Ericsson second quarter results
(Thomson Reuters ONE) -
CEO COMMENT
"Group sales in the quarter declined -8% year-over-year with lower sales in
Networks. Sales in Global Services were flat due to decline in network rollout
although Professional Services increased 5%," says Hans Vestberg, President and
CEO of Ericsson (NASDAQ:ERIC).
"Group sales increased sequentially by 6%. Sales for comparable units, adjusted
for currency exchange rate effects and hedging declined year-over-year -15%.
Operators showed a continued good demand for mobile broadband driven by
smartphone and laptop usage. Sales were however impacted by continued industry
component shortages and supply chain bottlenecks. We estimate that this had a
negative impact on our sales in the quarter by SEK 3-4 b.
Gross margin improved year-over-year and sequentially due to business mix and
efficiency gains. Cash flow declined year-over-year, mainly due to increased
working capital. Sony Ericsson continued to show improved results and
ST-Ericsson's transition program is on track.
Net income improved year-over-year and sequentially, positively impacted by
improved earnings in Sony Ericsson.
The market conditions we saw in the second half of 2009 with mixed operator
investment behavior prevailed also in the first half of this year. In the
quarter all regions, except North America, showed lower year-over-year sales.
Meanwhile, sequential sales showed a more mixed picture with growth in regions
such as Mediterranean, North America, Northern Europe and Central Asia, as well
as Sub-Saharan Africa.
Over the past years, we have gone through major changes with cost reductions and
strengthened portfolio and market presence while maintaining our technology
leadership. The cost reduction program, initiated in the first quarter 2009 has
been completed, reaching its target. Going forward, cost and capital efficiency
will remain top of our agenda," concludes Hans Vestberg.
Second quarter First quarter Six months
SEK b. 2010 2009 Change 2010 Change 2010 2009 Change
Net sales 48.0 52.1 -8% 45.1 6% 93.1 101.7 -8%
Gross margin 39% 36% - 39% - 39% 36% -
EBITA margin excl
JVs(1)) 14% 13%(3)) - 13% - 13% 13%(3)) -
Operating income excl
JVs 5.3 6.1(3)) -12% 4.5 17% 9.9 10.8(3)) -9%
Operating margin excl
JVs 11% 12%(3)) - 10% - 11% 11%(3)) -
Ericsson's share in
earnings in JVs -0.1 -2.0 - -0.3 - -0.4 -4.2 -
Income after financial
items 5.1 4.8 4% 4.1 23% 9.2 8.2 12%
Net income 2.0 0.8 154% 1.3 59% 3.3 2.6 26%
EPS diluted, SEK 0.58 0.26 123% 0.39 49% 0.98 0.79 24%
Adjusted cash flow(2)) -2.0 9.9 - 3.0 - 1.0 8.3 -
Cash flow from
operations -2.7 9.1 - 2.3 - -0.4 6.3 -
Restructuring charges
excl JVs 2.0 3.6 - 2.2 - 4.2 4.3 -
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 (0.8) b. For the first
quarter, cash outlays amounted to SEK 0.7 b.
(3)) Second quarter 2009 excl. capital gain of SEK 0.8 b from divested TEMS
services operation.
FINANCIAL HIGHLIGHTS
Income statement and cash flow
Sales in the quarter were down -8% year-over-year and increased 6% sequentially.
Sales for comparable units, adjusted for currency exchange rate effects and
hedging, declined -15% year-over-year. The net impact of currency exchange rate
effects and hedging was slightly negative. Sales were impacted by continued
industry component shortages and supply chain bottlenecks. We estimate that this
had a negative impact on our sales in the quarter by SEK 3-4 b.
During the quarter, operators in a number of developing markets were still
cautious with investments which impacted sales in Networks, Network Rollout and
Multimedia. This was partly offset by increased sales in Professional Services
and especially in Managed Services.
Gross margin, excluding restructuring, improved slightly sequentially and
improved year-over-year to 39% (36%) due to business mix and efficiency gains.
The cost reduction activities have reduced operating expenses as planned.
