Ericsson reports fourth quarter and full year
(firmenpresse) - STOCKHOLM, SWEDEN -- (Marketwire) -- 01/25/12 --
"For the full year 2011, we had a strong sales growth and an increase in
net
income. In the fourth quarter, however, we saw weaker development in
Networks,
as well as an expected gross margin impact from a changed business mix with
more
coverage projects, modernization projects in Europe, and a higher services
share," says Hans Vestberg, President and CEO of Ericsson (NASDAQ: ERIC).
"Group sales in the quarter were flat year-over-year and grew 15%
sequentially,
which is weaker than normal in the fourth quarter. The sequential growth is
mainly driven by a strong development of 32% in Global Services, while
Networks
sales were weak, up only 2%. The sales development in Networks is mainly
related
to North America and Russia, where the trend continued from the third
quarter
with slower operator spending after a period of high investments in
capacity. In
addition, we saw some increased operator cautiousness during the quarter
due to
uncertainties such as economic development and political unrest in some
countries.
2011 was a year of strong sales growth of 12%, and sales for comparable
units,
adjusted for currency exchange rate effects and hedging, increased 19%. In
spite
of weak JV results, net income increased SEK 1.3 b. to SEK 12.6 b., driven
by
higher sales and lower restructuring charges. The Board of Directors
proposes a
dividend for 2011 of SEK 2.50 (2.25), an increase by 11%.
In 2011, we have successfully executed on our strategy to leverage our
strength
in the growth areas mobile broadband, managed services and operating and
business support systems. Many operators have had mobile broadband high on
the
agenda and the industry has during the year seen a shift to higher
proportions
of coverage buildouts. We implemented our strategy to capture new market
share
in the network modernization projects in Europe, despite their initial
lower
margins. We have further strengthened our market position in mobile
networks.
With 70 new managed services contracts during 2011 we are confident of our
strong offering and market leadership. With the acquisition of Telcordia,
now
concluded, we have also gained a leadership position and skilled people in
the
important areas of operating and business support systems.
The quarter was challenging for our joint ventures and both reported
significant
losses. We have announced that Sony will acquire our 50% share in Sony
Ericsson.
Sony Ericsson's loss in the quarter reflects intense competition, price
erosion
and restructuring charges. ST-Ericsson made a loss of the same size as in
the
third quarter and during the quarter we announced a new CEO who has the
task to
review the strategy with the objective to restore profitability.
We believe that the industry fundamentals for longer-term positive
development
remain solid. Short-term, we expect operators to continue to be cautious
with
spending, reflecting factors such as macro economic and political
uncertainty.
We will continue to execute on our strategy which means that the business
mix,
with more coverage and network modernization projects than capacity
projects,
will prevail short-term. With our global scale and presence, as well as
technology and services leadership, we are well positioned to continue to
drive
and lead the industry development," concludes Vestberg.
FINANCIAL HIGHLIGHTS
Income statement and cash flow
Sales in the quarter amounted to SEK 63.7 (62.8) b., was up 1% year-over-
year
and 15% sequentially.
Sales for comparable units, adjusted for currency exchange rate effects and
hedging, increased 6%
year-over-year. The sequential increase is mainly related
to strong growth in services.
In 2011, sales amounted to SEK 226.9 (203.3) b., up 12%, driven by strong
demand
for mobile broadband along with network rollout services. Sales in 2011 for
comparable units, adjusted for currency exchange rate effects and hedging,
increased 19%.
Software represented 23% (24%), hardware 40% (37%) and services 37% (39%)
of
total sales in 2011.
In the fourth quarter 2011 restructuring charges of SEK 0.7 b. were
included,
while the last quarter 2010 exclude restructuring charges of SEK 1.7 b.
Total
restructuring charges for 2011 amounted to SEK 3.2 (6.8) b. excluding
joint ventures. For 2012, restructuring charges are estimated to
approximately
SEK 4 b. and the main part of activities expected in the first half of
2012.
Gross margin in the quarter was down year-over-year to 30.2% (36.6%), and
down
from 35.0% sequentially. As previously communicated, network modernization
projects in Europe accelerated in the quarter and together with a higher
proportion of coverage projects, as well as an all time high Global
Services
share of 42%, impacted gross margin negatively. Including restructuring
charges
fourth quarter 2010 gross margin amounted to 34.7%.
In 2011, gross margin declined from 38.2% to 35.1% due to higher share of
coverage projects, network modernization projects in Europe and 3G rollouts
in
India.
