Teleca divests remaining product business & adjusts guidance

Teleca divests remaining product business & adjusts guidance

Malmö, Sweden - October 13, 2008 - Teleca, a world-leading supplier of software
services to the mobile industry (Nordic Exchange, Small cap: TELC B), today
announces the divestment of its product business. 

o	Teleca divests 95% of its shares in its product business with a related
services business in Korea for about SEK 56 million in cash. The transaction is
conditioned by fulfillment of some customary conditions. The transaction is
expected to close before year-end.
o	The net result including transaction cost and provisions is estimated at SEK
25 million. In connection with this transaction combined with the focusing of
the company we expect restructuring charges of up to SEK 25 million in Q4 2008
which will offset the net result of SEK 25 million. The restructuring will
mainly be related to the discontinued operations. The transaction and the
results of the product business will be reported as discontinued operations in
Teleca's Q3 report.  
o	In total the divestment of the product business will result in an addition of
SEK 42 million in cash into Teleca before restructuring charges. 
o	The market for Teleca's continuing business is negatively affected by the
current trends in global economy. As a consequence Teleca has lowered its
expectations for revenues and profit in 2nd half of 2008. Teleca has lowered its
guidance for the second half of 2008 from slight negative growth and margin of
5-8% to a new guidance: Teleca expects sales in H2 2008 for continuing business
in the range of SEK 470 million to SEK 480 million equal to a decline of 7-9%
compared to H1 2008 and an EBIT result between SEK 5 million and a loss of SEK 5
million.   
o	The sudden dramatic negative change in market sentiment with a very short
visibility in combination with the accelerated change in business model to
off-shore deliveries have given reason for Teleca to perform an impairment test
on goodwill assets. Updated sales numbers for the continuing business as well as
cautious underlying assumptions on the growth and the profitability going
forward will result in a write-down of the total goodwill with approximately SEK
350 million.

René Svendsen-Tune, President & CEO of Teleca says: 
“The divestment of Products is a natural evolution of the decision we took in
April 2007 to stop investments in our product portfolio. We have now found an
excellent way forward that will create value for our customers, Teleca and the
employees in the product business. We can now focus all our efforts on
developing our core business of bringing the highest quality of engineering
services in wireless technology to our customers around the world.
In our continuing services business we have to accept that the turmoil driven by
the financial industry has not left the wireless industry and Teleca unaffected.
We experience a weaker market especially in Europe and like in many other
industries the visibility to the coming quarters is very limited just now. Our
customers are trying to reduce cost and this speaks for increased off-shoring
where we are very well positioned. It does however at the same time put pressure
on our high-cost sites where we are - partly proactively - losing revenues. Our
strategy has been to continually reduce cost for our customers by driving an
increasing part of work to off-shore sites. We remain confident and committed to
this strategy, but in current environment we have been forced to reduce scale in
higher cost countries faster than we can offset it in our off-shore operations
and therefore we face a current decline in revenues. 
In this environment we expect the demand for off-shore services and outsourcing
in general to prevail or increase and we expect our customers to turn to the
strongest suppliers who can deliver from a global platform at competitive
prices.

We target to increase our investments into building off-shore capability and
strengthen our sales and marketing efforts. At the same time we seek to limit
the risk in our high cost countries. We have already taken significant steps in
this direction including the opening of our first Indian office and the sale of
our French subsidiary which was announced at September, 19. 
The negative development on the market and the accelerated shift to off-shore
supplies force us to lower our guidance for the second half 2008. Further we
have revised our assumptions regarding the goodwill recorded in our balance
sheet. We are confident however that changes being implemented will pay off in
the long-term.”