However, integration of the acquired CDMA and GSM businesses, higher investments
in certain R&D areas and growing number of 4G/LTE trials, have resulted in an
increase in operating expenses to SEK 13.9 (13.6) b., excluding restructuring
charges. Other operating income and expenses were SEK 0.5 (1.6) b. in the
quarter. Last year includes a capital gain of SEK 0.8 b. from the divested TEMS
services operation.
Operating income, excluding joint ventures and restructuring charges, amounted
to SEK 5.3 (6.1) b., including positive contribution from the acquired CDMA and
GSM businesses. The year-over-year decline is mainly due to lower sales.
Operating margin declined to 11% (12%) for the same reason. Sequentially, the
margin improved due to increased sales and efficiency gains. The capital gain of
SEK 0.8 b. from the divested TEMS services operation is excluded from the 2009
numbers.
Ericsson's share in earnings of joint ventures, before tax, amounted to SEK -0.1
(-2.0) b. excluding restructuring charges, compared to SEK -0.3 b. in the first
quarter. Sequentially, Sony Ericsson improved sales and margins significantly
due to efficiency programs and new products. ST-Ericsson's sales declined
sequentially, however the loss remained at the same level, positively impacted
by efficiency programs. Restructuring charges in joint ventures were SEK 0.2 b.
in the quarter.
Financial net was SEK -0.1 (-0.1) b., mainly due to low interest rates and
negative currency revaluation effects on financial assets and liabilities.
Net income amounted to SEK 2.0 (0.8) b. and earnings per share were SEK 0.58
(0.26) in the quarter.
Adjusted cash flow was SEK -2.0 (9.9) b. in the quarter, down sequentially from
SEK 3.0 b. Cash flow from operations decreased mainly due to increased working
capital as a result of tight components supply conditions which led to
deliveries late in the quarter.
Balance sheet and other performance indicators
Dec 31 Mar 31 June 30
SEK b. 2009 2010 2010
Net cash 36.1 38.5 25.8
Interest-bearing liabilities and post-employment benefits 40.7 39.3 41.8
Trade receivables 66.4 62.7 69.4
Days sales outstanding 106 117 133
Inventory 22.7 24.1 29.4
Of which regional inventory 12.9 14.0 18.3
Inventory days 68 75 81
Payable days 57 59 61
Customer financing, net 2.3 2.9 3.1
Return on capital employed 4% 5% 6%
Equity ratio 52% 53% 51%
Trade receivables increased sequentially by SEK 6.7 b. to SEK 69.4 (62.7) b. and
days sales outstanding (DSO) increased from 117 to 133 days impacted by higher
proportion of deliveries late in the quarter and currency exchange effects. The
consolidation of the LG-Nortel operation impacted trade receivables by SEK 1.0
b.
Inventory increased sequentially by SEK 5.3 b. to SEK 29.4 (24.1) b. and
inventory turnover days increased by six days from 75 to 81 days, impacted by
continued component shortages and supply chain bottlenecks. The consolidation of
the LG-Nortel operation impacted inventory by SEK 1.0 b.
Cash, cash equivalents and short-term investments amounted to SEK 67.6 (77.9) b.
The net cash position decreased sequentially by SEK 12.7 b. to SEK 25.8 (38.5)
b., due to pay out of dividend of SEK 6.4 b., the acquisition of Nortel's part
of LG-Nortel and negative cash flow from operations as a result of increased
working capital.
During the quarter, approximately SEK 1.5 b. of provisions were utilized, of
which SEK 0.7 b. related to restructuring. Additions of SEK 2.4 b. were made, of
which SEK 1.3 b. related to restructuring. Reversals of SEK 0.3 b. were made.
Cost reduction program
The cost reduction program, initiated in first quarter 2009, has been completed
by the second quarter 2010. The total annual savings of the program are
estimated to SEK 15-16 b. from the second half of 2010. Of total restructuring
charges of SEK 15.5 b., about SEK 6.0 b. is related to cost of sales and SEK
9.5 b. to operating expenses.
In the second quarter, restructuring charges, excluding joint ventures, amounted
to SEK 2.0 b. At the end of the quarter, cash outlays of SEK 4.7 b. remain to be
made.