All modernization projects that Ericsson has won have started by the fourth
quarter 2011. The network modernization projects in Europe, with their
lower
margins, fully impacted the fourth quarter. Since average project duration
is
expected to be 18-24 months, the impact is expected to prevail for a couple
of
more quarters.
Total operating expenses amounted to SEK 15.6 (15.2) b. in the quarter. R&D
expenses amounted to SEK 8.7 (8.3) b., an increase of 6% year-over-year.
Selling
and general administrative expenses (SG&A) amounted to SEK 6.8 (6.9) b.,
representing 10.7% of sales compared to 11.0% in the last quarter 2010.
Other
operating income and expenses amounted to SEK 0.4 (0.6) b. in the quarter.
In 2011, total operating expenses amounted to SEK 59.3 (55.2) b. R&D
expenses
amounted to SEK 32.6 (29.9) b., an increase of 9% year-over-year. The
increase
is a result of earlier communicated planned higher investments in radio,
such as
TD-LTE and IP as well as the acquired LG-Ericsson operations. SG&A amounted
to
SEK 26.7 (25.3) b., representing 11.8% of sales compared to 12.4% in 2010.
Other
operating income and expenses decreased to SEK 1.3 (2.0) b. in 2011.
Operating income, excluding joint ventures, decreased to SEK 4.1 (8.4) b.
in the
quarter, due to changed business mix and a larger share of services sales.
Operating margin decreased to 6.4% (13.4%) year-over-year and sequentially
from
11.3%.
In 2011, operating income, before joint ventures, was SEK 21.7 (24.4) b.
Adjusted for restructuring charges operating income amounted to SEK 24.9 b.
Operating margin before joint ventures declined to 9.6% (12.0%) due to
lower
gross margin and the fact that restructuring charges is included in 2011
figures. Operating margin adjusted for restructuring charges was 11.0% in
2011.
In the fourth quarter, Ericsson's share in earnings of joint ventures,
before
tax, was SEK -1.9 (-0.3) b., compared to SEK -0.6 b. in the third quarter
2011
due to significantly lower result in Sony Ericsson. Ericsson's share in
Sony
Ericsson's result was SEK -1.1 (0.2) b. and in ST-Ericsson SEK -0.8 (-0.5)
b.
For the full year, Ericsson's share in earnings from joint ventures
decreased to
SEK -3.8 (-0.7) b. as a result of negative contribution from both Sony
Ericsson
and ST-Ericsson. The agreed cash consideration of EUR 1.05 b. for
Ericsson's
50% share in Sony Ericsson will not be impacted by 2011 year's result.
Financial net amounted to SEK -0.3 (-0.3) b. in the quarter and decreased
sequentially with SEK -0.5 b., mainly related to negative currency exchange
revaluation effects. For 2011 financial net was SEK 0.2 (-0.7) b. The
difference
is mainly attributable to a higher interest net of SEK 0.8 b. compared to
2010.
The tax rate in the quarter was 18% as a result of revalued tax assets. For
the
full year, the tax rate was 31%.
Net income decreased year-over-year to SEK 1.5 (4.4) b. due to lower sales
volumes in networks, lower gross margin and losses related to Sony
Ericsson.
Sequentially net income decreased from SEK 3.8 b to 1.5 b. mainly due to
lower
gross margin and losses related to Sony Ericsson. For the full year, net
income
increased to SEK 12.6 (11.2) b. driven by higher sales and lower
restructuring
charges.
Earnings per share were SEK 0.36 (1.34) in the quarter. Earnings per share,
Non-IFRS, diluted, i.e. excluding amortizations and write-downs of acquired
intangibles, were SEK 0.55 (1.65) in the quarter, down -67%. For the full
year,
earnings per share increased 9% to SEK 3.77 (3.46).
The Board of Directors proposes a dividend for 2011 of SEK 2.50 (2.25),
reflecting 2011 year's earnings and balance sheet structure, as well as
coming
years' business plans and expected economic development.
Adjusted operating cash flow was SEK 6.0 (16.2) b. in the quarter and cash
flow
from operations was SEK 5.5 (15.2) b. The weaker cash flow compared to the
last
quarter 2010 is mainly explained by a strong quarter last year, lower
profit and
higher working capital build up due to more projects. For the full year,
adjusted cash flow was SEK 13.2 (29.8) b. and cash flow from operations was
SEK
10.0 (26.6) b. During 2011, cash flow was negatively impacted by a
significant
increase in working capital as a result of higher sales and more projects.
