CEO comments
"Group sales in the quarter declined -9% year-over-year with lower sales in
Networks but with an increase in Global Services," says Hans Vestberg, President
and CEO of Ericsson (NASDAQ:ERIC).
"Sales for comparable units, adjusted for currency exchange rate effects and
hedging declined year-over-year -16%. Voice related sales, such as 2G, continued
to decline in the quarter but were partly offset by increased 3G sales. Sales
were also impacted by tight industry component supply conditions.
Gross margin improved, positively affected by business mix and continued
efficiency gains. Cash flow improved year-over-year. The work to regain
profitability in our joint ventures is on track and Sony Ericsson shows improved
results year-over-year.
The market conditions we saw in the second half of 2009 prevailed also in this
quarter with mixed operator investment behavior across regions and markets.
Operators in a number of developing markets were still cautious with their
investments which impacted Networks' sales while Professional Services sales
were good also this quarter.
During the quarter, the mobile data traffic increase continued, mainly in North
America and Western Europe, driven by increased consumer usage of smartphones
and other devices. We forecast that mobile data traffic will double annually
over the next five years. In markets with strong data traffic uptake, we
increasingly discuss with operators how to manage the higher data volumes and
how to maintain a good consumer user experience. The 16 managed services
contracts signed during the quarter reflect increased operator focus on network
quality and efficiency.
We also continued to strengthen our position in North America with the important
4G/LTE agreement with AT&T. With a clear roadmap for CDMA, customers show
confidence in our broadened offering. The acquired CDMA business developed
favorably during the quarter," concludes Hans Vestberg.
First quarter Fourth quarter
SEK b. 2010 2009 Change 2009 Change
Net sales 45.1 49.6 -9% 58.3 -23%
Gross margin 39% 36% - 35% -
EBITA margin excl JVs(1)) 13% 12% - 15% -
Operating income excl JVs 4.5 4.7 -4% 7.5 -39%
Operating margin excl JVs 10% 10% - 13% -
Ericsson's share
in earnings in JVs -0.3 -2.2 - -0.4 -
Income after financial items 4.1 3.3 23% 6.7 -38%
Net income 1.3 1.8 -30% 0.7 76%
EPS diluted, SEK 0.39 0.54 - 0.10 -
Adjusted cash flow(2)) 3.0 -1.7 - 13.6 -
Cash flow from operations 2.3 -2.9 - 12.5 -
Restructuring charges excl JVs 2.2 0.7 - 4.2
All numbers, excl. EPS, Net income and Cash flow from operations, excl.
restructuring charges.
(1)) EBITA - Earnings before interest, tax, amortizations and write-downs of
acquired intangibles.
(2)) Cash flow from operations excl. restructuring cash outlays that have been
provided for. Cash outlays in the quarter were SEK 0.7 (1.2) b. For the fourth
quarter, cash outlays amounted to SEK 1.1 b.
Financial highlights
Income statement and cash flow
Sales in the quarter were down -9% year-over-year and -23% sequentially. Sales
for comparable units, adjusted for currency exchange rate effects and hedging,
declined -16% year-over-year. The net impact of currency exchange rate effects
and hedging was limited. During the quarter, operators in a number of developing
markets were still cautious with investments which impacted sales, primarily in
Networks. This was partly offset by continued good services sales.
Gross margin, excluding restructuring, improved year-over-year to 39% (36%) due
to efficiency gains and product mix. Sequentially, the gross margin improved
from 35% for the same reasons.
Operating expenses were reduced to SEK 13.1 (13.6) b., excluding restructuring
charges. This includes operating expenses from the acquired CDMA business. The
year-over-year decline is primarily a result of ongoing cost reduction
activities. Other operating income and expenses were SEK 0.3 (0.3) b. in the
quarter.
Operating income, excluding joint ventures and restructuring charges, amounted
to SEK 4.5 (4.7) b., including positive contribution from the acquired CDMA
business. Operating margin was stable at 10% (10%) in the quarter, despite lower
year-over-year sales, but declined sequentially as a result of seasonally lower
sales.
