Ericsson reports third quarter results
(Thomson Reuters ONE) -
Third Second Nine
quarter quarter months
SEK b. 2011(1)) 2010(2)) Change 2011(1)) Change 2011(1)) 2010(2)) Change
Net sales 55.5 47.5 17% 54.8 1% 163.3 140.6 16%
Gross margin 35.0% 39.0% - 37.8% - 37.1% 38.9% -
EBITA margin
excl JVs 13.4% 15.8% - 11.4% - 13.0% 14.1% -
Operating
income
excl JVs 6.3 6.2 2% 5.0 25% 17.6 16.1 10%
Operating
margin
excl JVs 11.3% 13.0% - 9.2% - 10.8% 11.4% -
Ericsson's
share
in earnings
in JVs -0.6 0.0 - -0.8 - -1.9 -0.4 -
Income after
financial
items 5.9 6.1 -3% 4.6 28% 16.3 15.2 7%
Net income 3.8 3.6 6% 3.2 18% 11.1 6.9 62%
EPS diluted,
SEK 1.18 1.14 4% 0.96 23% 3.42 2.12 61%
EPS (Non-
IFRS), SEK
(3)) 1.44 1.42 1% 1.21 19% 4.17 3.15 32%
Adjusted
operating
cash flow(4)) 2.4 12.7 - 7.0 - 7.2 13.7 -
Cash flow
from
operations 1.6 11.8 - 5.8 - 4.5 11.4 -
--------------------------------------------------------------------------------
( )
(1)) Numbers for 2011 are stated incl. restructuring charges of SEK 0.4 b. in
Q3, SEK 1.7 b. in Q2 and SEK 0.4 b. in Q1
(2)) All numbers for 2010, excl. EPS, EPS (Non-IFRS), 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)) EPS, diluted, excl. amortizations and write-downs of acquired intangible
assets
(4)) 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 a
continued strong demand for mobile broadband as well as increased services
revenues," says Hans Vestberg, President and CEO of Ericsson (NASDAQ:ERIC).
"Sales for comparable units, adjusted for currency and hedging, increased 24%
year-over-year. Our performance year-to-date reaffirms our indications of a
strengthened global market share. A higher proportion of coverage projects along
with accelerating network modernization projects in Europe impacted gross margin
negatively. Operating income, excluding joint ventures, was SEK 6.3 (6.2) b. in
the quarter and net income amounted to SEK 3.8 (3.6) b., an increase of 6%.
Segment Networks sales grew 25% year-over-year. The sequential decrease of -3%
is due to seasonality and reduced CDMA sales in North America. All regions
except North America, Northern Europe & Central Asia, Mediterranean and India
showed sequential growth in Networks. In the quarter, all remaining effects from
the earthquake and tsunami in Japan in March this year on our supply chain have
been eliminated and lead times are back to normal. With economic uncertainties
in parts of the world, we cannot exclude somewhat more cautious short-term
operator spending.
Segment Global Services sales grew 7% year-over-year and sequentially and
Professional Services, currency adjusted, grew by 13% year-over-year. Managed
services showed good development with increased sales of 12% sequentially,
following 24 new managed services contracts reported in the second quarter.
Segment Multimedia sales grew 11% year-over-year and 8% sequentially, with good
traction also this quarter for revenue management in Middle East and Sub-Saharan
Africa.
The quarter was mixed for our joint ventures. Sony Ericsson reported increased
sales and improved average selling price. Our share of Sony Ericsson's profit
was SEK 0.1 (0.3) b. ST-Ericsson's sales increased sequentially by 7% and
revenues from new products continued to grow offsetting continuous decline in
legacy products. Our share of ST-Ericsson's loss was SEK -0.7 (-0.4) b.
Increased global smart phone penetration, new devices and the introduction of
tiered pricing is driving continued mobile data traffic growth. Mobile broadband
subscriptions are expected to reach close to one billion by year-end and to
reach close to five billion by 2016. 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," concludes Vestberg.
FINANCIAL HIGHLIGHTS
Income statement and cash flow
Sales in the quarter amounted to SEK 55.5 (47.5) b., up 17% year-over-year and
1% sequentially. Sales for comparable units, adjusted for currency exchange rate
effects and hedging, increased 24% year-over-year. The strong growth in mobile
broadband equipment that we have seen the past quarters, continued also this
quarter. In this quarter, we also saw an uptake in the services segment.