As a
result, cash conversion ended at 40% (112%).
Trade receivables decreased sequentially to SEK 64.5 b. from SEK 65.6 b.
Compared to December 31, 2010 trade receivables have increased by SEK 3.4
b. as
a result of higher sales volumes. Days sales outstanding (DSO) decreased
from
106 to 91 days sequentially and increased from 88 the same period last
year.
Inventory decreased sequentially by SEK 5.6 b. to SEK 33.1 b. The earlier
higher
inventory level that followed the Japan earthquake has been reduced in the
quarter. That effect, in combination with increased sales, resulted in a
reduction of inventory turnover days from 91 to 78 days. For the full year,
inventory has increased by SEK 3.2 b. which is related to increased sales
and
increased share of coverage projects.
Cash, cash equivalents and short-term investments increased sequentially by
SEK
3.6 b. and decreased SEK -6.6 b. full year to SEK 80.5 b.
During the quarter, approximately SEK 1.5 b. of provisions was utilized, of
which SEK 0.5 b. related to restructuring. Additions of SEK 0.8 b. were
made, of
which SEK 0.2 b. related to restructuring. Reversals of SEK 0.8 b. were
made of
which SEK 0.1 b. related to restructuring. Cash outlays for restructuring
amounted to SEK 0.5 b. in the quarter. Cash outlays of SEK 1.3 b. remain to
be
made.
In 2011, SEK 6.0 b. of provisions was utilized, of which SEK 3.2 b. related
to
restructuring. Additions of SEK 4.8 b. were made, of which SEK 1.8 b.
related to
restructuring. Reversals of SEK 1.9 b. were made of which 0.4 b. related to
restructuring.
Total number of employees at the end of the year amounted to 104,525
(90,261),
an increase by 3,635 from end September, 2011, mainly related to our
services
business, primarily in India and Brazil. For the full year the net number
of
employees increased by 14,264, of which 12,330 in services, 1,770 in R&D
and
995 in supply. In other job areas, there were reductions or flat
development in
the number of employees. In 2011, 1,334 people joined Ericsson through
acquisitions and 3,775 through managed services agreements.
Networks sales in the quarter were SEK 33.3 (36.4) b., a decline of -9%
year-over-year and up 2% sequentially. The slow development in the quarter
is mainly
related to North America and Russia. North America, down -27% sequentially,
was
impacted by operator consolidation, technology shift from CDMA to LTE as
well as
a slower pace after a period of high operator investments in network
capacity.
In addition, we saw some increased operator cautiousness during the quarter
due
to uncertainties such as economic development and political unrest in
certain
countries.
For the full year, Networks sales increased 17%, driven by a strong demand
for
mobile broadband, especially in regions China and North East Asia as well
as
North America. Our strategy to focus on growth in the mobile broadband
business
has been successful and during the year we have gained market share. This
gain
is a result of long-term partnerships with successful operators as well as
captured footprint with new and existing customers.
In 2010 we acquired Nortel's CDMA business in order to strengthen our
position
in North America. Ericsson is now established as the market leader in this
market and we now see the expected decline in CDMA sales and subsequent
rapid
shift to LTE. CDMA sales increased slightly for the full year, but declined
in
the quarter year-over-year and sequentially. The CDMA acquisition has
created
substantial value for the company. In the quarter the CDMA decline impacted
margins negatively due to the change in business mix from capacity
investments
to LTE coverage.
In the fourth quarter, the first RBS6000 with CDMA functionality was
shipped.
RBS6000 now accounts for close to 100% of all deliveries of GSM/WCDMA/LTE
radio
base stations. Shipping of the IP Edge router, Smart Service Router SSR
8020,
and the Antenna Integrated Radio unit (AIR) also commenced in the quarter.
EBITA margin in the quarter decreased year-over-year to 10% (18%) due to
lower
volumes, higher degree of coverage projects, modernization projects in
Europe
and planned R&D investments to accelerate technology leadership. The same
factors caused the sequential drop in margin from 16%. For the full year,
EBITA
margin decreased to 16% (18%) due to business mix. The full year number is
impacted by restructuring charges of 1%-point.
Global Services sales in the quarter were SEK 27.0 (22.9) b., an increase
of
18% year-over-year and 32% sequentially. In 2011, Global Services sales
increased 5% to SEK 83.9 (80.1) b., driven by network rollout, consulting
and
systems integration.
