ERICSSON REPORTS FIRST QUARTER RESULTS
(Thomson Reuters ONE) -
First Fourth
quarter quarter
SEK b. 2011(1)) 2010(2)) Change 2010(2)) Change
Net sales 53.0 45.1 17% 62.8 -16%
Gross margin 38.5% 38.5% - 36.6% -
EBITA margin
excl JVs 14.1% 12.8% - 15.3% -
Operating income
excl JVs 6.3 4.5 39% 8.4 -25%
Operating margin
excl JVs 11.9% 10.1% - 13.4% -
Ericsson's share
in earnings in JVs -0.5 -0.3 - -0.3 -
Income after
financial items 5.8 4.1 41% 7.8 -26%
Net income 4.1 1.3 220% 4.4 -7%
EPS diluted, SEK 1.27 0.39 - 1.34 -
EPS diluted, excl.
amortizations and write-downs
of acquired intangibles, SEK 1.52 0.87 75% 1.65 -8%
Adjusted operating
cash flow(3)) -2.1 3.0 - 16.2 -
Cash flow from
operations -2.9 2.3 - 15.2 -
(1)) All numbers for 2011 are stated incl. restructuring charges
(2)) All numbers for 2010, excl. EPS, Net income and Cash flow from operations,
are stated excl. restructuring charges. For details see section on restructuring
under Financial Statements and Additional Information
(3)) Cash flow from operations excl. restructuring cash outlays that have been
provided for
"Group sales in the quarter increased by 17% year-over-year driven by continued
strong demand for mobile broadband and especially for the multi-standard radio
base station RBS 6000," says Hans Vestberg, President and CEO of Ericsson
(NASDAQ:ERIC). "Sales for comparable units, adjusted for currency and hedging,
increased 25% year-over-year. Net income improved from SEK 1.3 b to SEK 4.1 b.
mainly related to increased profitability in segment Networks. Cash flow in the
quarter amounted to SEK -2.9 (2.3) b. impacted by higher level of work in
progress in the regions and continued ramp up of production.
The increase in Group sales was driven by segment Networks where revenues grew
35% year-over-year with an EBITA margin of 20%. The strong demand for mobile
broadband resulted in five out of ten regions showing growth year-over-year.
Countries with especially strong growth were the US, India, Japan, Korea and
Russia. China had continued good momentum for 2G.
Segment Global Services sales decreased -4% year-over-year primarily due to
currency exchange rate effects. In local currencies Professional Services grew
3%. EBITA margin decreased to 7% in the quarter mainly due to lower
profitability in Network Rollout. Managed Services was flat compared to the
first quarter 2010, but grew 11% year-over-year in local currencies driven by a
number of new smaller contracts. Segment Multimedia sales were flat year-over-
year while EBITA margin dropped to -7%, mainly due to product mix. Our joint
ventures showed mixed performance. Sony Ericsson contributed with a profit
before tax of SEK 0.1 b. while ST-Ericsson's loss amounted to SEK -0.6 b.
Sales in the first quarter were not impacted by the devastating earthquake and
tsunami in Japan. Our global supply chain of components is partly dependent on
Japan and we estimate delays in delivery of certain products. We have taken a
number of actions to mitigate the effects to secure that we limit the impact on
our customers. These activities include finding and integrating alternative
components in our products as well as increasing volumes with second source
suppliers. Effects will also depend on Japan's overall recovery but our best
estimate is that we will be able to deliver the majority of these volumes before
end of third quarter 2011.
During 2010 we continued to gain market shares in 3G and at least maintained our
market shares in 4G/LTE of more than 50%. While GSM will continue to exist for
many years, we will see the bulk of investments shifting to 3G/WCDMA and
4G/LTE. In services we increased the market share and we continue to be the
leading provider in the industry," concludes Hans Vestberg.
FINANCIAL HIGHLIGHTS
Income statement and cash flow
Sales in the quarter amounted to SEK 53.0 (45.1) b., up 17% year-over-year and
down -16% sequentially. Sales for comparable units, adjusted for currency
exchange rate effects and hedging, increased 25% year-over-year.
A one-off revenue from the sale of patents of SEK 0.3 b. positively impacted
sales and margins in the first quarter. Reported numbers for the first quarter
2010 exclude restructuring charges of SEK 2.2 b., while reported numbers for the
first quarter 2011 include restructuring charges of SEK 0.4 b.