Ericsson's share in earnings of joint ventures, before tax, amounted to SEK -0.3
(-2.2) b. excluding restructuring charges, compared to SEK -0.4 b. in the fourth
quarter. Sequentially, Sony Ericsson improved sales and margins significantly
due to efficiency programs and new products, while ST-Ericsson's loss increased
mainly due to lower sales and seasonality. Restructuring charges in joint
ventures were SEK 0.1 b in the quarter.
Financial net was SEK -0.2 (0.8) b., mainly due to low interest rates and
negative currency revaluation effects on financial assets and liabilities.
Net income amounted to SEK 1.3 (1.8) b. and earnings per share were SEK 0.39
(0.54).
Adjusted cash flow improved to SEK 3.0 (-1.7) b. in the quarter, down
sequentially from SEK 13.6 b. However, cash flow from operations improved
year-over-year due to focus on capital efficiency. Cash flow in the quarter was
negatively affected by an employer contribution to pension trusts of SEK 0.9
(1.5) b.
Balance sheet and other performance indicators
Mar 31 Dec 31 Sep 30 Jun 30 Mar 31
SEK b. 2010 2009 2009 2009 2009
Net cash 38.5 36.1 33.9 27.9 22.9
Interest-bearing liabilities
and post-employment benefits 39.3 40.7 45.9 47.6 41.2
Trade receivables 62.7 66.4 62.4 69.4 75.2
Days sales outstanding 117 106 118 121 124
Inventory 24.1 22.7 26.8 29.0 30.7
Of which regional inventory 14.0 12.9 15.9 17.7 18.9
Inventory days 75 68 77 78 83
Payable days 59 57 57 59 65
Customer financing, net 2.9 2.3 2.7 3.1 2.8
Return on capital employed 5% 4% 4% 5% 7%
Equity ratio 53% 52% 52% 51% 52%
Trade receivables decreased by SEK 3.7 b in the quarter to SEK 62.7 (66.4) b.,
impacted by seasonally lower sales, days sales outstanding (DSO) increased
sequentially from 106 to 117 days.
Inventory increased by SEK 1.4 b. in the quarter to SEK 24.1 (22.7) b. due to
seasonal build-up. The year-over-year reduction is partly due to lower sales and
product mix shift. Turnover improved year-over-year to 75 days due to improved
project execution.
The net cash position increased by SEK 2.4 b. in the quarter to SEK 38.5 (36.1)
b. Cash, cash equivalents and short-term investments amounted to SEK 77.9 (76.7)
b.
During the quarter, approximately SEK 1.6 b. of provisions were utilized, of
which SEK 0.7 b. related to restructuring. Additions of SEK 1.8 b. were made, of
which SEK 0.7 b. related to restructuring. Reversals of SEK 0.5 b. were made.
Cost reductions
The ongoing cost reduction program, initiated in first quarter 2009, will be
completed by the second quarter 2010 and the total annual savings of the entire
program are estimated to SEK 15-16 b. from the second half of 2010.
In the first quarter, restructuring charges, excluding joint ventures, amounted
to SEK 2.2 b. At the end of the quarter, cash outlays of SEK 4.2 b. remain to
be made. Total restructuring charges for the program are estimated to SEK 15 b.
of which approximately SEK 1.5 b remains. Cash outlays related to this program
will be made also after the finalizing of the program in the second quarter
2010.
2009 2010
Restructuring charges, SEK b. Full year Q1
Cost of sales -4.2 -0.8
Research and development expenses -6.1 -0.3
Selling and administrative expenses -1.0 -1.1
Total -11.3 -2.2
Segment results
First quarter Fourth quarter
SEK b. 2010 2009 Change 2009 Change
Networks sales 24.7 28.8 -14% 31.8 -22%
EBITA margin(1)) 16% 14% - 19% -
Operating margin 12% 12% - 17% -
Global Services sales 18.1 17.5 3% 23.1 -22%
Of which Professional Services 13.3 12.8 4% 16.5 -20%
Of which managed services 4.9 4.2 17% 5.1 -4%
Of which Network Rollout 4.8 4.7 3% 6.7 -27%
EBITA margin(1)) 12% 10% - 10% -
Of which Professional Services 16% 16% - 14% -
Operating margin 11% 10% - 9% -
Of which Professional Services 15% 15% - 13% -
Multimedia sales 2.3 3.2 -29% 3.4 -31%
EBITA margin(1)) -5% 8% - 17% -
Operating margin -13% 2% - 10% -
Total sales 45.1 49.6 -9% 58.3 -23%
All numbers exclude restructuring charges
(1)) EBITA - Earnings before interest, tax, amortizations and write-downs of
acquired intangibles.