Professional Services sales were SEK 18.1 (16.7) b. in the quarter, up 8%
year-over-year and 23% sequentially. The year-over-year increase is due to
increased
managed services sales, while the sequential increase mainly relates to
strong
development in consulting and systems integration. Currency adjusted sales
of
Professional Services increased year-over-year 12%. In the quarter, ten
significant systems integration contracts were signed in the areas of
OSS/BSS,
Service Delivery Platforms and data center build projects. In 2011, sales
were
up 1% and increased 7% in local currencies. In 2011, more than 60% of
Professional Services sales were recurring.
Managed Services sales increased by 13% year-over-year to SEK 6.0 (5.4) b.
and
14% sequentially, mainly driven by India and Latin America. Currency
adjusted
Managed Services sales increased 17% year-over-year. The sequential growth
is
reflecting the 14 new managed services contracts signed in the third
quarter. In
the fourth quarter, 23 (16) new managed services contracts were signed, of
which
12 (5) were extensions or expansions. In 2011, sales decreased slightly -1%
to
SEK 21.0 (21.1) b. although it increased 7% in local currencies. In 2011,
70
(54) contracts were signed, of which 32 (26) extensions or expansions.
Network Rollout sales amounted to SEK 8.9 (6.2) b. in the quarter, an
increase
of 44% year-over-year and 56% sequentially, driven by high volumes of
network
modernization in Europe and coverage projects in other regions. In 2011,
sales
increased 16% to SEK 25.1 (21.6) b.
Global Services' EBITA margin decreased in the quarter to 6% (13%)
year-over-year and decreased sequentially from 9%. Network Rollout margins
are still
negative primarily due to high activity levels related to network
modernization
in Europe. The margin impact on Global Services from restructuring charges
was
2%-points in the quarter. EBITA margin for the full year was 7% (12%) with
an
impact of 2%-points from restructuring charges in the 2011 margin.
EBITA margin for Professional Services amounted to 14% (16%) in the
quarter.
Margin was flat sequentially at 14%. Excluding the impact of restructuring
charges of 1%-point in the quarter, margin was flat also year-over-year.
EBITA
margin for the full year was 14% (16%) with an impact of 2%-points from
restructuring charges in the 2011 margin.
Ericsson provides support for networks that serve more than two billion
subscribers worldwide. The total number
of subscribers in networks managed by Ericsson is 900 (750) million, of
which
500 (450) million in network operation contracts and 400 (300) million in
field
operations. The number of services professionals employed amounts to
56,000.
Multimedia sales in the quarter decreased -2% year-over-year and increased
33%
sequentially. Sequentially, multimedia brokering and TV showed good
development.
For the full year, sales were flattish, negatively impacted by political
unrest
in Middle East and weak development in India.
EBITA margin decreased to 6% (16%) in the quarter due to unfavorable
product mix
with relatively lower sales of revenue management. Full year EBITA margin
amounted to 2% (3%). Restructuring charges had no material impact on either
period. Efficiency measures are still top on the agenda in order to improve
profitability.
The integration of Telcordia will now start and with this acquisition
Ericsson
holds a leading position in the OSS/BSS market. Telcordia generated
revenues of
USD 739 m. during the fiscal year ended January 31, 2011. Telcordia is
expected
to be accretive to Ericsson's earnings per share within twelve months.
Sony Ericsson's fourth quarter loss reflects intense competition, price
erosion
and restructuring charges. The quarter was also impacted by unfavorable
macro
economic conditions and effects from the flooding in Thailand.
Restructuring
charges of EUR 93 m. impacted the quarter, including global workforce
reductions. Sales of Android-based smartphones increased 65%
year-over-year.
Cash flow from operating activities during the quarter was negative EUR -26
million. External borrowings were EUR 19 m. during the quarter resulting in
total borrowing of EUR 742 m. at year-end. Total cash balances at year-end
were
EUR 442 m.
Sony Ericsson estimates that its share in the global Android-based
smartphone
market during the quarter was 10% in volume and 7% in value and for the
full
year 10% in volume and 10% in value.
Ericsson's share in Sony Ericsson's income before tax was SEK -1.1 (0.2) b.
in
the quarter and SEK -1.2 (0.7) b. for the full year.
October 27, 2011, it was announced that Sony Corporation will acquire
Ericsson's
50% share of Sony Ericsson and that Sony Ericsson will become a
wholly-owned
subsidiary of Sony. The transaction is expected to close in late January to
February, subject to customary closing conditions, including regulatory
approvals.
ST-Ericsson's sales was flat sequentially and decreased -29%
year-over-year. For
the full year sales declined by -28% as a result of decreased sales in
legacy
products. The net financial position at the end of the quarter was negative
USD
-798 m.