2010 2010 2009
Restructuring charges, SEK b. Q2 Q1 Full year
Cost of sales -1.0 -0.8 -4.2
Research and development expenses -0.6 -0.3 -6.1
Selling and administrative expenses -0.4 -1.1 -1.0
Total -2.0 -2.2 -11.3
SEGMENT RESULTS
Second quarter First quarter Six months
SEK b. 2010 2009 Change 2010 Change 2010 2009 Change
Networks sales 25.5 28.8 -12% 24.7 3% 50.2 57.6 -13%
EBITA margin(1)) 17% 14% - 16% - 16% 14% -
Operating margin 13% 12% - 12% - 13% 12% -
Global Services sales 20.1 20.0 0% 18.1 11% 38.2 37.5 2%
Of which Professional 14.1 13.3 26.9
Services 14.8 5% 12% 28.1 5%
Of which Managed 4.6 4.9 8.8
Services 5.6 23% 15% 10.5 20%
Of which Network Rollout 5.2 5.9 -12% 4.8 8% 10.1 10.6 -5%
EBITA margin(1)) 12% 12%(2)) - 12% - 12% 11%(2)) -
Of which Professional 16%(2)) 16% 16%(2))
Services 15% - - 16% -
Operating margin 12% 12%(2)) - 11% - 11% 11%(2)) -
Of which Professional 16%(2)) 15% 15%(2))
Services 15% - - 15% -
Multimedia sales 2.4 3.3 -27% 2.3 5% 4.7 6.6 -28%
EBITA margin(1)) -5% 15% - -5% - -5% 12% -
Operating margin -13% 9% - -13% - -13% 5% -
Total sales 48.0 52.1 -8% 45.1 6% 93.1 101.7 -8%
All numbers exclude restructuring charges.
(1)) EBITA - Earnings before interest, tax, amortizations and write-downs of
acquired intangibles.
(2)) Second quarter 2009 excl. capital gain of SEK 0.8 b from divested TEMS
services operation.
Networks
Networks' sales in the quarter declined by -12% year-over-year. Voice related
sales, such as 2G access and circuit switched core continued to decline.
Increased mobile broadband sales (3G), including radio, backhaul and packet
core, partly offset this impact. CDMA continued to develop favorably. Similar to
the first quarter segment sales were negatively impacted by continued component
shortages and supply chain bottlenecks.
The strong data traffic uptake is creating
transmission bottlenecks and demand for microwave based backhaul solutions was
strong in the quarter.
EBITA margin in the quarter increased year-over-year to 17% (14%) despite lower
sales, positively impacted by continued efficiency gains and business mix with a
high proportion of network expansions.
The multi standard radio base station RBS 6000 has been well received by
customers and is now shipping in volumes. In the quarter, the world's first
commercial 42 Mbit/s HSPA network was launched with Ericsson equipment. There
was continued good demand for IP infrastructure based on the SmartEdge platform.
The same platform is used in Ericsson's converged packet gateway which is part
of the mobile packet core for 4G/LTE.
Global Services
Global Services sales were flat year-over-year, but increased 11% sequentially.
Global services sales account for some 42% of total Group sales. Professional
Services sales increased 5% year-over-year and in local currencies growth
amounted to 9% year-over-year. Managed Services sales in the quarter increased
by 23% year-over-year. Network Rollout sales decreased -12% year-over-year.
The year-over-year slow-down in growth in Global Services sales is primarily an
effect of lower network rollout activity driven by fewer turnkey projects,
continued component shortages and supply chain bottlenecks.
There is a continued good demand for services targeting the operational
efficiency of operators, such as managed services, systems integration and
consulting. Operators also show growing interest in network optimization
services, driven by mobile broadband build out, as well as revenue assurance
services. Services related to 2G voice sales developed unfavorably also this
quarter.
EBITA margin for Global Services was flat year-over-year and sequentially at
12% (12%). EBITA margin for Professional Services amounted to 15% (16%) in the
quarter and decreased slightly sequentially from 16%. Last year excludes a
capital gain of SEK 0.8 b. from the divested TEMS operations.