Change in segment reporting
As of January 1, 2010, Ericsson reports the following business segments:
Networks, Global Services, Multimedia, Sony Ericsson and ST-Ericsson. The only
change compared to last year is that Network Rollout services is now included in
Global Services and excluded from Networks. All other segments are reported as
before. With this change the external reporting is aligned with the new internal
reporting structure.
Networks
Networks' sales in the quarter declined by -14% year-over-year, positively
impacted by CDMA sales. However, tight industry component supply conditions
affected sales in the quarter. This was more than offset by the acquired CDMA
operations.
Voice related sales, such as 2G access and core continued to decline. Increased
mobile broadband (3G) sales, including radio, mobile backhaul and packet core,
partly offset this impact. In a number of developing markets the conditions we
saw in the second half of 2009 prevailed also in this quarter, especially in
Sub-Saharan Africa and South East Asia, and negatively impacted sales.
The integration of acquired CDMA assets progresses well.
EBITA margin in the quarter increased year-over-year to 16% (14%) despite lower
sales, positively impacted by continued efficiency gains, product mix as well as
a higher proportion of software.
Technology milestones in the quarter include; the world's first live 2.5 Gbps
microwave radio connection, world record of 84 Mbps HSPA. Ericsson maintains its
number one position in wireless infrastructure and is now larger than its two
nearest competitors combined.
Global Services
Global Services sales grew 3% year-over-year and declined -22% sequentially.
Professional Services sales increased 4% year-over-year and in local currencies
growth amounted to 12% year-over-year. Managed Services sales in the quarter
increased by 17% year-over-year. Network Rollout sales increased 3%
year-over-year.
There is a continued good demand for services targeting the operational
efficiency of operators, such as managed services, systems integration and
consulting. Services related to 2G voice sales developed unfavorably.
EBITA margin for Global Services improved year-over-year to 12% (10%) and was up
from 10% sequentially due to continued efficiency gains and improved project
management in network rollout.
EBITA margin for Professional Services amounted to 16% (16%) in the quarter and
was up from 14% sequentially. The margin was however somewhat negatively
impacted by large managed services deals in transformation phase.
During the quarter 16 managed services contracts were signed of which
approximately half were extensions or expansions of existing customer
agreements.
Ericsson now provides support for networks that serve more than two billion
subscribers worldwide. The total number of subscribers in managed networks is
now 410 million, of which 50% are in high-growth markets. The number of services
employees amounts to over 40,000 globally.
Multimedia
Multimedia sales in the quarter decreased by -29% year-over-year and -31%
sequentially, due to continued slower sales of revenue management solutions in
regions Sub-Saharan Africa, Middle East and South East Asia and Oceania. Sales
in multimedia brokering (IPX) were also somewhat slower.
The TV business continued to show good development with strong demand for
compression technology and IPTV solutions.
EBITA margin declined to -5% (8%) year-over-year as a result of the lower
volumes.
Sony Ericsson
First quarter Fourth quarter
EUR m. 2010 2009 Change 2009 Change
Number of units shipped (m.) 10.5 14.5 -28% 14.6 -28%
Average selling price (EUR) 134 120 12% 120 12%
Net sales 1,405 1,736 -19% 1,750 -20%
Gross margin 31% 8% - 23% -
Operating margin 1% -21% - -10% -
Income before taxes 18 -370 - -190 -
Income before taxes,
excl restructuring charges 21 -358 - -40 -
Net income 21 -293 - -167 -
Units shipped in the quarter were 10.5 million, a decrease of -28%
year-over-year. Sales in the quarter were EUR 1,405 million, a decrease of -19%
year-over-year.
Average selling price in the quarter increased by 12% due to good sell through
of existing models and new flagship phones starting to ship at the end of the
quarter and a positive currency effect.
Gross margin improved both sequentially and year-over-year, reflecting a more
favorable product mix and the benefit of cost of sales improvements in the past
year, as well as the resolution of certain royalty matters during the quarter.