Gross margin in the quarter was flat year-over-year at 38.5% (38.5%), and was up
from 36.6% sequentially. The business mix from second half of 2010, with
expansions and upgrades, has prevailed in the quarter. This, in combination with
strong sales in segment Networks and continued efficiency gains, have impacted
gross margin positively.
3G volumes in India were high, which affected margins negatively. The negative
margin effects from network modernization projects, which we indicated in the
fourth quarter 2010, have partly materialized in the quarter.
R&D expenses amounted to SEK 8.0 (7.3) b., an increase by 10% year-over-year.
The increase is a result of the planned higher investments in radio, such as TD-
LTE and IP as well as the acquired LG-Ericsson operations. Selling and general
administrative expenses (SG&A) amounted to SEK 6.4 (5.9) b., an increase by 10%
year-over-year, representing 12% of sales. This is mainly a result of the
acquired LG-Ericsson operations and a growing number of LTE trials. Total
operating expenses amounted to
SEK 14.4 (13.1) b.
Other operating income and expenses were flat, SEK 0.3 (0.3) b. in the quarter.
Operating income, excluding joint ventures, increased 39% to SEK 6.3 (4.5) b. in
the quarter. Operating margin improved to 11.9% (10.1%) year-over-year mainly
due to the volume increase.
Ericsson's share in earnings of joint ventures, before tax, amounted to SEK -0.5
(-0.3) b., compared to SEK -0.3 b. in the fourth quarter 2010. Sony Ericsson
contributed with a profit of SEK 0.1 b. while ST-Ericsson's loss amounted to SEK
-0.6 b.
Financial net amounted to SEK 0.0 (-0.2) b. in the quarter. Financial net
improved slightly sequentially from SEK -0.3 b. due to higher short-term
interest rates and a high cash position.
Net income amounted to SEK 4.1 (1.3) b. The improvements are mainly a result of
increased sales volumes and improved profitability in Networks.
Earnings per share were SEK 1.27 (0.39) in the quarter. Earnings per share
excluding amortizations and write-downs of acquired intangibles were SEK 1.52
(0.87) in the first quarter.
Adjusted operating cash flow was SEK -2.1 (3.0) b. in the quarter. Cash flow
from operations amounted to
SEK -2.9 (2.3) b. mainly due to higher inventories and a payment of SEK 1.1
(0.9) b. to pension funds. Cash outlays for restructuring amounted to SEK 0.8
(0.7) b. in the quarter. Cash outlays of SEK 2.5 b. remain to be made.
Balance sheet and other performance indicators
Mar 31 Dec 31 Sep 30 June 30 Mar 31
SEK b. 2011 2010 2010 2010 2010
Net cash 48.2 51.3 35.7 25.8 38.5
Interest-bearing
liabilities and post-employment
benefits 34.8 35.9 40.4 41.8 39.3
Trade receivables 60.6 61.1 57.8 69.4 62.7
Days sales
outstanding 101 88 109 133 117
Inventory 32.1 29.9 30.3 29.4 24.1
Of which
egional inventory 21.1 18.7 19.1 18.3 14.0
Inventory days 87 74 82 81 75
Payable days 70 62 62 61 59
Customer
financing, net 4.2 4.4 3.5 3.1 2.9
Return on
capital employed 13% 10% 8% 6% 5%
Equity ratio 53% 52% 52% 51% 53%
Trade receivables decreased sequentially by SEK 0.5 b. to SEK 60.6 (61.1) b. due
to the strong SEK and lower seasonal decline in sales. Days sales outstanding
(DSO) decreased from 117 to 101 days year-over-year as a result of higher sales
and strong collections.
Inventory increased sequentially by SEK 2.2 b. to SEK 32.1 (29.9) b. The higher
inventory level year-over-year is reflecting higher level of work in progress in
the regions and continued ramp up of production. Inventory turnover days
increased from 74 to 87 days.
Goodwill decreased SEK 1.4 b. to SEK 25.8 (27.2) b. due to a stronger SEK.
Cash, cash equivalents and short-term investments amounted to SEK 83.0 (87.2) b.
The net cash position decreased sequentially by SEK 3.1 b. to SEK 48.2 (51.3)
b., mainly due to negative cash flow.