Reported numbers for the third quarter 2011 include restructuring charges of SEK
0.4 b., while reported numbers for the third quarter 2010 exclude restructuring
charges of SEK 0.9 b. Total estimated restructuring charges for 2011 remains at
approximately SEK 3 b.
Gross margin in the quarter was down year-over-year to 35.0% (39.0%), and down
from 37.8% sequentially. A higher proportion of coverage projects along with
accelerating network modernization projects in Europe impacted gross margin
negatively. Sequentially the increased share of services business also had a
negative impact.
The network modernization projects in Europe, with their lower margins, will
continue to accelerate in the fourth quarter. Average project duration is
expected to be 18-24 months.
Total operating expenses amounted to SEK 13.5 (13.0) b. Typically, operating
expenses are lower in the third quarter. R&D expenses amounted to SEK 7.8 (7.2)
b., an increase of 8% 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. Selling and general administrative
expenses (SG&A) amounted to SEK 5.7 (5.7) b., representing 10% of sales compared
to 12% in the third quarter 2010. Other operating income and expenses amounted
to SEK 0.4 (0.6) b. in the quarter.
Operating income, excluding joint ventures, increased to SEK 6.3 (6.2) b. in the
quarter despite a negative impact from restructuring charges of SEK 0.4 b.
Operating margin decreased to 11.3% (13.0%) year-over-year and increased
sequentially from 9.2%. In the second quarter operating income was impacted by a
one-off restructuring charge of SEK 1.3 b. related to activities in Sweden.
Ericsson's share in earnings of joint ventures, before tax, was SEK -0.6 (0.0)
b., compared to SEK -0.8 b. in the second quarter 2011 due to improved results
in Sony Ericsson. Ericsson's share in Sony Ericsson's result was SEK 0.1 (0.3)
b. and in ST-Ericsson SEK -0.7 (-0.4) b.
Financial net amounted to SEK 0.2 (-0.1) b. in the quarter as a result of
positive revaluation effects from lower interest rates. Financial net decreased
sequentially from SEK 0.3 b.
Net income improved year-over-year to SEK 3.8 (3.6) b. due to higher sales
volumes. Sequentially net income increased from SEK 3.2 b. mainly due to
improved operating margin.
Earnings per share were SEK 1.18 (1.14) in the quarter. Earnings per share, Non-
IFRS, diluted, i.e. excluding amortizations and write-downs of acquired
intangibles, were SEK 1.44 (1.42) in the third quarter, up 1%.
Adjusted operating cash flow was SEK 2.4 (12.7) b. in the quarter. Cash flow
from operations amounted to SEK 1.6 (11.8) b. Last year the quarter was
positively impacted by exceptionally good collections. Cash outlays for
restructuring amounted to SEK 0.7 (0.9) b. in the quarter. Cash outlays of SEK
1.8 b. remain to be made.
Balance sheet and other performance indicators
Sept 30 June 30 Mar 31 Dec 31
SEK b. 2011 2011 2011 2010
Net cash 35.4 42.6 48.2 51.3
Interest-bearing
liabilities and
post-employment benefits 41.5 36.1 34.8 35.9
Trade receivables 65.6 60.2 60.6 61.1
Days sales outstanding 106 99 101 88
Inventory 38.6 35.1 32.1 29.9
Of which
regional inventory 24.9 22.5 21.1 18.7
Inventory days 91 89 87 74
Payable days 67 68 70 62
Customer financing, net 4.6 4.0 4.2 4.4
Return on
capital employed 13% 13% 13% 10%
Equity ratio 50% 52% 53% 52%
-------------------------------------------------------
Trade receivables increased sequentially at SEK 65.6 (60.2) b. Days sales
outstanding (DSO) increased from 99 to 106 days sequentially due to a higher
share of projects with longer payment terms.
Inventory increased sequentially by SEK 3.5 b. to SEK 38.6 (35.1) b. In the
quarter, we had good progress in normalizing the supply chain, however, there
were remaining effects from the earlier mitigating activities taken in
connection to the events in Japan. Inventory was also negatively impacted by a
weaker SEK and a higher share of projects. Inventory turnover days increased
from 89 to 91 days.