Income before taxes for the quarter, excluding restructuring charges, was a
profit of EUR 21 (-358) million, illustrating the positive impact of the cost
reduction program. As of March 31, 2010, Sony Ericsson had a net cash position
of EUR 563 million.
During the first quarter 2010 Sony Ericsson obtained additional external funding
of EUR 150 million. The funding is guaranteed by the parent companies on a
50/50 basis.
Ericsson's share in Sony Ericsson's income before tax was SEK 0.1 (-1.0) b. in
the quarter.
ST-Ericsson
2010 2009
USD m. Q1 Q1 Pro Forma Feb-Mar Q4
Net sales 606 562 391 740
Adjusted operating
income (1)) -114 -149 -78 -50
Operating income
before taxes -164 -179 -98 -139
Net income -154 NA -89 -125
(1) )Operating income adjusted for amortization of acquired intangibles and
restructuring charges
Net sales in the quarter showed a -18% decrease sequentially, due to the impact
of the ongoing portfolio transition, to seasonal effects as well as the number
of days in the quarter.
The sequential change in operating loss mostly reflects lower sales, the effect
of an unfavorable product mix and the lower contribution from European funding
programs which positively impacted the previous quarters.
Inventory declined due to continued control of the supply chain.
Net cash was USD 120 million at the end of the quarter with a sequential decline
of USD 109 million mainly due to the operating loss and cash outflows related to
restructuring.
The restructuring runs according to plan.
ST-Ericsson is reported in US GAAP. Ericsson's share in ST-Ericsson's income
before tax, adjusted to IFRS, was SEK -0.5 b. in the quarter, including
restructuring charges of SEK -0.1 b. Ericsson Mobile Platforms incurred a loss
of SEK -0.5 b. in January 2009, which was included in the result in segment
ST-Ericsson. The reported result in the segment in the first quarter 2009 was
therefore SEK -0.7 b.
Regional overview
First quarter Fourth quarter
Sales, SEK b. 2010 2009 Change 2009 Change
North America 9.5 4.8 99% 6.7 41%
Latin America 4.0 4.4 -9% 5.9 -32%
Northern Europe and Central Asia 2.3 2.9 -20% 3.5 -34%
Western and Central Europe 5.2 5.4 -3% 6.1 -15%
Mediterranean 5.1 6.1 -17% 7.1 -28%
Middle East 3.9 4.0 0% 5.0 -22%
Sub-Saharan Africa 2.4 4.7 -48% 3.8 -37%
India 2.3 4.0 -43% 3.4 -33%
China and North East Asia 5.0 5.8 -15% 7.4 -33%
South East Asia and Oceania 3.5 5.2 -32% 5.2 -32%
Other 1.9 2.3 -19% 4.2 -54%
Total 45.1 49.6 -9% 58.3 -23%
Change in regional reporting
As of January 1, 2010, the geographical reporting is changed. Instead of five
geographical areas, ten regions are reported which mirrors the new internal
geographical organization.
North America sales increased 99% year-over-year and 41% sequentially. The
integration of acquired CDMA assets progresses well. The very strong data
traffic increase continues in North America due to mobile broadband adoption.
Smartphones and laptops with embedded modules and dongle type devices are
important drivers. Ericsson's position in North America was further strengthened
in the first quarter with the 4G/LTE award from AT&T.
Latin America sales decreased by -9% year-over-year and by -32% sequentially.
With data traffic uptake operators are looking into mobile broadband
investments, including required backhaul capacity. New 3G licenses are planned
to be auctioned in the region later this year (Brazil, Costa Rica and Mexico).
There is continued good development in services, especially managed services.
The tragic earthquakes in Chile and Haiti highlighted the importance for us to
be able to support our customers in responding to emergencies.
Northern Europe and Central Asia sales decreased by -20% year-over-year and by
-34% sequentially. The decrease is mainly related to sales of mobile network
infrastructure while services sales are stable. Northern Europe saw good demand
for mobile broadband as well as modernization of fixed networks. Central Asia
still saw low investment levels.
Western and Central Europe sales decreased -3% year-over-year and -15%
sequentially. Development in the region showed large variations, where Western
Europe and especially UK developed favorably and Germany showed stable
development, while parts of Central Europe were still slow. 4G/LTE and network
modernization is high on operators agendas, services remain strong and represent
half of the sales in the quarter.