During the quarter, approximately SEK 1.1 b. of provisions were utilized, of
which SEK 0.8 b. related to restructuring. Additions of SEK 1.3 b. were made, of
which SEK 0.1 b. related to restructuring. Reversals of SEK 0.1 b. were made.
Provisions will fluctuate over time depending on business mix, market mix as
well as technology shifts.
Total number of employees at the end of the quarter amounted to approximately
91,500 (86,500), an increase by 1,200 from December 31, 2010. In the quarter,
some 300 individuals joined Ericsson through acquisitions and approximately
1,000 related to our services business, mainly in Brazil, India and China. Main
reductions were made in countries in Western Europe.
SEGMENT RESULTS
Networks
First Fourth
quarter quarter
SEK b. 2011(1)) 2010(2)) Change 2010(2)) Change
Networks sales 33.2 24.7 35% 36.4 -9%
EBITA margin(3)) 20% 16% - 18% -
Operating margin 17% 12% - 16% -
(1)) All numbers for 2011 are stated incl. restructuring charges
(2)) All numbers for 2010 are stated excl. restructuring charges
(3)) EBITA - Earnings before interest, tax, amortizations and write-downs of
acquired intangibles
Networks' sales in the quarter were SEK 33.2 (24.7) b. The increase of 35% year-
over-year was an effect of high mobile broadband sales. Sales were negatively
impacted by a strong SEK. Sequentially sales decreased -9%.
Sales of the multi-standard radio base station RBS 6000 continued to be high as
well as of packet-core, IP-routers and microwave based backhaul. CDMA and GSM
showed good growth year-over-year and LG-Ericsson performed well also this
quarter. GSM demand is primarily driven by capacity needs in countries such as
China and India. In China, GSM/EDGE is also used as fall back for mobile
broadband coverage.
EBITA margin in the quarter increased year-over-year to 20% (16%) and from 18%
sequentially. The increase was driven by increased volumes, business mix with
expansions and upgrades and continued efficiency gains.
In Europe the captured network modernization deals will give us an estimated
market share increase of approximately three percentage points in the combined
2G/3G market.
Global Services
First Fourth
quarter quarter
SEK b. 2011(1)) 2010(2)) Change 2010(2)) Change
Global Services sales 17.4 18.1 -4% 22.9 -24%
Of which
Professional Services 12.6 13.3 -5% 16.7 -25%
Of which
Managed Services 4.9 4.9 1% 5.4 -8%
Of which
Network Rollout 4.9 4.8 0% 6.2 -21%
EBITA margin(3)) 7% 12% - 13% -
Of which
Professional Services 13% 16% - 16% -
Operating margin 7% 11% - 12% -
Of which
Professional Services 12% 15% - 15% -
(1)) All numbers for 2011 are stated incl. restructuring charges
(2)) All numbers for 2010 are stated excl. restructuring charges
(3)) EBITA - Earnings before interest, tax, amortizations and write-downs of
acquired intangibles
Global Services sales in the quarter were SEK 17.4 (18.1) b. a decrease of -4%
year-over-year, and -24% sequentially. The year-over-year decline is primarily a
result of currency exchange rate effects.
Professional Services sales were SEK 12.6 (13.3) b. in the quarter, a decrease
of -5% year-over-year and by -25% sequentially, negatively impacted by a low
level of integration projects. Managed Services sales increased by 1% year-over-
year to SEK 4.9 (4.9) b. and were down -8% sequentially. Currency adjusted sales
of Professional Services increased 3% and Managed Services sales increased 11%.
Demand for managed services and transformational OSS/BSS projects continued to
be high.
Network Rollout sales amounted to SEK 4.9 (4.8) b. in the quarter, flat year-
over-year and -21% sequentially. Since network rollout typically lags equipment
sales with 6-9 months, sales were negatively impacted by the industry wide
component shortage in 2010.
Global Services' EBITA margin decreased in the quarter, both year-over-year and
sequentially. It was impacted by a loss in Network Rollout following large 3G
rollouts in India with low margins and the effects of supply constraints in
2010.
EBITA margin for Professional Services decreased to 13% (16%) year-over-year and
sequentially due to lower proportion of product near systems integration
business and with a percentage point negative impact from restructuring during
the first quarter.
During the quarter nine new managed services contracts were signed of which five
were extensions or expansions.
