Next, turning to profitability. In Networks, we expect Q2 gross margin, excluding restructurings to remain solid between 42% to 44%. Sequential changes will be driven primarily by less favorable market mix compared to Q1, which also benefits from higher IPR revenues. As mentioned before, the benefits from recent contract wins in North America will be seen more in the second half. Regarding OpEx, we expect to see the usual seasonality between Q1 and Q2, which over the last three years has been an increase of some SEK 1.6 billion. And finally, the further cost actions announced during the quarter will bring additional restructuring costs, which we anticipate will be in the range of SEK 3 billion to SEK 4 billion in 2024. We are in the early stages of discussions with unions, and we’ll update you on timing once those have been progressed.
With that, I will hand back to you, Borje.
Borje Ekholm: Thank you, Lars. Yes, we are facing a tough market environment, but given that we are laser focused on managing what’s in our control through commercial discipline and the strategic actions we’re taking, of course, including the cost savings initiatives. We’re prudently managing our operations and balance sheet. At the same time, we’re focused on executing on our strategy and keeping investments critical to our long-term transformation and future growth intact. It’s foundational that we maintain our technology and market leadership. We’re also focused on taking important steps to build a stronger Ericsson for the long-term, which will ensure we remain best positioned when the market eventually recovers. In addition to investing in our technology leadership, flexible supply chain and digitalization of Ericsson, we’re investing in Enterprise to help generate the meaningful growth the telecom industry needs, including through our Global Network Platform for network APIs. Creating this new market will take time, but will be a crucial in the next step of driving digitalization of enterprises as well as society.
And our vision to become the leading networks and enterprise platform is unchanged. And as you’ve seen, we’re taking steps to realize these ambitions. With this, I think we are ready to take your questions.
A -Daniel Morris: Right. Thanks, Borje. [Operator Instructions]. Super. So the first question today is going to come from Andreas Joelsson from Carnegie. Andreas your line is now open.
Andreas Joelsson: Thanks a lot. And good morning everyone. Just a little bit curious on the comments into the second half. It seems like you feel that the visibility for the second half is a little bit higher than normal perhaps, given the contract that you have signed. But can you say something more about the rest of North America and the visibility you have on that part? What you build your expectation on the improved stabilization for the second half? That would be great. Thanks.
Borje Ekholm: So Andreas, what we see is in reality a couple of things going on in North America. The first one is really that inventory levels are stabilizing now and our norm kind of at low levels with our customers. And that gives us more comfort. The second thing is, of course, the contract wins that will start to drive meaningful revenues in the second part. And that’s what creates the view that we have — that we should be able to see a potential for stabilization in the second part of the year on sales.
Andreas Joelsson: Could I have a follow-up on that maybe on that contract? What has the reaction been from other large customers based on that open RAN contract?
Borje Ekholm: It’s generating a lot of discussions in the market and basically with all customers that this is — and I think we said that already when we announced, it’s a bit of an industry shaping type of contract where the customer, in this case, looks at the total OpEx envelope and the total CapEx envelope and tries to optimize the investments in revenue generating equipment. So when they look at this, this is starting to drive the similar discussion in many customer interactions. We saw that in Mobile World Congress just a few months ago in the end of February, where this was one of the key discussion items with a number of customers, and we’ll see how we can deliver on that going forward, but it puts us in a very interesting position with very interesting discussions with customers.
Andreas Joelsson: Thanks a lot, Borje.
Daniel Morris: Thanks for the question, Andreas. We will move to the next question. The next question comes from Francois Bouvignies from UBS. Francois your line is now open.
Francois-Xavier Bouvignies: Great. Thank you very much. So my question was on the gross margin, which obviously was strong this quarter and looking at your Q1 outlook as well remaining at high level. So maybe what would be helpful is, can you quantify this cost versus mix versus pricing, in a way, giving more visibility into the gross margin trend? And how should we think about the gross margin, therefore, going forward? Do you have a lot of costs to take out still? And so basically, in other words, the sustainability of this gross margin would be very helpful. Thank you.
Lars Sandstrom: I can start and then you fill in Borje. On the gross margin here in Q1, I think it’s worth mentioning, there is — it is — in basics, it’s — there are no big one-offs. There is one, and that is the IPR agreement that helped the margin a bit in Q1. But otherwise, it’s a fairly stable product and market mix. In some areas, you could argue a little bit weaker on the software product mix side. But what we see is a general improvement in our cost structure, supporting margins and also general improvement in margins in several markets and product areas coming through actually. So it’s — there is no big swings in the quarter from that perspective. So I think it is the cost reductions that you are coming through in a good way.
And also what we mentioned here when it comes to commercial discipline to really focus on profitability in the business that we conduct. And on your question there forward, we don’t guide and we give you an outlook for Q2. What we can say on the second half is that we have somewhat support from the market mix with North America ramping up and India then as a year-over-year comparison coming down somewhat. But that is — that has some impact, but not too much, I would argue still.