Mediterranean sales decreased -17% year-over-year and -28% sequentially. The
demand for increased mobile broadband capacity continues, but operator
investments in Spain and Greece remain low. Operators focus on operational
efficiency leads to continued good demand for managed services and consulting.
The year-over-year sales were negatively impacted by the reduced scope by a
managed services agreement in Italy but improved sequentially.
Middle East sales were flat year-over-year and down -22% sequentially, with
mixed development across the region. Services sales were strong in the quarter,
especially in Saudi Arabia. Sales of mobile network infrastructure declined
although we saw a strong quarter in Turkey and in some of the Gulf countries.
Sub-Saharan Africa sales decreased by -48% year-over-year and -37% sequentially.
The region continued to be impacted by the global economic climate which is
reflected in decreased operator investments. The region is predominately a
market where 2G rollouts are in operators' focus. However, 3G is picking up from
low levels. Furthermore, the interest for managed services is increasing among
operators. Operator consolidation is also taking place in the region, which
temporarily reduced investments.
India sales decreased -43% year-over-year and -33% sequentially due to cautious
operator investments pending 3G auctions. The decline in business volumes mainly
affected mobile networks infrastructure sales while recurring services business
maintained its good development. During the quarter, Ericsson secured a USD 1.3
b. agreement with Bharti to expand and upgrade Airtel's network in 15 of India's
22 telecom circles. Subscription growth continues, driven by tariff competition
among operators.
China and North East Asia sales decreased -15% year-over-year and by -33%
sequentially. However, the comparison year-over-year is tough due to the large
3G rollouts in China in the first quarter 2009. Mainland China operators' focus
is still on achieving a successful 3G introduction, with subscriber take up and
high network quality. In Japan, the high mobile data growth continues.
South East Asia and Oceania sales decreased -32% both year-over-year and
sequentially. The year-over-year comparison is tough due to significant deals
and major network expansions in the first quarter 2009. Operators
in many markets, such as Bangladesh, Indonesia and the Philippines, continued to
be cautious with investments. There is continued uncertainty over timing of 3G
licenses in Bangladesh and Thailand. In markets where 3G has been deployed we
see continued growth in mobile broadband usage. In Vietnam, major 3G rollouts
are taking place.
Other includes sales of for example embedded modules, cables, power modules as
well as licensing and IPR.
Market development
Growth rates are based on Ericsson and market estimates
Operator investment activities continued to vary between regions and countries.
Operators in a number of developing markets were still cautious with
investments. In markets with strong data traffic uptake, network quality and
efficiencies are high on operators' agendas.
While the global mobile infrastructure market declined by more than 10% in
2009, measured in USD, we believe that the fundamentals for longer-term positive
development for the industry remain solid. Ericsson is well positioned to drive
and benefit from this development.
Global mobile data traffic has surpassed voice traffic. In addition, 3G/WCDMA
traffic has surpassed GSM traffic. Ericsson's findings show that mobile data
traffic globally grew 280% during the last two years and is forecast to double
annually over the next five years. The data traffic growth is contributing to
operator revenue growth as more and more consumers use data traffic generating
devices, such as smartphones and laptops.
The growth in mobile and fixed internet traffic is mainly driven by video, 24/7
connectivity, and IPTV.
With operators' focus on increased network quality and efficiency, the ability
to deal with high data volumes while maintaining telecom grade service levels is
key. This also drives demand for services targeting the operational efficiency
of operators, such as managed services and consulting.
As a consequence of the strong growth in mobile data traffic, there are signs of
operator price plans for mobile data starting to move beyond bundles and flat
rates to variable or tiered pricing, where high-speed and volume users pay more.
Mobile subscriptions grew by 184 million in the quarter to a total
of 4.8 billion, returning to higher growth levels. Global mobile penetration is
now 70%. China and India alone accounted for 44% of net additions with 28 and
53 million respectively.
The global number of new WCDMA subscriptions grew by 39 million in the quarter
to a total of 490 million, of which 225 million are estimated to be HSPA. In
the fourth quarter 2009, fixed broadband connections grew to 457 million,
adding 19 million subscribers.