Goodwill increased SEK 1.4 b. to SEK 27.7 (26.3) b. due to a weaker SEK.
Cash, cash equivalents and short-term investments amounted to SEK 76.9 (78.7) b.
The net cash position decreased sequentially by SEK 7.2 b. to SEK 35.4 (42.6) b.
The post-employment benefits in Sweden has been recalculated due to lower
discount rates resulting in a negative effect on net cash position of SEK -5.0
b. Furthermore, Ericsson's acquisition cost for Nortel's remaining patents and
patent applications was close to SEK 2 b.
During the quarter approximately SEK 1.5 b. of provisions were utilized, of
which SEK 0.7 b. related to restructuring. Additions of SEK 0.6 b. was made, of
which nothing related to restructuring. Reversals of SEK 0.6 b. were made.
Total number of employees at the end of the quarter amounted to 100,890
(88,060), an increase by 2,961 from June 30, 2011, mainly related to our
services business, primarily in India, China, Brazil and Italy.
SEGMENT RESULTS
Networks
Third Second Nine
quarter quarter months
SEK b. 2011(1)) 2010(2)) Change 2011(1)) Change 2011(1)) 2010(2)) Change
Networks sales 32.5 26.1 25% 33.4 -3% 99.1 76.3 30%
EBITA -
margin(3)) 16% 21% - 16% 17% 18% -
Operating -
margin 13% 17% - 14% 15% 14% -
--------------------------------------------------------------------------------
(1)) All numbers for 2011 are stated incl. restructuring charges of SEK 0.1 b
in Q3, SEK 1.0 b. in Q2 and SEK 0.2 b. in Q1
(2)) All numbers for 2010 are stated excl. restructuring charges of SEK 0.6 b
in Q3, SEK 0.9 b. in Q2 and SEK 1.5 b. in Q1
(3)) EBITA - Earnings before interest, tax, amortizations and write-downs of
acquired intangibles
Networks sales in the quarter were SEK 32.5 (26.1) b., negatively impacted by
the strong SEK year-over-year. The increase of 25% year-over-year was an effect
of continued high sales in mobile broadband related equipment including packet
core, IP routers and microwave based backhaul. The sequential decrease of -3% is
due to seasonality and reduced CDMA sales in North America. All regions except
North America, Northern Europe & Central Asia, Mediterranean and India showed
sequential growth in Networks. In India 3G rollouts peaked in the second
quarter.
Regions Latin America and Sub Saharan Africa developed favorably with especially
strong growth in Brazil and Nigeria where operators invested in mobile broadband
coverage. Japan also showed strong development in the quarter with a high degree
of capacity investments. China had a somewhat slower quarter due to seasonality.
In the quarter, all remaining effects from the earthquake and tsunami in Japan
in March this year on our supply chain have been eliminated and lead times are
back to normal. With economic uncertainties in parts of the world, we cannot
exclude somewhat more cautious short-term operator spending.
EBITA margin in the quarter decreased year-over-year to 16% (21%) and was flat
sequentially. In the second quarter 2011, margins were negatively impacted by
one-off restructuring charges in Sweden. In the network modernization projects
in Europe the old GSM- and WCDMA-radio base stations are now starting to be
replaced with the new multi-standard radio.
Global Services
Second
Third quarter quarter Nine months
SEK b. 2011(1)) 2010(2)) Change 2011(1)) Change 2011(1)) 2010(2)) Change
--------------------------------------------------------------------------------
Global
Services
sales 20.4 19.1 7% 19.0 7% 56.9 57.3 -1%
Of which
Professional
Services 14.7 13.7 7% 13.5 9% 40.8 41.8 -3%
Of
which Managed
Services 5.3 5.2 1% 4.7 12% 15.0 15.8 -5%
Of which
Network
Rollout 5.7 5.3 7% 5.6 3% 16.1 15.4 5%
EBITA
margin(3)) 9% 12% - 6% - 8% 12% -
Of which
Professional
Services 14% 16% - 13% - 13% 16% -
Operating
margin 9% 11% - 5% - 7% 11% -
Of which
Professional
Services 14% 16% - 12% - 13% 15% -
--------------------------------------------------------------------------------
(1)) All numbers for 2011 are stated incl. restructuring charges of SEK 0.3b in
Q3, SEK 0.5 b. in Q2 and SEK 0.2 b. in Q1
(2)) All numbers for 2010 are stated excl. restructuring charges of SEK 0.3b in
Q3, SEK 1.0 b. in Q2 and SEK 0.7 b. in Q1
(3)) EBITA - Earnings before interest, tax, amortizations and write-downs of
acquired intangibles
Global Services sales in the quarter were SEK 20.4 (19.1) b. an increase of 7%
both year-over-year and sequentially.