ST-Ericsson is reported in US GAAP and Ericsson's share in ST-Ericsson's
income
before tax, adjusted to IFRS, decreased year-over-year and sequentially to
SEK
-0.8 (-0.5) b. in the quarter. For the full year, the operating loss was
SEK
-2.7 (-1.8) b. due to lower sales.
By the end of the quarter ST-Ericsson had utilized USD 800 m. of the
short-term
credit facility granted on a 50/50 basis by the parent companies.
ST-Ericsson is currently in a shift from legacy to new products. Though
their
path to success is challenging, ST-Ericsson is continuing to focus on
securing
the successful execution and delivery of their new products to customers
while
lowering its break-even point.
The changes in the business environment at a large customer during 2011
have
reduced demand for legacy products and are delaying the ramp of new
products
with that customer. As ST-Ericsson does not yet have the adequate level of
sales, the company's path to improve its financial performance is expected
to
take longer. Additionally, ST-Ericsson has recently increased its focus on
execution.
In light of the current business environment, ST-Ericsson's recently
appointed
CEO is reviewing the company's strategic plan and financial prospects.
Ericsson,
together with our partner STMicroelectronics, is firmly committed to
support
ST-
Ericsson in the transition to turn-over to sustainable profitability and
cash
generation.
As a result of this strategic review, we may consider additional actions to
solidify and accelerate ST-Ericsson's path to profitability. In such an
event,
or in case of a significant worsening of business' prospects, the value of
ST-
Ericsson for Ericsson could decrease to a value significantly lower than
the
current carrying amount of ST-Ericsson on our books and we may be required
to
take an impairment charge.
North America sales decreased -20% year-over-year, -7% sequentially and -1%
for
the full year. The decline is related to a drop in networks sales, while
services and multimedia developed favorably. The sequential growth in
services
sales was 19% driven by market share gains and a high level of project
executions. As previously communicated, the networks business developed
slower
in the second half of 2011 after a period of high operator investments in
network capacity along with operators focus on cash flow management as well
as
negative impacts from operator consolidation. The CDMA sales declined
sequentially and year-over-year as a result of the ongoing rapid technology
shift to LTE. With increases in mobile devices and data usage there is a
continued need for investments in mobile broadband in both HSPA and LTE.
Latin America sales increased 16% year-over-year, 17% sequentially and 23%
for
the full year. Year-over-year, Networks and Global Services increased while
Multimedia dropped. For the full year, all segments grew. Operators show an
increasing interest in network performance.
Northern Europe and Central Asia sales decreased -22% year-over-year,
increased
7% sequentially and 25% for the full year. The slowdown in Networks sales
is
especially visible in Russia, following strong operator investments in
network
capacity and coverage during the first half of 2011. Services showed strong
growth compared to last quarter 2010 as well as sequentially and for the
full
year due to project completions. In multimedia, sales declined
year-over-year
due to lower sales of revenue management although sales picked up compared
to
the third quarter.
Western and Central Europe sales decreased -11% year-over-year, increased
14%
sequentially and decreased -4% for the full year. Sequentially, sales in
all
segments increased, but declined for the full year. The positive sequential
development is driven by continued rollout of network modernization
projects as
well as demand for managed services.
Mediterranean sales increased 19% year-over-year, 58% sequentially and 5%
for
the full year. Networks sales increased year-over-year and sequentially
although
it was flat for the full year. Networks positive development in the quarter
is
due to market share gains, following contract wins in network modernization
deals. Services sales showed good development in all periods as a result of
network rollout related to network modernization and systems integration
projects. Multimedia developed well in the quarter, following good sales of
multimedia brokering.
Middle East sales increased 12% year-over-year, 42% sequentially and 2% for
the
full year. Sequentially, there was a strong development in all segments.
Saudi
Arabia developed especially favorably in the quarter although the region
was
still negatively impacted by political unrest in many countries with
operators
continuing to be cautious with infrastructure investments. LTE is being
deployed
in parts of the region and WCDMA/HSPA continued to develop positively
across the
region, resulting in positive networks sales both year-over-year,
sequentially
and for the full year. Services also developed favorably since operators
are
looking into opportunities to increase efficiencies.
Sub-Saharan Africa sales increased 59% year-over-year, 28% sequentially and
11%
for the full year, primarily due to increased build-out of networks to meet
demand for capacity and quality. The use of mobile data generating services
is
increasing which drive operators to focus on transmission capacity as well
as
investments in higher speeds.