Voice traffic is still the main revenue source for operators even though data
represents an increasing share. For many large operators, mobile data revenues
constitute 25% of total service revenues or more. In addition to capacity
enhancements, operators face the challenge of converting to all-IP broadband
networks. This will include increased deployments of broadband access, routing
and transmission equipment along with next-generation service delivery and
revenue management systems.
There is continued good growth in professional services, fueled by operators'
desire to reduce operating expenses and improve efficiency in network operation
and maintenance. The move toward all-IP and increased network complexity will
create further demand for systems integration and consulting.
Parent Company information
Net sales for the first quarter amounted to SEK 0.0 (0.2) b. and income after
financial items was SEK -0.6 (1.4) b. A write-down of intangible assets in the
amount of SEK 0.9 b. was made during the first quarter.
Major changes in the Parent Company's financial position for the first quarter
include; decreased current and non-current receivables from subsidiaries of SEK
7.9 b.; increased cash, cash equivalents and short-term investments of SEK 3.0
b. and decreased current and non-current liabilities to subsidiaries of SEK 5.3
b.
At the end of the quarter cash, cash equivalents and short-term investments
amounted to SEK 65.4 (62.4) b.
Guarantees to Sony Ericsson Mobile Communications AB are reported as contingent
liabilities and amounted to SEK 1.5 (0.8) b.
In accordance with the conditions of the long-term variable remuneration program
(LTV) for Ericsson employees, 1,276,203 shares from treasury stock were sold or
distributed to employees during the first quarter. The holding of treasury stock
at March 31, 2010, was 77,702,330 Class B shares.
Annual General Meeting of Shareholders
The Annual General Meeting (AGM) decided, as previously announced and in
accordance with the proposal by the Board of Directors, on a dividend payment of
SEK 2.00 per share for 2009 and with April 16, 2010, as the date of record for
the dividend. The total dividend payment amounts to SEK 6.4 (6.0) b.
In accordance with the Board of Directors' proposals, the AGM resolved the
completion of LTV 2009 (Long Term Variable compensation). The AGM also resolved
the implementation of LTV 2010, including transfer of shares. In addition, the
AGM resolved the transfer of treasury stock for previously decided LTV programs.
For more details, see www.ericsson.com/investors
<http://www.ericsson.com/investors>
Other information
Acquisition of Nortel's GSM business completed
On March 31, 2010, Ericsson completed the acquisition of Nortel's North American
GSM business. On November 25, 2009, Ericsson announced it had entered into an
agreement for these assets. More than 350 employees from Nortel will be
integrated into the Ericsson Group over the coming months. The acquired
operations are expected to be accretive to Ericsson's earnings within a year
after closing.
All shares in LHS acquired
On February 23, 2010, Ericsson announced that it had acquired all shares in LHS.
The remaining minority shareholders in LHS AG have sold their shares in a
squeeze out process. A delisting of LHS from the Deutsche Börse, Frankfurt am
Main, was finalized during the quarter.
Acquisition of Pride Spa completed
In the quarter, Ericsson completed the acquisition of Pride Spa in Italy, a
consulting and systems integration company. The intention to acquire Pride Spa
was announced on January 12, 2010.
Changes in Ericsson's executive leadership team
On February 8, 2010, Ericsson announced that Mats H Olsson, head of China and
North East Asia, and Angel Ruiz, head of North America, have been appointed
members of the executive leadership team.
In parallel, it was announced a reorganization from 23 market units to ten
regions. Effective July 1, 2010, Marita Hellberg, current head of corporate HR,
takes on HR in region China and North East Asia. A new head of HR will be
announced separately.
Key events after end of the quarter
On April 21, 2010, Ericsson announced it had entered into share purchase
agreement to acquire Nortel's majority shareholding (50%+1 share) in LG-Nortel,
the joint venture of LG Electronics and Nortel Networks. The acquisition will
significantly expand Ericsson's footprint in the Korean market and provide
Ericsson with a well established sales channel and strong R&D capability in the
country. The purchase price is USD 242 m. on a cash and debt free basis. The new
name of the joint venture will be LG-Ericsson. The transaction is subject to
customary regulatory approvals.
