Francois Bouvignies: Good morning, everyone. So I have two quick questions. The first one is on the software mix that impacted the quarter. Obviously, a good impact on margins. And I was looking at your reporting, you said that you had 38% of revenues from hardware, 22% in 2023, which indeed is higher than the last 3 years of reports where hardware was more than 40% of revenue. So it seems that 2023 was a bit more favorable in terms of mix, software versus hardware versus the last 3 years. But then I was looking back like beyond or before the last 3 years. So the last 10 years, and I was surprised to see that the hardware percentage and software percentage is actually in line with what you reported in 2023. And I was only thinking that your business would be more software and service intensive as we move forward because you always said that software and it’s more important in the coming technologies.
So how should we think about the mix in 2024, if – or maybe even longer term because I don’t see much change in the last 10 years, and that would be very interesting to know how we should think about that or any fundamentals behind? And the second one – second question, if I may, on Vonage. I mean you mentioned this contract loss that impacted the quarter. Can you provide a bit more color about what’s going on here? How can you reassure about the offering of Vonage because 2 percentage growth is well below what you expected originally. So I was wondering if there is anything you can provide in terms of color here? Thank you.
Börje Ekholm: I think on the – if we start a bit on the software mix. So what you see, depending on where you are in the cycle, you will have more hardware sales and thereby less software. And that’s really what you see in 2023. It was a rather sharp reduction in hardware volumes. That’s actually impacting the mix more than kind of any structural change. But that has been the case in almost all or it has been the case in previous cycles as well. So you see this shifting over time depending on where you are on rollouts. And remember, it’s still only one in three or maybe one in four even sites that are upgraded to 5G mid-band and that’s actually ultimately going to require hardware. So it’s a bit tricky to put exactly a number.
But with what you’re going to see with the separation of hardware and software going forward, you will see the hardware portion come down. It’s not going to be – happen from one quarter to the next or the year to the next. But this is over a period of time as the new technology stack will be implemented, making us more focused towards the software side basically. So I would say that longer term, the portion of software is going to increase and the portion of hardware is going to decrease for that reason more than anything else.
Carl Mellander: And I complement that also, of course, as you said, we’re in build-out phases, of course, hardware grows as well. And that is, of course, a good thing because that has to do with building footprint with the operators, shipping our hardware, installing it in the field. And then, of course, software comes on top of that installed base. So we are also happy, of course, with high hardware sales in these phases. So no question. And also, I would say, over the years, the margin delta between software and hardware has also been reduced because now we have a very competitive hardware portfolio as well. So we should also…
Börje Ekholm: No, we should say that…
Carl Mellander: And a lot investment…
Francois Bouvignies: Typically…
Carl Mellander: A lot of the investments we did in R&D, if you go back a few years, it was actually to make sure we had a very – or less sensitivity to the mix between hardware and software. So – and that’s why where the increased hardware portion that you saw the last few years actually could still generate a very solid gross profit.
Börje Ekholm: Exactly.
Francois Bouvignies: And on 2024 directionally – directionally 2024? Is it – what visibility do you have? Is it like more hardware or more software year based on your activity and orders?
Börje Ekholm: I would say the longer-term trend is towards more software as per given how the networks will be built and so on. 2024, we’ll have to see how it plays out. But maybe to mention one aspect that could play in, and that’s the inventory buffering we saw in North America. And as you know, that’s one of the reasons why we have shipped less hardware also in 2023 is that the carriers in the U.S. have depleted their buffer inventory of radio equipment. Now we have reached, of course, a level which we believe is the normalized inventory level. So that could bode well for additional hardware deliveries. But I think it’s fair to say that the volume decline we see is quite a lot in hardware side of course.
Peter Nyquist: And then you had a question, Francois, about the development in Vonage, maybe?
Börje Ekholm: The Vonage, it’s – the mentioned contract is actually a very low-margin contract. So from a profitability point of view, less impact.
Francois Bouvignies: Any reason why – I mean, contract loss, I mean just to give colors and do you still expect to grow double-digit percentage after this normalization of contract loss or…
Börje Ekholm: No. Our – I mean, we have to come back on thinking about what is the rationale behind Vonage, what we are trying to do. We’re – of course, we have an existing business that we need to run, which is the CPaaS, UCaaS CCaaS business. That needs to develop as well. And – but we also have said that we want to prioritize higher-margin product offerings within that suite. But the real strategic area that we’re actually working on is to develop the market for network APIs and with the ability to expose the capabilities of the network in a new way. That is where we are 100% focused on while trying to maintain the existing business. This was one where, of course, it had an impact on the sales number, but we didn’t feel it was strategic for us. And therefore, that didn’t – was not a critical contract for the success of the business, but it did impact top line.