India sales decreased -46% year-over-year, -33% sequentially and increased
13%
for the full year. Networks sales were positively impacted by the initial
3G
rollouts in the first half of the year. Regulatory uncertainty,
particularly
around mergers and acquisitions as well as spectrum trading policy,
contributed
to a slowdown in infrastructure investments in the second half of the year.
The
telecom market is fragmented and cost competitive, which has created a
renewed
focus among operators on reducing operating expenses. This has resulted in
a
growing managed services business for Ericsson.
China and North East Asia sales increased 15% year-over-year, 13%
sequentially
and 47% for the full year. The year-over-year increase is mainly related to
broad introduction of smartphones by all operators leading to continuous
growth
in mobile broadband in the region together with steady growth of mobile
subscriptions. The extraordinary high level of GSM shipments in China
during the
first three quarters of the year, was normalized during the quarter. At the
end
of the quarter, the business mix started to change with relatively higher
share
of LTE sales in Korea and in Japan there was a substantial amount of
project
completions.
South East Asia and Oceania sales increased 2% year-over-year, 8%
sequentially
and decreased -7% for the full year. Sales of networks increased
year-over-year
and sequentially, driven by business in Australia and Thailand. The decline
for
the full year is due to reduced 2G business in Vietnam. Year-over-year and
for
the full year, the services business declined due to a concluded managed
services contract in Australia.
Other includes sales of for example embedded modules, cables, power modules
as
well as licensing and IPR. Revenues for licensing and IPR had a strong
fourth
quarter. In the quarter, Ericsson took the decision to phase out the
embedded
modules business.
Industry development
GSM network coverage has reached more than 85% of the world's population
and
more than 45% of the population has the possibility to access WCDMA/HSPA
networks. Both technologies will continue to expand its footprint going
forward
and in five years time, WCDMA/HSPA is expected to have the same coverage as
GSM
has today. Further buildout of HSPA coverage will be driven by the
availability
of affordable smartphones, as well as the surge in mobile broadband
services,
applications and faster speeds. More than 70% of the commercial HSPA
networks
have been upgraded, at least partly, to a peak speed of 7.2 Mbps or above.
Following a strong wave of upgrades to 42 Mbps, more than 10% of the
networks
now have that speed. Several major operators have started LTE deployments
but in
terms of population coverage, LTE only covers a few percentages today. In
five
years time, it is expected that LTE will have roughly the same population
coverage as WCDMA/HSPA has today. In terms of global operator investments,
WCDMA/HSPA will remain the leading mobile access technology for many years
to
come.
Yearly WCDMA/HSPA radio access network investments passed GSM investments
in
2009, eight years after the 3G introduction in Western Europe. Co-existence
of
GSM, WCDMA/HSPA, CDMA2000 and 4G/LTE and increasing number of frequency
bands
pave the way for investments in multi-standard solutions and networks
modernization.
In addition to radio investments, the strong growth in mobile and fixed
broadband drives need for higher capacity in areas such as backhaul,
aggregation, transport, and routing based on IP and Ethernet technologies.
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 enables operators to provide premium quality and differentiating
offerings to the end users. Recognizing that quality of service is becoming
more
important, some operators now differentiate by deploying superior networks
emphasizing end user experience and quality. This also drives demand for
services targeting the operational efficiency of operators, such as
consulting,
including network optimization, systems integration and managed services.
End user trends
Global mobile penetration is 85% and total mobile subscriptions are around
6
billion. The number of subscribers/users is likely around 4.1 billion,
representing 60% of the world's population. Around 75% of the
subscriptions, or
4.5 billion, are GSM while only 15% are WCDMA/HSPA subscriptions.
Year-over-year
growth was roughly 13%. India and China accounted for approximately 35% of
the
estimated 180 million net additions during the fourth quarter. Bangladesh,
Brazil and Indonesia follow in terms of net addition. There is continued
strong
momentum for uptake of smartphones in all regions; approximately 30% of all
handsets sold in 2011 were smartphones, compared to around 20% for 2010.
However, out of the installed base of subscriptions worldwide only around
10%
use smartphones, which means that there is a big room for further uptake.
Global fixed broadband subscriptions grew by 17 million to reach 577
million by
the end of the third quarter 2011. Massive deployments of DSL and FTTH/B
(fiber
to the home/building) in China alone accounts for around 50% of fixed
broadband
additions. DSL still represents more than 60% of all fixed broadband
subscriptions globally but FTTH/B have caught up with DSL in net additions.