On April 20, 2010, Ericsson announced it had signed a memorandum of
understanding to establish a strategic cooperation with Chinese Datang Telecom
Technology & Industry Holdings Co Ltd to jointly developed advanced TDD
solutions. As part of the memorandum of understanding Ericsson will start
integrating Datang's current TD-SCDMA radio access network equipment into its
own 3G mobile communications offering.
Assessment of risk environment
Ericsson's operational and financial risk factors and uncertainties are
described under "Risk factors Assessment of risk environment" in our Annual
Report 2009.
Risk factors and uncertainties in focus during the forthcoming six-month period
for the Parent Company and the Ericsson Group include:
* potential negative effects of the continued uncertainty in the financial
markets and the weak economic business environment on operators' willingness
to invest in network development as well as uncertainty regarding the
financial stability of suppliers, for example due to lack of borrowing
facilities, or reduced consumer telecom spending, or increased pressure on
us to provide financing;
* effects on gross margins and/or working capital of the product mix in the
Networks segment between sales of software, upgrades and extensions as well
as break-in contracts;
* effects on gross margins of the product mix in the global services segment
including proportion of new network build-outs and share of new managed
services deals with initial transition costs
* a volatile sales pattern in the Multimedia segment or variability in our
overall sales seasonality could make it more difficult to forecast future
sales;
* results and capital needs of our two major joint ventures, Sony Ericsson
and ST-Ericsson, which both are negatively affected to a larger extent than
our three other segments by the current economic slowdown;
* effects of the ongoing industry consolidation among our customers as well as
between our largest competitors, e.g. intensified price competition;
* changes in foreign exchange rates, in particular USD and EUR;
* political unrest or instability in certain markets;
* effects on production and sales from restrictions with respect to timely and
adequate supply of materials, components and production capacity and other
vital services on competitive terms;
* effects on production and sales from restrictions in transport facilities as
a result of the Iceland volcanic activities.
Ericsson conducts business in certain countries which are subject to trade
restrictions or which are focused on by certain investors. We stringently follow
all relevant regulations and trade embargos applicable to us in our dealings
with customers operating in such countries. Moreover, Ericsson operates globally
in accordance with Group level policies and directives for business ethics and
conduct. In no way should our business activities in these countries be
construed as supporting a particular political agenda or regime. We have
activities in such countries mainly due to that certain customers with
multi-country operations put demands on us to support them in all of their
markets.
Please refer further to Ericsson's Annual Report 2009, where we describe our
risks and uncertainties along with our strategies and tactics to mitigate the
risk exposures or limit unfavorable outcomes.
Stockholm, April 23, 2010
Hans Vestberg, President and CEO
Telefonaktiebolaget LM Ericsson (publ)
Date for next report: July 23, 2010
Auditors' review report
We have reviewed this report for the period January 1 to March 31, 2010, for
Telefonaktiebolaget LM Ericsson (publ). The board of directors and the CEO are
responsible for the preparation and presentation of this interim report in
accordance with IAS 34 and the Annual Accounts Act. Our responsibility is to
express a conclusion on this interim report based on our review.
We conducted our review in accordance with the Standard on Review Engagements
SÖG 2410, Review of Interim Financial Information Performed by the Independent
Auditor of the Entity, issued by FAR SRS. A review consists of making inquiries,
primarily of persons responsible for financial and accounting matters, and
applying analytical and other review procedures. A review is substantially less
in scope than an audit conducted in accordance with Standards on Auditing in
Sweden, RS, and other generally accepted auditing practices. The procedures
performed in a review do not enable us to obtain a level of assurance that would
make us aware of all significant matters that might be identified in an audit.
Therefore, the conclusion expressed based on a review does not give the same
level of assurance as a conclusion expressed based on an audit.
Based on our review, nothing has come to our attention that causes us to believe
that the interim report is not prepared, in all material respects, in accordance
with IAS 34 and the Swedish Annual Accounts Act regarding the Group and with the
Swedish Annual Accounts Act regarding the Parent Company.
Stockholm, April 23, 2010
PricewaterhouseCoopers AB
Peter Clemedtson
Authorized Public Accountant
Editor's note
To read the complete report with tables, please go to:
www.ericsson.com/investors/financial_reports/2010/3month10-en.pdf
<http://www.ericsson.com/investors/financial_reports/2010/3month10-en.pdf>
Ericsson invites media, investors and analysts to a press conference at the
Ericsson headquarters, Torshamnsgatan 23, Stockholm, at 09.00 (CET), April 23.