Ericsson provides support for networks that serve more than two billion
subscribers worldwide. The total number of subscribers in networks managed by
Ericsson is more than 800 million, of which 450 million in network operation
contracts and 350 million in field maintenance.
Multimedia
First Fourth
quarter quarter
SEK b. 2011(1)) 2010(2)) Change 2010(2)) Change
Multimedia sales 2.3 2.3 -1% 3.5 -34%
EBITA margin(3)) -7% -5% - 16% -
Operating margin -15% -13% - 11% -
(1)) All numbers for 2011 are stated incl. restructuring charges
(2)) All numbers for 2010 are stated excl. restructuring charges
(3)) EBITA - Earnings before interest, tax, amortizations and write-downs of
acquired intangibles
Multimedia sales in the quarter decreased -1% year-over-year and -34%
sequentially. Sales of multimedia brokering (IPX) and revenue management were
good. However, sales for TV solutions were weaker. EBITA margin amounted to -7%
(-5%) due to lower volumes and product mix, partly offset by lower operating
expenses.
Sony Ericsson
First Fourth
quarter quarter
EUR m. 2011 2010 Change 2010 Change
Number of
units shipped (m.) 8.1 10.5 -23% 11.2 -28%
Average selling
price (EUR) 141 134 5% 136 4%
Net sales 1,145 1,405 -19% 1,528 -25%
Gross margin 33% 31% - 30% -
Operating margin 2% 1% - 3% -
Income before taxes 15 18 - 35 -
Income before taxes,
excl restructuring
charges 15 21 - 39 -
Net income 11 21 - 8 -
Operating cash flow -353 -94 - -128 -
Sony Ericsson is executing on its strategy to grow within the smartphone segment
and during the quarter over 60% of total sales were smartphones. The company is
experiencing some disruptions in its supply chain from the earthquake in Japan.
Cash flow from operating activities during the quarter was negative EUR 353
million, mainly due to inventory investments. New external borrowings of EUR
375 million were made in the quarter resulting in total borrowings
of EUR 604 million on March 31, 2011. Total cash balances amounted to EUR 599
million. Guarantees from the
Parent Company Telefonaktiebolaget LM Ericsson to Sony Ericsson Mobile
Communications AB amounted to
SEK 2.0 (1.1) b. in the quarter.
Sony Ericsson estimates that its market share for smartphones was approximately
5% in units and approximately 3% in value.
Ericsson's share in Sony Ericsson's income before tax was SEK 0.1 (0.1) b. in
the quarter.
ST-Ericsson
First quarter Fourth quarter
USD m. 2011 2010 Change 2010 Change
Net sales 444 606 -27% 577 -23%
Adjusted
operating income(1)) -149 -114 - -119 -
Operating income -178 -164 - -171 -
Net income -178 -154 - -177 -
(1) )Operating income adjusted for amortization of acquired intangibles and
restructuring charges
The company is currently in a shift from legacy to new products. The drop in
legacy products was higher than expected during the quarter. Securing the
successful execution and delivery of the new products to customers is critical
for the long-term value of the company.
The operating loss increased sequentially primarily due to lower sales volumes.
The company is taking additional action to improve internal efficiency in
product development and further reductions of selling, general and
administrative expenses.
The net financial position at March 31, 2011, was negative USD -195 (-82)
million. For the second quarter ST-Ericsson expects net sales to decline
sequentially primarily due to the ongoing decline in legacy products. By the end
of the quarter ST-Ericsson had utilized USD 234 million of a short-term credit
facility granted on a 50/50 basis by the parent companies. Ericsson is committed
to financially support ST-Ericsson's execution of their new portfolio.
ST-Ericsson is reported in US GAAP. Ericsson's share in ST-Ericsson's income
before tax, adjusted to IFRS, was SEK -0.6 (-0.5) b. in the quarter.