Professional Services sales were SEK 14.7 (13.7) b. in the quarter, up 7% year-
over-year and 9% sequentially. Currency adjusted sales of Professional Services
increased year-over-year 13%. The increase is mainly a result of increased sales
of systems integration projects. In the quarter, four significant systems
integration contracts were signed in the areas of OSS/BSS, Service Delivery
Platforms and data center build projects.
Managed Services sales increased by 1% year-over-year to SEK 5.3 (5.2) b. and
12% sequentially, mainly driven by Brazil, Germany, Italy, UK and the US.
Currency adjusted Managed Services sales increased 8% year-over-year. The
sequential growth is reflecting the 24 new managed services contracts signed in
the second quarter. In the third quarter, 14 new managed services contracts were
signed, of which six were extensions or expansions.
Network Rollout sales amounted to SEK 5.7 (5.3) b. in the quarter, an increase
of 7% year-over-year and 3% sequentially, driven by continued high volumes of
network modernization.
Global Services' EBITA margin decreased in the quarter to 9% (12%) year-over-
year and increased sequentially from 6%. Sequentially, margin was positively
impacted by increased volumes and improved Network Rollout margins driven by
supply chain improvements. However, Network Rollout margins are still negative
due to network modernization in Europe and finalization of 3G projects in India.
The margin impact from restructuring charges was 1%-point in the quarter.
EBITA margin for Professional Services amounted to 14% (16%). Margins improved
sequentially from 13% positively impacted by increased volumes. In the quarter
there was an impact from restructuring charges of 2%-points.
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 850 million, of which 475 million in network operation
contracts and 375 million in field operations. The number of services
professionals employed amounts to 53,000.
Multimedia
Third Second Nine
quarter quarter months
SEK b. 2011(1)) 2010(2)) Change 2011(1)) Change 2011(1)) 2010(2)) Change
--------------------------------------------------------------------------------
Multimedia 8%
sales 2.6 2.3 11% 2.4 7.2 7.0 3%
EBITA -
margin(3)) 11% 0% - -4% 0% -3% -
Operating -
margin 3% -8% - -11% -7% -11% -
--------------------------------------------------------------------------------
(1)) All numbers for 2011 are stated incl. restructuring charges of SEK 0.0 b
in Q3, SEK 0.1 b. in Q2 and SEK 0.0 b. in Q1
(2)) All numbers for 2010 are stated excl. restructuring charges of SEK 0.0 b
in Q3, SEK 0.2 b. in Q2 and SEK 0.0 b. in Q1
(3)) EBITA - Earnings before interest, tax, amortizations and write-downs of
acquired intangibles
Multimedia sales in the quarter increased 11% year-over-year and 8%
sequentially, with continued good development in revenue management. TV
solutions improved sequentially, driven by IPTV where several contracts were
signed in the quarter. EBITA margin improved to 11% (0%) due to increased
volumes and the efficiency program which has resulted in lower operating
expenses.
Sony Ericsson
Third Second Nine
quarter quarter months
EUR m. 2011 2010 Change 2011 Change 2011 2010 Change
Number of
units shipped (m.) 9.5 10.4 -9% 7.6 25% 25.3 31.9 -21%
Average selling
price (EUR) 166 154 8% 156 6% 155 150 3%
Net sales 1,586 1,603 -1% 1,193 33% 3,924 4,765 -18%
Gross margin 27% 30% - 31% - 30% 29% -
Operating margin 2% 4% - -3% - 1% 3% -
Income before taxes 31 62 - -42 - 4 112 -
Income before taxes,
excl restructuring
charges 31 66 - -42 - 4 151 -
Net income 0 49 - -50 - -40 82 -
Operating cash flow 53 -54 - -224 - -524 -119 -
-----------------------------------------------------------------------
Sony Ericsson's third quarter profitability improved sequentially as a result of
higher sales volumes. The company's shift to Android-based smartphones
continues, now representing more than 80% of total sales.