During the quarter, nine managed services contracts were signed of which six
were extensions or expansions of existing customer agreements.
Further proof of operators' interest in our services offering is our largest
managed services contract in China to date with China Mobile Hebei announced on
July 19.
Ericsson provides support for networks that serve more than two billion
subscribers worldwide. The total number of subscribers in managed networks is
more than 450 million, of which 50% are in high-growth markets.
Multimedia
Multimedia sales in the quarter decreased by -27% year-over-year due to
continued weak demand for revenue management solutions in regions India, Middle
East and Sub-Saharan Africa. Sales grew 5% sequentially, driven by TV and
Multimedia Brokering.
The TV business continued to show good development with strong demand for
compression technology. EBITA margin declined to -5% (15%) year-over-year as a
result of the lower sales.
Sony Ericsson
Second quarter First quarter Six months
EUR m. 2010 2009 Change 2010 Change 2010 2009 Change
Number of units shipped (m.) 11.0 13.8 -20% 10.5 5% 21.5 28.3 -24%
Average selling price (EUR) 160 122 31% 134 19% 147 121 21%
Net sales 1,757 1,684 4% 1,405 25% 3,162 3,419 -8%
Gross margin 28% 12% - 31% - 29% 10% -
Operating margin 2% -16% - 1% - 2% -19% -
Income before taxes 31 -283 - 18 - 50 -653 -
Income before taxes, excl
restructuring charges 63 -283 - 21 - 84 -640 -
Net income 12 -213 - 21 - 33 -505 -
Units shipped in the quarter were 11 million, a decrease of -20% year-over-year
and an increase of 5% sequentially. Sales in the quarter were EUR 1,757 million,
an increase of 4% year-over-year and 25% sequentially.
Average selling price in the quarter increased by 31% year-over-year due to
improved product and geographical mix, as well as currency effects.
Income before taxes for the quarter, excluding restructuring charges, was a
profit of EUR 63 (-283) million, illustrating the positive impact of the cost
reduction program and favorable product mix. As of June 30, 2010, Sony Ericsson
had a net cash position of EUR 609 million.
Ericsson's share in Sony Ericsson's income before tax was SEK 0.1 (-1.5) b. in
the quarter.
ST-Ericsson
Second quarter First quarter
USD m. 2010 2009 Change 2010 Change
Net sales 544 666 -18% 606 -10%
Adjusted operating income (1)) -118 -165 - -114 -
Operating income before taxes -148 -224 - -164 -
Net income -139 -213 - -154 -
(1) )Operating income adjusted for amortization of acquired intangibles and
restructuring charges.
Net sales decreased by -10% sequentially, reflecting the continued portfolio
transition, weaker than expected performance in Asia and some supply
limitations, which were only partially offset by a positive performance by
certain EDGE products.
The adjusted operating loss increased sequentially by USD 4 m. The impact of the
lower level of revenues was mitigated by the positive effects of the cost
savings generated in the quarter.
Net cash was USD 43 m. at the end of the quarter. During the quarter the company
sold trade receivables without recourse, of which USD 67 m. were outstanding at
the end of the quarter. The cash outflow was due to the operating loss and
payments related to the restructuring.
The restructuring plans, respectively, of USD 230 m., announced on April
29, 2009, and of USD 115 million, announced on December 3, 2009, are on track.
The USD 230 m. plan was completed with 87% of the savings realized at the end of
the second quarter, and the full effects are expected to come through in the
third quarter. The USD 115 m. restructuring plan is expected to start
contributing savings from the third quarter of 2010.
ST-Ericsson is reported in US GAAP. Ericsson's share in ST-Ericsson's income
before tax, adjusted to IFRS, was SEK -0.4 (-0.6) b. in the quarter, including
restructuring charges of SEK -19 (-140) m.