REGIONAL OVERVIEW
First quarter Fourth quarter
Sales, SEK b. 2011 2010 Change 2010 Change
North America 13.2 9.5 39% 14.1 -6%
Latin America 4.0 4.0 1% 6.1 -34%
Northern Europe 3.4 2.3 4.8 -30%
and Central Asia 46%
Western and 4.8 5.2 5.9 -19%
Central Europe -8%
Mediterranean 4.8 5.1 -5% 6.9 -31%
Middle East 3.1 3.9 -22% 4.6 -34%
Sub-Saharan Africa 2.2 2.4 -9% 2.0 9%
India 3.2 2.3 38% 2.8 11%
China and 8.6 5.0 9.5 -9%
North East Asia 74%
South East Asia 3.1 3.5 3.9 -21%
and Oceania -12%
Other 2.6 1.9 37% 2.2 25%
Total 53.0 45.1 17% 62.8 -16%
North American sales increased 39% year-over-year and decreased -6%
sequentially, negatively impacted by a strong SEK. Growth in the region was
driven by continued data traffic increase. Capacity expansions are being carried
out via the addition of new hardware as well as software upgrades along with
associated services. Since iOS and Android-based devices have been introduced to
the market these have become core drivers of traffic growth.
In addition, LTE-equipped devices will be deployed in 2011.
Latin America sales increased 1% year-over-year and decreased -34% sequentially.
Demand for mobile broadband is increasing in the region, driven by mobile data
traffic. At the same time, there are rural expansion projects, driving demand
for voice related products and services. LTE trials are ongoing across the
region.
Northern Europe and Central Asia sales increased 46% year-over-year
and decreased -30% sequentially.
The year-over-year increase is mainly driven by build out of mobile broadband
coverage in Russia where mobile data traffic shows triple-digit growth. Russia
was strong also in the first quarter, spurred by network rollouts with large
operators such as Vimpelcom and MTS.
Western and Central Europe sales decreased -8% year-over-year and -19%
sequentially due to somewhat cautious spending by major operators while
preparing for network modernization projects. Deployment of multi-standard radio
base stations has commenced as part of the network modernization program that
Ericsson is delivering to Telefónica O2 UK along with the continued supply of
core network infrastructure. In Germany LTE
roll-out to Vodafone continues.
Mediterranean sales decreased -5% year-over-year and -31% sequentially,
negatively impacted by the political unrest in North Africa as well as the
general economic situation in Spain, Portugal and Greece. Modernization projects
started in Spain and Italy. Managed services developed favorably in the quarter
due to new and extended contracts in Spain. Tenders for 4G/LTE spectrum have
been or will soon be initiated in Spain, Portugal and Italy.
Middle East sales decreased -22% year-over-year and -34% sequentially, impacted
by political unrest in the region. 2G declined in the quarter, while sales of
mobile broadband continued to increase across the region. Mobile broadband
volumes are now almost on par with 2G volumes. 4G/LTE is expected to be rolled
out in parts of the
Gulf region later this year. Managed services increased both year-over-year and
sequentially while revenue management, consulting and systems integration as
well as network rollout had a weak quarter.
Sub-Saharan Africa sales decreased by -9% year-over-year, but increased
sequentially by 9%. The sequential improvement is primarily due to 2G
expansions. Services had a weaker quarter due to delayed deliveries affecting
network rollouts and the continued slow development for revenue management.
India sales increased 38% year-over-year and 11% sequentially. Growth was driven
by 3G deployments also comparing to low level investments during first half of
2010 awaiting 3G licenses. BWA license holders are currently deciding on vendors
for their TD-LTE networks where initial roll-outs are expected later in the
year.
China and North East Asia sales increased 74% year-over-year and was down -9%
sequentially. The
year-over-year increase is mainly related to growth in mobile broadband in
Japan, 2G expansions in China and added sales from LG-Ericsson. In Japan data
traffic has doubled over the last 18 months and in Korea it has increased 11
times in the last 12 months. Ericsson is one of the vendors selected for a
large-scale TD-LTE trial with China Mobile.
South East Asia and Oceania sales decreased -12% year-over-year and -21%
sequentially. Operators' investments in mobile broadband are not yet
compensating for drop in 2G sales. Mobile data services are different levels of
maturity across the region. However, data traffic grows both in volumes and
subscribers. Multimedia showed good development in the quarter due to the first
sales of revenue management solutions for data traffic.
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
Mobile infrastructure market
The global mobile infrastructure market slightly declined in the range of mid-
single digits in USD terms in 2010. During the third quarter in 2010, the market
conditions improved and growth picked up in the fourth quarter 2010.
Ericsson mobile infrastructure market share, including the Nortel acquisition,
increased 2010 in USD terms. The CDMA business, acquired from Nortel, increased
market shares in USD terms, driven by strong mobile broadband demand in North
America. Measured in shipped radio base stations 2010, Ericsson increased its
share of WCDMA/HSPA and strengthened its leading position within 4G/LTE. Due to
the industry wide component shortage in 2010 Ericsson could not fully meet the
demand for GSM. However, deliveries picked up in the first quarter 2011 and it
is Ericsson's view that the company has at least maintained its market share
also in GSM.