Cash flow from operating activities during the quarter was positive EUR 53
million. Repayment of external borrowings of EUR 51 million were made in the
quarter resulting in total borrowings of EUR 718 million on September 30, 2011.
Total cash balances amounted to EUR 466 million.
Sony Ericsson estimates that its share in the global Android-based smartphone
market during the quarter was approximately 12% in volume and 11% in value.
Ericsson's share in Sony Ericsson's income before tax was SEK 0.1 (0.3) b. in
the quarter.
ST-Ericsson
Third Second
quarter quarter
USD m. 2011 2010 Change 2011 Change
Net sales 412 565 -27% 385 7%
Adjusted operating -128% -7%
income(1)) -194 -85 -181
Operating income -224 -129 -73% -222 -1%
Net income -211 -121 -74% -221 5%
-----------------------------------------------
(1) )Operating income adjusted for amortization of acquired intangibles and
restructuring charges
ST-Ericsson's sales increased sequentially by 7% and revenues from new products
continued to grow offsetting the continuous decline in sale of legacy products.
The net financial position at the end of the quarter was negative USD -594 m.
(last quarter net financial position was USD -427 m.) ST-Ericsson is reported in
US GAAP and Ericsson's share in ST-Ericsson's income before tax, adjusted to
IFRS, was SEK -0.7 (-0.4) b. in the quarter.
By the end of the quarter ST-Ericsson had utilized USD 614 m. of a 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, which in the
quarter represented more than 50% of total sales.
Ericsson is committed to support the execution of ST-Ericsson's business plan
and we still believe in the company's recovery to profitability and positive
operating cash flows. However, in the event of a significant worsening of the
current market conditions, we may consider additional actions to improve
performance. Under this scenario the value of ST-Ericsson for Ericsson may be
lower than the current carrying amount of the investment on our books. We will
continuously monitor ST-Ericsson's business evolution and will value the
situation on a quarterly basis.
REGIONAL OVERVIEW
Third Second Nine
quarter quarter months
Sales, SEK b. 2011 2010 Change 2011 Change 2011 2010 Change
North America 12.1 12.9 -6% 12.3 -2% 37.6 35.4 6%
Latin America 6.0 3.7 64% 4.9 22% 15.0 11.8 26%
Northern Europe
and
Central Asia 3.5 2.4 49% 4.6 -23% 11.4 7.3 56%
Western and
Central Europe 4.6 4.3 7% 4.3 6% 13.8 14.0 -1%
Mediterranean 5.2 5.0 4% 5.5 -6% 15.6 15.7 -1%
Middle East 3.7 2.7 34% 3.5 3% 10.3 10.5 -2%
Sub-Saharan
Africa 2.5 1.8 40% 2.2 14% 6.9 7.2 -3%
India 2.3 2.1 7% 2.8 -19% 8.2 5.8 42%
China and
North East Asia 9.7 6.9 39% 9.0 7% 27.3 16.5 66%
South East Asia
and Oceania 3.7 3.8 -3% 3.0 23% 9.9 11.0 -10%
Other 2.2 1.9 19% 2.5 -10% 7.3 5.4 35%
---------------------------------------------------------------
Total 55.5 47.5 17% 54.8 1% 163.3 140.6 16%
---------------------------------------------------------------
North America sales decreased -6% year-over-year and -2% sequentially. A
positive uptake in the services and OSS/BSS businesses in the quarter could not
fully offset the impact from a slower networks business after a period of high
operator investments in network capacity. CDMA sales declined sequentially
although it increased year-over-year. There is a continued operator focus on
commercial LTE launches and in addition, operators also focus on cash flow
management.
Latin America sales increased 64% year-over-year and 22% sequentially with
growth across all segments. Operators invest in mobile broadband coverage as
well as GSM to meet increased data traffic. There were also good traction for
transmission, opto and IP. In the quarter, new IPTV deals were signed.
Northern Europe and Central Asia sales increased 49% year-over-year and
decreased -23% sequentially. The sequential decline is due to slower
infrastructure and network rollout sales, mainly in Russia, following strong
operator investments in network capacity and coverage during the first six
months of 2011.