An analysts, investors and media conference call will begin at 14.00 (CET).
Live webcasts of the press conference and conference call as well as supporting
slides will be available at www.ericsson.com/press
<http://www.ericsson.com/press> and www.ericsson.com/investors
<http://www.ericsson.com/investors>
Video material will be published during the day on
www.ericsson.com/broadcast_room <http://www.ericsson.com/broadcast_room>
For further information, please contact
Henry Sténson, Senior Vice President, Communications
Phone: +46 10 719 4044
E-mail: investor.relations@ericsson.com <mailto:investor.relations@ericsson.com>
or media.relations@ericsson.com <mailto:media.relations@ericsson.com>
Investors
Susanne Andersson,
Investor Relations
Phone: +46 10 719 4631
E-mail: investor.relations@ericsson.com <mailto:investor.relations@ericsson.com>
Andreas Hedemyr,
Investor Relations
Phone: +46 10 714 3748
E-mail: investor.relations@ericsson.com <mailto:investor.relations@ericsson.com>
Media
Åse Lindskog, Vice President,
Head of Public and Media Relations
Phone: +46 10 719 9725, +46 730 244 872
E-mail: media.relations@ericsson.com <mailto:media.relations@ericsson.com>
Ola Rembe,
Public and Media Relations
Phone: +46 10 719 9727, +46 730 244 873
E-mail: media.relations@ericsson.com <mailto:media.relations@ericsson.com>
Telefonaktiebolaget LM Ericsson (publ)
Org. number: 556016-0680
Torshamnsgatan 23
SE-164 83 Stockholm
Phone: +46 10 719 0000
www.ericsson.com <http://www.ericsson.com/>
Disclosure Pursuant to the Swedish Securities Markets Act
Ericsson discloses the information provided herein pursuant to the Securities
Markets Act. The information was submitted for publication at 07.30 CET, on
April 23, 2010.
Safe Harbor Statement of Ericsson under the US Private Securities Litigation
Reform Act of 1995;
All statements made or incorporated by reference in this release, other than
statements or characterizations of historical facts, are forward-looking
statements. These forward-looking statements are based on our current
expectations, estimates and projections about our industry, management's beliefs
and certain assumptions made by us. Forward-looking statements can often be
identified by words such as "anticipates", "expects", "intends", "plans",
"predicts", "believes", "seeks", "estimates", "may", "will", "should", "would",
"potential", "continue", and variations or negatives of these words, and
include, among others, statements regarding: (i) strategies, outlook and growth
prospects; (ii) positioning to deliver future plans and to realize potential for
future growth; (iii) liquidity and capital resources and expenditure, and our
credit ratings; (iv) growth in demand for our products and services; (v) our
joint venture activities; (vi) economic outlook and industry trends; (vii)
developments of our markets; (viii) the impact of regulatory initiatives; (ix)
research and development expenditures; (x) the strength of our competitors; (xi)
future cost savings; (xii) plans to launch new products and services; (xiii)
assessments of risks; (xiv) integration of acquired businesses; (xv) compliance
with rules and regulations and (xvi) infringements of intellectual property
rights of others.
In addition, any statements that refer to expectations, projections or other
characterizations of future events or circumstances, including any underlying
assumptions, are forward-looking statements. These forward-looking statements
speak only as of the date hereof and are based upon the information available to
us at this time. Such information is subject to change, and we will not
necessarily inform you of such changes. These statements are not guarantees of
future performance and are subject to risks, uncertainties and assumptions that
are difficult to predict. Therefore, our actual results could differ materially
and adversely from those expressed in any forward-looking statements as a result
of various factors. Important factors that may cause such a difference for
Ericsson include, but are not limited to: (i) material adverse changes in the
markets in which we operate or in global economic conditions; (ii) increased
product and price competition; (iii) reductions in capital expenditure by
network operators; (iv) the cost of technological innovation and increased
expenditure to improve quality of service; (v) significant changes in market
share for our principal products and services; (vi) foreign exchange rate or
interest rate fluctuations; and (vii) the successful implementation of our
business and operational initiatives.
[HUG#1407235]