Data traffic uptake in mobile and fixed networks 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. This also drives demand for
services targeting the operational efficiency of operators, such as consulting,
including network optimization, systems integration and managed services.
Telecom services market
The global telecom services market showed positive growth in mid-single digits
in USD terms in 2010, mainly driven by continued strong growth in managed
services. Operators' focus on efficiency drives interest in exploring business
models such as managed operations, network sharing and network IT
transformation. Estimates show that only around 35-40% of addressable operator
network operating expenditure is spent externally on telecom services today
leaving significant continued opportunities, particularly for managed services.
End user drivers
Global mobile penetration is 79% and total mobile subscriptions have reached
5.5 billion. India and China accounted for about 48% of the estimated 190
million net additions during the first quarter, adding around 65 and 30 million
respectively. Indonesia and Vietnam were third and fourth countries in terms of
net additions. India has now passed 800 million subscriptions and the US has
passed 300 million subscriptions.
Global fixed broadband subscriptions grew by 14 million new subscriptions to
reach 523 million during the fourth quarter 2010, mainly boosted by strong
growth in DSL in China. DSL represents more than 60% of all fixed broadband
subscriptions.
First Full | Ericsson
Unit quarter year | forecast
|
2010 2011 Change 2006 2007 2008 2009 2010| 2011
|
Mobile subscriptions Billion 4.8 ~5.5 ~16% 2.7 3.3 4.0 4.6 ~5.3| ~6.1
----------------------------------------------------------------------+---------
Net additions Million 160 ~190 ~17% 500 620 660 640 ~720| ~730
|
Mobile |
broadband(1)) Million 420 ~670 ~57% 55 130 220 370 600| ~1,000
|
Net additions Million 50 70 ~35% 30 70 90 160 ~320| ~450
----------------------------------------------------------------------+---------
(1)) Mobile broadband includes handset and mobile PC for the following
technologies: HSPA, LTE, CDMA2000 EVDO, TD-SCDMA and WiMax
Ericsson findings, based on measurements in live networks, show that global
mobile data traffic more than doubled in 2010 and mobile data traffic is
forecasted to almost double annually over the next few years, driven by 24/7
connectivity and end user demand for bandwidth. Increased proliferation of
devices such as smartphones, tablets and laptops will impact the traffic going
forward. The traffic forecast could be subject to change if operators start to
implement traffic shaping and caps to a larger degree.
To cater for the increased surge for mobile data services, mobile networks are
being built-out across the world and WCDMA networks now cover more than 35% of
the world's population. Almost all of these networks have also launched HSPA. At
the moment, more than 65% of the commercial HSPA networks have been upgraded, at
least partly, to a peak speed of 7.2 Mbps or above. Operators are continuously
upgrading to higher speeds and around 6% of the HSPA networks have launched
services with 42 Mbps peak speed, currently the highest HSPA speed that is
commercially available. In addition, Ericsson has as the first vendor
demonstrated 84 and 168 Mbps based on commercial network equipment. Building
wider coverage to reach further into the remaining 65% of the population, the
availability of affordable handsets, as well as the surge for mobile broadband
services and faster speeds, will drive continued strong uptake of HSPA.
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 service revenues. Many
operators in mature mobile broadband markets have today more than offset the
decline in voice revenues, not uncommon in mature markets, with increasing data
revenues.
In average, a smartphone generates approximately 10 times more traffic compared
to a normal feature phone, while a mobile PC user generates 100 times more
traffic than a feature phone. There are indications of higher than average per-
smartphone traffic in the US networks, however traffic profiles per user do vary
considerably between networks and markets.
Yearly WCDMA/HSPA radio access network investments passed GSM investments in
2009, eight years after the 3G introduction in Western Europe. It will remain
the dominant access technology for many years to come, in terms of global
investment, despite the fact that 4G/LTE is being rolled out and launched.
Coexistence 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.
