last year and now they're planning to axe another 13% of their Swedish workforce. CEO Borje Ekholm basically said they're going to keep this cost-cutting train rolling through 2026 because, well, someone's got to pay for all those "elevated" restructuring charges. It's tough, but it's clearly working since their margins are looking healthier even though sales actually dropped 5% to 69.3 billion kronor.

Investors were apparently thrilled with all this because Ericsson's stock shot up 12% to 96.28 kronor, essentially evaporating a whole year's worth of losses in one day. The company's feeling flush enough to hand out a three kronor dividend (though analysts were hoping for more like 3.76 kronor) and throw up to 15 billion kronor at that historic buyback program. They have extra cash sitting around after selling off their Iconectiv business, so why not give some back to shareholders, right?

Now here's where it gets interesting: Ekholm is betting the farm on AI being the next big thing that's going to save everyone's bacon. He's talking about how all these new AI gadgets like drones and those fancy Meta AI glasses are going to need tons of network capacity and he's positioning Ericsson to be the go-to guys for "AI enabled networks." His take is that AI and connectivity are going to be "the fabric of the future," which sounds pretty sci-fi but could be where the money is.

The reality check, though, is that the bread-and-butter radio access network market is going to be flat as a pancake this year. So Ericsson is looking for growth in enterprise stuff and "mission critical" markets. They're even getting into defense because seemingly that's where the action is these days. Nokia is doing the same thing (time to dig out that random cord from that box in the closet). CFO Lars Sandström put it pretty bluntly: they're living in "a world with a flat RAN market" and they have to get more efficient to deal with inflation and rising costs.

What's kind of funny is how differently Ericsson and Nokia are playing the whole European tech independence game. While Nokia is trying to be Europe's favorite alternative to American and Chinese tech companies, Ekholm actually thinks Europe's push for "tech sovereignty" is "dangerous.” At least that’s what he said at that fancy Davos conference. Meanwhile, Nokia got a billion-dollar investment from Nvidia and completely reorganized around AI networking. Different strategies, but hey, at least Ericsson's approach seems to be working for now based on these numbers.

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