Western and Central Europe sales increased 7% year-over-year and 6%
sequentially, mainly driven by increased volumes related to network
modernization projects as well as the managed services business. There is
momentum for managed services and network sharing as operators seek to reduce
operating expenses.
Mediterranean sales increased 4% year-over-year and decreased -6% sequentially.
Network modernization projects are underway across the region. Year-over-year,
network rollout and system integration showed a good development, reflecting the
ongoing modernization projects. Sequentially, Spain and Greece were impacted by
macroeconomic instability and in Northern Africa sales developed slow due to
political unrest.
Middle East sales increased 34% year-over-year and 3% sequentially. The year-
over-year comparison is easy due to a slow market in Q3 2010 following supply
constraints. Mobile broadband sales continued to develop positively across the
region. Operators are looking into opportunities to reducing their operating
expenses, resulting in a positive development for managed services both year-
over-year and sequentially. Political unrest continues to impact sales
development in the region with operators being cautious on infrastructure
investments.
Sub-Saharan Africa sales increased 40% year-over-year and 14% sequentially,
driven by both networks and multimedia. Operators invested in 3G network
coverage in preparation for expected increased data traffic. To reduce operating
expenditures, operators show interest in managed services.
India sales increased 7% year-over-year and decreased -19% sequentially.
Networks sales decreased sequentially due to slower 3G investments. The initial
3G rollouts reached a temporary peak already in the second quarter 2011
following three quarters of intense deployments. The Indian market is fragmented
and in the near future a telecom policy reform is expected which might make
operator consolidation easier. After the end of the quarter the first TD-LTE
deal in India was signed with Augere Wireless Broadband Pvt Ltd and services
will start next year.
China and North East Asia sales increased 39% year-over-year and 7% sequentially
across all segments and with especially strong demand in services and
multimedia. Operator investments in the region are mainly driven by the broad
introduction of smartphones which has lead to continuous growth in mobile
broadband subscriptions and usage. The high level of GSM expansions continued
in China although total revenue was somewhat lower due to seasonality. Ericsson
has successfully completed the first phase of the large-scale TD-LTE trial with
China Mobile. Japan showed strong development in the quarter with a high degree
of capacity investments. In Korea, the LTE contracts with LGU+ and SKT have both
moved into deployment phase and LG-Ericsson is also implementing a WCDMA/HSPA
capacity expansion project in the Seoul metropolitan area.
South East Asia and Oceania sales decreased -3% year-over-year and increased
23% sequentially, with contribution from the Telstra LTE project which is now in
deployment. Data traffic growth is only 10% in the region and smartphone
penetration is still low. Overall profitability for operators is declining due
to diminishing voice and sms revenues.
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
Third Full Ericsson
Unit quarter year forecast
2010 2011 Change 2006 2007 2008 2009 2010 2011
Mobile Billion 5.1 ~5.8 ~13% 2.7 3.3 4.0 4.6 5.3 ~6.1
subscriptions
Net additions Million 175 ~135 ~-30% 500 620 660 640 710 ~800
Mobile Million 540 ~870 ~60% 55 130 220 360 610 ~900
broadband1)
Net additions Million 65 ~85 ~30% 30 70 90 150 250 ~300
(1) Mobile broadband includes handset, tablets and mobile PC for the following
technologies: HSPA, LTE, CDMA2000 EV-DO, TD-SCDMA and WiMax)
(Note: Due to continuous improvements in reported data from operators,
subscriptions figure from Q211 has changed compared to last report, affecting
comparison of net additions.)
Industry development
GSM network coverage has reached more than 85% of the world's population and
more than 40% 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. 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 82% and total mobile subscriptions are around 5.8
billion. Around 75% of the subscriptions, or 4.4 billion, are GSM while only
14% are WCDMA/HSPA subscriptions. Year-over-year growth was roughly 13%. India
and China accounted for approximately 40% of the estimated ~135 million net
additions during the third quarter, adding around 20 and 30 million
respectively. For India, this is lower than previous quarters. Indonesia, Brazil
and Bangladesh follow in terms of net addition. There is continued strong
momentum for uptake of smartphones in all regions; we expect to see
approximately 30% of all handsets sold in the third quarter to be smartphones,
compared to around 20% for the full year 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 reached around 550 million by the end of
the second quarter 2011, mainly boosted by strong growth in DSL in China. DSL
represents more than 60% of all fixed broadband subscriptions.