Tiered pricing for mobile broadband is now a reality, as many operators
today
have evolved beyond flat-rate unlimited data models and introduced
segmented
price plans, such as volume-, time- or speed-based plans. Segmented data
price
plans intend to attract a wide variety of data users and differentiate the
offering, in order to maximize data revenues and to grow total service
revenues.
Traffic load and traffic pattern differ significant between networks and
countries, with higher than average usage in e.g. North America. It is
worth
mentioning that North America also has much higher voice minutes per user
compared with other regions, possibly due to their different tariff
structures.
An average world mobile PC user currently generates about 2 Gbyte per
month,
while a high traffic smartphone generates approximately 500 Mbyte per month
and
the usage has been increasing over time. Going forward, the strong uptake
of
tablets will further stimulate traffic growth. For all device types,
measurements show that video streaming and web browsing are the
applications
that generate the largest share of the traffic. The amount of traffic
generated
over WiFi varies between different types of devices.
PARENT COMPANY INFORMATION
Income after financial items was SEK 4.4 (6.8) b, including group
contribution
to subsidiaries of SEK 2.0 b. A write-down of investments in subsidiaries
of SEK
1.3 b. was made during the quarter.
Major changes in the Parent Company's financial position for the year
include;
decreased cash, cash equivalents and short-term investments of SEK 12.7 b.,
increased current and non-current receivables from subsidiaries of SEK 2.7
b.
and decreased current liabilities to subsidiaries of SEK 7.8 b. At the end
of
the quarter, cash, cash equivalents and short-term investments amounted to
SEK
58.9 (71.6) b. Guarantees to Sony Ericsson Mobile Communications AB are
reported
as contingent liabilities and amounted to SEK 2.0 (1.1) b. By the end of
the
quarter ST-Ericsson had utilized USD 400 million of a short-term credit
facility.
In accordance with the conditions of the long-term variable compensation
program
(LTV) for Ericsson employees, 3,034,363 shares from treasury stock were
sold or
distributed to employees during the fourth quarter. The holding of treasury
stock at December 31, 2011, was 62,846,503 Class B shares.
DIVIDEND PROPOSAL
The Board of Directors will propose to the Annual General Meeting a
dividend of
SEK 2.50 (2.25) per share, representing some SEK 8.2 (7.4) b., and May 8,
2012,
as record day for payment of dividend. The dividend is reflecting 2011
year's
earnings and balance sheet structure, as well as coming years' business
plans
and expected economic development.
ANNUAL GENERAL MEETING OF SHAREHOLDERS
The Annual General Meeting of shareholders will be held on May 3, 2012,
15.00
(CET) at Kistamässan in Kista, Stockholm, Sweden.
ANNUAL REPORT
The annual report will be made available on our website
and at
the Ericsson headquarters, Torshamnsgatan 23, Stockholm, around mid-March.
OTHER INFORMATION
Sony to acquire Ericsson's 50% share of Sony Ericsson
On October 27, 2011, it was announced that Sony Corporation will acquire
Ericsson's 50% stake in Sony Ericsson Mobile Communications, making the
mobile
handset business a wholly-owned subsidiary of Sony. As part of the
transaction,
Ericsson will receive a cash consideration of EUR 1.05 b. The transaction
also
provides Sony with a broad IP cross-licensing agreement and ownership of
five
essential patent families. Sony and Ericsson will also create a wireless
connectivity initiative to drive connectivity across multiple platforms.
The
transaction is expected to close in late January to February, subject to
customary closing conditions, including regulatory approvals.
Changes in Ericsson's Executive Leadership Team
On October 28, 2011, Ericsson announced that Magnus Mandersson was
appointed
Executive Vice President. In parallel to the appointment, which was
effective
November 1, 2011, Mandersson retained his previous role as Head of Business
Unit
Global Services and as member of the Executive Leadership Team.
On December 12, 2011, Ericsson announced that Håkan Eriksson, will
take on a new
role as Head of Ericsson in Australia, New Zealand and Fiji, effective
February
1, 2012, at which time he will also leave Ericsson's Executive Leadership
Team.
On December 14, 2011, Ericsson announced that Cesare Avenia, Chief Brand
Officer, would step down and leave the Ericsson Leadership Team as of
December
21, 2011. No replacement as Chief Brand Officer will be recruited.