Background on the Products transaction
In April 2007 Teleca decided to discontinue investments into its software
product business to eliminate the risk of continued losses in the product
business. Since then Teleca has driven the business from Korea increasingly in a
services and maintenance mode. This approach has worked very well for Teleca. We
have been able to focus on our core business - the consulting business and at
the same time we have extracted significant value from the Products. In contrast
with last year, the product business has been a solid profit contributor in
2008.
Teleca is not however prepared to invest in the roadmap of the Products going
forward, and we therefore feel that a divestment to a company with a product
strategy is the best option for Teleca, the employees and the future of the
product business. 
The product business is being sold off for the estimated sum of SEK 56 million
in cash. The transaction is conditioned by fulfillment of some customary
conditions. The transaction is expected to close within the next couple of
months. The final purchase price will be based on the net assets in the product
business as per closing. The buyer is a private company where two Korean
wireless industry related private equity funds are majority owners and members
of the former management of Teleca Korea have a minority share. Teleca will form
a tight partnership with the new company and keep a 5% equity stake at least for
one year. 
Also included in the transaction is the Korean services business which was
tightly linked to the Products. In total 100 employees are effected by the
transaction. The transaction will add SEK 42 million in cash including
transaction costs but excluding restructuring charges of up to SEK 25 million.
The PC Connectivity product suite is not included in the divestment and will
remain within Teleca.
During the first half of 2008 the Product business and the related Korean
services business has contributed with SEK 74 million in revenue and earnings
before interest and tax (EBIT) of SEK 18 million. During 2007 the same units
contributed with SEK 233 million in revenue and made a loss of SEK 82 million
excluding write-down of intangible assets. 

Financial implications on continuing operation 
The product business and the result of the transaction will be reported as
discontinued operations in Telecas remaining financial reports for 2008. On a
pro-forma basis excluding discontinued operations, first half 2008 has a result
of SEK 515 million in revenue and SEK 12 million in EBIT excluding one time
charges of SEK 22 million. In the 515 million revenue of SEK 15 million has also
been removed as a result of the sale of the French subsidiary.   
Telecas pro-forma account, including the sale of Products, will be included in
the report for the third quarter which is to be released on October 21, 2008.
The pro-forma account will also include the effects of the sale of the French
subsidiary which was announced at September 19, 2008.

Write-down of goodwill
Teleca has revised its underlying assumptions regarding the goodwill. Telecas
Board of Directors has after an impairment test found it necessary to write-down
the goodwill with approximately SEK 350 million. The write-down is related to
Telecas consulting business excluding the Russian operations. The remaining
goodwill is based on sales numbers for the continuing business as well as
cautious underlying growth and profitability assumptions. This write-down of
goodwill is in addition to the goodwill write-down on discontinued business of
SEK 42 million which was announced on September 19, 2008 as a result of the sale
of the French subsidiary.

Previous financial outlook for 2008 announced in Q2 2008
As a consequence of the changes being implemented in H1 2008 Teleca expects a
small decline in service revenue in second half 2008 over H2 2007. Product
revenues will continue to decline in H2 2008 compared to the same period 2007.
Investments into off-shore capacity and increased marketing spend will have a
negative impact on the EBIT margin. Teleca targets an EBIT margin for the second
half 2008 at a level of 5-8%. 

New financial outlook for 2008 
Teleca expects revenues (excluding discontinued operations) in the second half
of 2008 to be in the range of SEK 470 million to SEK 480 million equal to a
decline of 7 - 9% compared to H1 2008. Teleca expects EBIT for the second half
of 2008 to be at the range of SEK  5 million to a loss of SEK 5 million
excluding potential one-time charges and approximately SEK 350 million related
to write-down of goodwill for continuing business. 
For the full year 2008 revenue is expected to be around SEK 990 million for
continuing business. This implies a negative growth of 5% compared to 2007. EBIT
is expected to be in the range of SEK 7-17 million excluding one-time charges of
SEK 22 million taken in H1 2008 and approximately SEK 350 million related to
write-down of goodwill for continuing business. 
EBIT from discontinued business is expected to be approximately SEK 25-30
million excluding write-down of goodwill of SEK 42 million related to the
divested French subsidiary. Profit from sales of shares in Products and the
French subsidiary is expected to be zero after restructuring of up to SEK 25
million.

For more information, please contact:
	René Svendsen-Tune, CEO, Teleca AB, 
rene.svendsen-tune@teleca.com, +45-40540068
	Leif Nørgaard, CFO, Teleca AB, 
      leif.norgaard@teleca.com, +46 738 393040
	Mattias Stenberg, Investor Relations Manager, Teleca AB,
mattias.stenberg@teleca.com, +46-706119616


Teleca is a world-leading supplier of software services to major players of the
mobile device industry. The company offers tailored solutions, systems design
and the integration of software and hardware for mobile phones. Teleca has about
2,000 employees in 9 countries in Asia, Europe and North America and is quoted
on the small cap list of the Nordic Exchange.