PARENT COMPANY INFORMATION
Income after financial items was SEK 3.1 (-0.6) b. The increase in financial
net, year-over-year, is mainly due to Group internal dividends. Major changes in
the Parent Company's financial position for the first quarter include; decreased
cash, cash equivalents and short-term investments of SEK 2.2 b. and decreased
current and non-current liabilities to subsidiaries of SEK 1.8 b. At the end of
the quarter cash, cash equivalents and short-term investments amounted to SEK
69.4 (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 117 million of a short-term credit facility.
In accordance with the conditions of the long-term variable compensation program
(LTV) for Ericsson employees, 2,625,812 shares from treasury stock were sold or
distributed to employees during the first quarter. The holding of treasury stock
at March 31, 2011, was 70,462,703 Class B shares.
ANNUAL GENERAL MEETING OF SHAREHOLDERS
The Annual General Meeting of shareholders (AGM) decided, as previously
announced and in accordance with the proposal by the Board of Directors, on a
dividend payment of SEK 2.25 per share for 2010 and with April 18, 2011, as the
date of record for the dividend. The total dividend payment amounts to SEK 7.2
(6.4) b.
In accordance with the proposal by the Nomination Committee, Leif Johansson was
elected new Chairman of the Board of Directors and Jacob Wallenberg was elected
new member of the Board of Directors, replacing Marcus Wallenberg.
In accordance with the Board of Directors' proposals, the AGM resolved the
implementation of LTV 2011 (Long Term Variable compensation), with the same
structure as previous programs but with new performance criteria in the
executive performance stock plan.
The AGM also resolved on transfer of shares for implementation of LTV 2011. In
addition, the AGM resolved the transfer of treasury stock for previously decided
LTV programs.
The AGM resolved in accordance with the Board of Directors' proposal, on an
amendment of the object's of the company in the Articles of Association (§ 2),
to adjust to the Company's strategy to expand into new industry segments, such
as governments, health industry, transport, utilities and mobile money. For more
details,
seewww.ericsson.com/investors
OTHER INFORMATION
Completion of acquisition of Nortel's Multiservice Switch business
On March 11, 2011, Ericsson announced the completion of the asset purchase
agreement to acquire Nortel's Multiservice Switch business. The acquisition
gives Ericsson access to a strong product portfolio and installed base in the
data segment while ensuring the supply of the platform for the recently acquired
CDMA and GSM units.
The closing follows the announcement on September 25, 2010, that Ericsson was
entering into an asset purchase agreement for substantially all of the assets of
Nortel's Multiservice Switch business.
Acquisition of assets from Telenor Connexion
On April 19, 2011, Ericsson announced the acquisition of Telenor Connexion's
machine-to-machine (M2M) technology platform. The acquisition is in line with
Ericsson's ambition to drive the market for M2M communication, adding valuable
technology and know-how from Telenor Connexion.
Telenor Connexion will also be first customer on Ericsson's Device Connection
Platform, a service allowing operators to offer M2M connection beyond
smartphones and laptops.
The acquisition is not subject to approval from authorities but to contractual
agreements before closing.
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 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.
Stockholm, April 27, 2011
Telefonaktiebolaget LM Ericsson (publ)
Hans Vestberg, President and CEO
Date for next report: July 21, 2011
AUDITORS' REVIEW REPORT
We have reviewed this report for the period January 1 to March 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 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 International Standards of
Auditing (ISA), 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 27, 2011
PricewaterhouseCoopers AB
Peter Nyllinge
Authorized Public Accountant
EDITOR'S NOTE
To read the complete report with tables, please go to:
www.ericsson.com/res/investors/docs/q-reports/2011/3month11-en.pdf
Ericsson invites media, investors and analysts to a press conference at the
Ericsson Studio, Grönlandsgången 4, Stockholm, at 09.00 (CET), April 27, 2011.
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 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, Director,
Investor Relations
Phone: +46 10 719 4631
E-mail:investor.relations(at)ericsson.com
Åsa Konnbjer, Director,
Investor Relations
Phone: +46 10 713 3928
E-mail:investor.relations(at)ericsson.com
Stefan Jelvin, Director,
Investor Relations
Phone: +46 10 714 2039
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:media.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
April 27, 2011.
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.
FIRST QUARTER REPORT 2011:
http://hugin.info/1061/R/1509318/444165.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
[HUG#1509318]
Unternehmensinformation / Kurzprofil:
Datum: 27.04.2011 - 07:29 Uhr
Sprache: Deutsch
News-ID 53890
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contact information:
Town:
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