POST-CLOSING EVENTS
Closing of Telcordia acquisition
On January 12, 2012, Ericsson announced that it had completed the
acquisition of
Telcordia, a global leader in the development of mobile, broadband and
enterprise communications software and services, for USD 1.15 billion in an
all
cash transaction, on a cash and debt-free basis. The acquisition is
expected to
be accretive to Ericsson's earnings per share within twelve months.
Telcordia is
fully consolidated by Ericsson and its approximately 2,600 skilled
employees
have joined Ericsson.
Telcordia is headquartered in Piscataway, New Jersey, and generated
revenues of
USD 739 million during the last fiscal year ended January 31, 2011.
Telcordia
will be managed by business unit Multimedia but sales and results will be
split
between segments Multimedia and Global Services pending portfolio mix.
Appointment of new Chief Technology Officer
On January 20, 2012, Ericsson announced the appointment of Ulf Ewaldsson as
Senior Vice President, Chief Technology Officer, Head of Group Function
Technology and Portfolio Management. The appointment is effective from
February
1, 2012, at which date Ewaldsson will also join the Ericsson Executive
Leadership Team. Ewaldsson is currently Head of Product Area Radio within
Ericsson's Business Unit Networks and a member of Ericsson's research
board.
Assessment of risk environment
Ericsson's operational and financial risk factors and uncertainties along
with
our strategies and tactics to mitigate risk exposures or limit unfavorable
outcomes are described in our Annual Report 2010. Compared to the risks
described in the Annual Report 2010, no material new or changed risk
factors or
uncertainties have been identified in the quarter.
Risk factors and uncertainties in focus during the forthcoming nine-month
period
for the Parent Company and the Ericsson Group include:
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.
Stockholm, January 25, 2012
Telefonaktiebolaget LM Ericsson (publ)
Org. Nr. 556016-0680
Board of Directors
Date for next report: April 25, 2012
AUDITORS' REVIEW REPORT
We have reviewed this report for the period January 1, 2011, to December
31, 2011, for Telefonaktiebolaget LM Ericsson (publ). The board of
directors and
the CEO are responsible for the preparation and presentation of this
financial
information in accordance with IAS 34 and the Swedish Annual Accounts Act.
Our
responsibility is to express a conclusion on this financial information
based on
our review.
We conducted our review in accordance with the Swedish Standard on Review
Engagements SÖG 2410, Review of Interim Report Performed by the
Independent
Auditor of the Entity. 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 International Standards on
Auditing
(ISA) and other generally accepted auditing standards in Sweden. The
procedures
performed in a review do not enable us to obtain assurance that we would
become
aware of all significant matters that might be identified in an audit.
Accordingly, we do not express an audit opinion.
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, January 25, 2012
PricewaterhouseCoopers AB
Peter Nyllinge
Authorised Public Accountant
EDITOR'S NOTE
To read the complete report with tables, please go to:
Ericsson invites media, investors and analysts to a press conference at the
Ericsson Studio, Grönlandsgången 4, Stockholm, at 09.00 (CET),
January
25, 2012. An analysts, investors and media conference call will begin at
14.00
(CET).
Live webcast of the press conference and conference call as well as
supporting
slides will be available at and
Video material will be published during the day on
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
January 25, 2012.
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.
Fourth quarter 2011:
This announcement is distributed by Thomson Reuters on behalf of
Thomson Reuters clients. The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and
other applicable laws; and
(ii) they are solely responsible for the content, accuracy and
originality of the information contained therein.
Source: Ericsson via Thomson Reuters ONE
[HUG#1579912]
FOR FURTHER INFORMATION, PLEASE CONTACT
Helena Norrman
Senior Vice President, Communications
Phone: +46 10 719 3472
E-mail: or
Investors
Åse Lindskog
Vice President, Head of Investor and Analyst Relations
Phone: +46 10 719 9725, +46 730 244 872
E-mail:
Stefan Jelvin
Director, Investor Relations
Phone: +46 10 714 2039
E-mail:
Åsa Konnbjer
Director, Investor Relations
Phone: +46 10 713 3928
E-mail:
Rikard Tunedal
Director, Investor Relations
Phone: +46 10 714 5400
E-mail:
Media
Ola Rembe
Vice President, Head of Corporate Public and Media Relations
Phone: +46 10 719 9727, +46 730 244 873
E-mail:
Corporate Public & Media Relations
Phone: +46 10 719 69 92
E-mail:
Telefonaktiebolaget LM Ericsson (publ)
Org. number: 556016-0680
Torshamnsgatan 23
SE-164 83 Stockholm
Phone: +46 10 719 0000
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