REGIONAL OVERVIEW
Second quarter First quarter Six months
Sales, SEK b. 2010 2009 Change 2010 Change 2010 2009 Change
North America 13.1 5.7 128% 9.5 37% 22.5 10.5 115%
Latin America 4.2 4.8 -12% 4.0 6% 8.2 9.2 -11%
Northern Europe and Central 2.7 2.9 -7% 2.3 16% 5.0 5.8 -14%
Asia
Western and Central Europe 4.4 5.4 -19% 5.2 -16% 9.6 10.8 -11%
Mediterranean 5.6 6.8 -17% 5.1 11% 10.7 12.9 -17%
Middle East 3.8 4.7 -20% 3.9 -4% 7.7 8.7 -11%
Sub-Saharan Africa 3.0 3.6 -19% 2.4 22% 5.4 8.3 -35%
India 1.4 3.7 -63% 2.3 -41% 3.7 7.7 -52%
China and North East Asia 4.6 7.2 -36% 5.0 -7% 9.6 13.0 -26%
South East Asia and Oceania 3.6 5.7 -36% 3.5 4% 7.2 10.9 -34%
Other 1.6 1.6 3% 1.9 -14% 3.5 3.9 -10%
Total 48.0 52.1 -8% 45.1 6% 93.1 101.7 -8%
North America sales increased 128% year-over-year and 37% sequentially. The
strong mobile data growth was further spurred by the launch of smartphones by
all leading carriers. This development drives capacity investments in mobile
broadband networks. Operators are also working on tiered price plans. In the
quarter, Ericsson started volume deliveries of 4G/LTE.
Latin America sales decreased -12% year-over-year and grew 6%
sequentially. Operator consolidation is ongoing in the region. Lower cost
smartphones has created continuous growth in mobile broadband usage, pushing
operators for investments in networks and services. LTE trials are ongoing in
the region and additional 3G licenses are still to be auctioned in Costa Rica,
Brazil and Mexico.
Northern Europe and Central Asia sales decreased by -7% year-over-year and
increased 16% sequentially. Sales of mobile network infrastructure increased
sequentially, mainly driven by major 2G expansions and 3G build-outs in the
Eastern part of the region.
Western and Central Europe sales decreased -19% year-over-year and -16%
sequentially due to cautious operator investments in parts of the region.
Development in the region showed large variations, parts of Western
Europe developed favorably while Central Europe in general was slow. Mobile
broadband usage is rapidly increasing in the region and operators are marketing
network quality and speed as a differentiator. 4G/LTE and network modernization
is high on operators' agendas and new projects will be defined in coming
quarters.
Services represented two thirds of the sales in the quarter, and operators'
focus on efficiency continued to drive a strong interest in exploring business
models such as network sharing and network transformations leading to
opportunities both in services and networks.
Mediterranean sales decreased -17% year-over-year and increased 11%
sequentially. Operator investments in Spain and Greece were low due to overall
economic environment. In order to meet demand for mobile broadband services
operators continued to focus on network modernization. Operators also have
operational efficiency high on the agenda which created good demand for managed
services and consulting.
Middle East sales decreased -20% year-over-year and by -4% sequentially.
Services sales showed a continued growth in the quarter driven by demand for
managed services. Services represented 46% of the business in the region this
quarter.
Sales development showed large variations across the region but in general
operators were cautious with investments. Egypt and Gulf Countries developed
favorably, while Turkey and Saudi Arabia were slower. Although 2G is still in
operators' focus, 3G related sales are becoming significant.
Sub-Saharan Africa sales decreased by -19% year-over-year and increased 22%
sequentially. The region continued to be impacted by the global economic
downturn with a tight credit environment. Operator consolidation is also taking
place in the region, which temporarily reduced investments. Mobile subscriptions
are developing positively with net additions for both voice and broadband
services. New mobile licenses are being selected in certain countries.
India sales decreased -63% year-over-year and -41% sequentially due to cautious
operator investments in the lead up to the 3G auctions as well as the ongoing
government initiated security clearance process. The decline in business volumes
mainly affected mobile infrastructure sales while recurring services business
maintained its good development. The auctions for 3G and broadband wireless
access operating at 2.3GHz took place in the quarter and deployments are
expected to start in the second half of the year in a highly competitive market.
China and North East Asia sales decreased -36% year-over-year and by -7%
sequentially. The year-over-year decline is related to timing of roll-out for
3G/WCDMA in mainland China. In 2009 a majority of network rollouts took place
during the first half of the year. While operators on mainland China are still
focused on successful 3G launches, operators across the region also now have
4G/LTE on the agenda. In Japan, demand for mobile broadband has had a positive
effect on sales.
On June 30, 2010, the acquisition of Nortel's part of LG-Nortel was completed.
This positions Ericsson as a leading vendor in Korea. Another milestone was the
showcase of the first complete TD-LTE solution with end-to-end capabilities
together with ST-Ericsson in China.
South East Asia and Oceania sales decreased -36% year-over-year and increased
4% sequentially. Sales of network equipment were weaker overall due to cautious
investment in a number of markets. Highlights include network expansions in
Indonesia and Bangladesh. Access to spectrum for 3G and also 4G/LTE remains a
limitation in several markets. Overall there is an increasing interest for
managed services among operators in several countries.
The region includes a mix of markets focused on long-term government sponsored
fiber deployments as well as operator investment in HSPA upgrades and 4G/LTE
trials. Other markets in the region are continuing to expand in 2G and 3G mobile
networks.
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 behavior continues to vary across regions and countries. In
markets with strong data traffic uptake, network quality and efficiencies are
high on operators' agendas.
Ericsson's addressable market was estimated to USD 350 b. in 2009 of which USD
200 b. relates to the core business mobile networks, converged networks,
services and multimedia. USD 150 b. relates to platforms and handsets.
While the global mobile infrastructure market declined by more than 10% in 2009
with continued decline in the first quarter 2010, 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.
Mobile broadband is being built-out across the world. However, HSPA still only
covers 25% of the world's population.
Ericsson findings based on measurements in live networks show that global mobile
data traffic almost doubled between Q109 to Q110. Mobile data traffic is
forecasted to double annually over the next five years, primarily driven by
24/7 connectivity and usage of smartphones and laptops.
Voice traffic is still the main revenue source for operators even though data
represents an increasing share as more and more consumers use data traffic
generating devices, such as smartphones and laptops. For many large operators,
mobile data revenues constitute 25% of total service revenues or more. In Japan
there are operators whose data revenues account for more than 50% of total
revenues. Tiered price plans for mobile broadband are on operators agendas and
in some markets such plans have already been introduced.
From having connected places and currently people, operators are now moving
towards connecting things. Ericsson believes that every device that can benefit
from connectivity will be connected in the future. Ericsson envisions that by
2020 50 b. devices will be connected.
Data traffic uptake in mobile as well as fixed networks drives need for higher
capacity in areas such as backhaul, aggregation, transport, 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 also drives demand for services targeting the operational efficiency
of operators, such as managed services and consulting.
There is continued good growth in the professional services market. The move
toward all-IP and increased network complexity will create further demand for
systems integration and consulting.
Mobile subscriptions are estimated to have increased by 190 million in the
quarter, returning to higher growth levels. China and India alone accounted for
50% of net additions with 33 and 61 million respectively. Ericsson estimates
that the global mobile subscriptions hit the 5 b. mark on July 8, 2010. Global
mobile penetration is now 72%. GSM/GPRS/EDGE added 125 of the 190 million net
subscription additions in the quarter and will continue to be an important
technology for billions of users many years to come.
The global number of new WCDMA subscriptions grew by 40 million in the quarter
to a total of 530 million, of which 245 million are estimated to be HSPA.
Ericsson estimates that the global mobile broadband subscriptions will amount to
more than 3.4 b. by 2015.
Demand for fixed broadband maintained a 3.5% growth rate during Q110 to add 16
million subscriptions for the quarter and reached 474 million. DSL remains the
prevailing technology with around 66% of total subscribers. Top 3 countries,
China, US and Japan, account for almost 50% of global fixed broadband
subscriptions.
PARENT COMPANY INFORMATION
Net sales for the six-month period amounted to SEK 0.0 (0.3) b. and income after
financial items was SEK 4.8 (5.2) b.
Major changes in the Parent Company's financial position for the six-month
period include; investments in LG-Ericsson of SEK 1.8 b.; decreased current and
non-current receivables from subsidiaries of SEK 5.1 b.; decreased cash, cash
equivalents and short-term investments of SEK 7.5 b. and decreased current and
non-current liabilities to subsidiaries of SEK 10.6 b.
During the second quarter the dividend payment of SEK 6.4 b., as decided by the
Annual General Meeting, has been made. As per June 30, 2010, cash, cash
equivalents and short-term investments amounted to SEK 54.9 (62.4) b.
In accordance with the conditions of the long-term variable remuneration program
(LTV) for Ericsson employees, 1,316,895 shares from treasury stock were sold or
distributed to employees during the second quarter. The holding of treasury
stock at June 30, 2010 was 76,385,435 Class B shares.
OTHER INFORMATION
Acquisition of Nortel's stake of LG-Nortel completed
On June 30, 2010, Ericsson announced it had completed the acquisition of
Nortel's majority shareholding (50%+1 share) in LG-Nortel, the joint venture of
LG Electronics and Nortel Networks. The purchase price was USD 242 million on a
cash and debt free basis. The acquisition will be accretive to Ericsson's
earnings within a year.
LG-Nortel generated approximately USD 650 million of sales in 2009 and had
1,300 employees. LG-Nortel was consolidated by Ericsson as of June 30, 2010 and
is included in segment Networks. The new name of the operation is LG-Ericsson.
Nomination committee appointed
On June 16, 2010 Ericsson announced that the nomination committee for the Annual
General Meeting of Shareholders (AGM) 2011 had been appointed in accordance with
the procedure resolved by the AGM 2010. The committee consists of Jacob
Wallenberg (chairman of the nomination committee), Carl-Olof By, Caroline af
Ugglas, Marianne Nilsson and Michael Treschow.
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 on operators' willingness to invest in network
development due to a continued uncertainty in the financial markets and a
weak economic business environment as well as uncertainty regarding the
financial stability of suppliers, for example due to lack for 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 continued volatile sales pattern in the Multimedia segment or variability
in our overall sales seasonality could make it more difficult to forecast
future sales;
* Effects of the ongoing industry consolidation among our customers as well as
between our largest competitors, e.g. with postponed investments and
intensified price competition as a consequence;
* 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;
* Natural disasters, effecting production, supply and transportation.
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 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 risk
exposures or limit unfavorable outcomes.
Stockholm, July 23, 2010
Hans Vestberg, President and CEO
Telefonaktiebolaget LM Ericsson (publ)
Date for next report: October 22, 2010
AUDITORS' REVIEW REPORT
We have reviewed this report for the period January 1 to June 30, 2010, 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 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 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, July 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/2010/6month10-en.pdf
Ericsson invites media, investors and analysts to a press conference at the
Ericsson headquarters, Torshamnsgatan 23, Stockholm, at 09.00 (CET),
July 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 and
www.ericsson.com/investors
Video material will be published during the day on
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(at)ericsson.com or media.relations(at)ericsson.com
Investors
Åse Lindskog, Vice President,
Head of Industry and Investor Relations
Phone: +46 10 719 9725, +46 730 244 872
E-mail:investor.relations(at)ericsson.com
Susanne Andersson,
Investor Relations
Phone: +46 10 719 4631
E-mail:investor.relations(at)ericsson.com
Andreas Hedemyr,
Investor Relations
Phone: +46 10 714 3748
E-mail:investor.relations(at)ericsson.com
Media
Ola Rembe, Vice President,
Head of Corporate Public and Media Relations
Phone: +46 10 719 9727, +46 730 244 873
E-mail:media.relations(at)ericsson.com
Corporate Public & Media Relations
Phone: +46 10 719 69 92
E-mail:medial.relations(at)ericsson.com
Telefonaktiebolaget LM Ericsson (publ)
Org. number: 556016-0680
Torshamnsgatan 23
SE-164 83 Stockholm
Phone: +46 10 719 0000
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 July
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#1433677]
SECOND QUARTER REPORT 2010: http://hugin.info/1061/R/1433677/379491.pdf
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
Unternehmensinformation / Kurzprofil:
Datum: 23.07.2010 - 07:31 Uhr
Sprache: Deutsch
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