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, mainly due to their different tariff structures. An
average mobile PC user currently generates 1-2 Gbyte per month and the usage has
been increasing over time. On average in a mobile network, a smartphone
generates approximately 10 times more data traffic compared to a normal feature
phone, while a mobile PC generates 100 times more traffic than a feature phone.
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 6.1 (5.9) b. Major changes in the Parent
Company's financial position for the nine-month period include; decreased cash,
cash equivalents and short-term investments of SEK 13.3 b., increased current
and non-current receivables from subsidiaries of SEK 6.6 b. and decreased
current liabilities to subsidiaries of SEK 8.6 b. At the end of the quarter,
cash, cash equivalents and short-term investments amounted to SEK 58.3 (71.6) b.
Guarantees to Sony Ericsson Mobile Communications AB are reported as contingent
liabilities and amounted to SEK 2.1 (1.1) b. By the end of the quarter ST-
Ericsson had utilized USD 307 million of a short-term credit facility.
In accordance with the conditions of the long-term variable compensation program
(LTV) for Ericsson employees, 2,600,304 shares from treasury stock were sold or
distributed to employees during the third quarter. The holding of treasury stock
at September 30, 2011, was 65,880,866 Class B shares.
OTHER INFORMATION
Closing of acquisition of M2M technology platform from Telenor Connexion
On August 24, 2011, Ericsson announced the completion of the asset purchase
agreement to acquire Telenor Connexion's M2M (machine-to-machine) technology
platform. The acquisition follows Ericsson's ambition to drive the market for
M2M communication.
Nortel patent portfolio
On July 29, 2011, Ericsson, as part of a consortium of leading technology
companies, completed the acquisition of all of Nortel's remaining patents and
patent applications. The acquisition, which is still subject to final approval,
includes more than 6,000 patents and patent applications touching nearly every
aspect of telecommunications and additional markets as well, including Internet
search and social networking.
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:
* Potential negative effects on operators' willingness to invest in network
development due to a increased 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 of financing, 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;
* Results and capital needs of our two major joint ventures Sony Ericsson and
ST-Ericsson;
* 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, October 20, 2011
Telefonaktiebolaget LM Ericsson (publ)
Date for next report: January 25, 2012
AUDITORS' REVIEW REPORT
We have reviewed this report for the period January 1, 2011, to September
30, 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, October 20, 2011
PricewaterhouseCoopers AB
Peter Nyllinge
Authorised Public Accountant
EDITOR'S NOTE
To read the complete report with tables, please go to:
www.ericsson.com/res/investors/docs/q-reports/2011/9month11-en.pdf
Ericsson invites media, investors and analysts to a press conference at the
Ericsson Studio, Grönlandsgången 4, Stockholm, at 09.00 (CET), October
20, 2011. An analysts, investors and media conference call will begin at 15.30
(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
Helena Norrman, Senior Vice President, Communications
Phone: +46 10 719 3472
E-mail:investor.relations(at)ericsson.com or media.relations(at)ericsson.com
Investors
Åse Lindskog, Vice President,
Head of Investor and Analyst Relations
Phone: +46 10 719 9725, +46 730 244 872
E-mail:investor.relations(at)ericsson.com
Stefan Jelvin, Director,
Investor Relations
Phone: +46 10 714 2039
E-mail:investor.relations(at)ericsson.com
Åsa Konnbjer, Director,
Investor Relations
Phone: +46 10 713 3928
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
October 20, 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.
Third quarter 2011:
http://hugin.info/1061/R/1556365/480264.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#1556365]
Unternehmensinformation / Kurzprofil:
Datum: 20.10.2011 - 07:29 Uhr
Sprache: Deutsch
News-ID 78803
Anzahl Zeichen: 50192
contact information:
Town:
STOCKHOLM
Kategorie:
Business News
Diese Pressemitteilung wurde bisher 160 mal aufgerufen.
Die Pressemitteilung mit dem Titel:
"Ericsson reports third quarter results"
steht unter der journalistisch-redaktionellen Verantwortung von
Ericsson (Nachricht senden)
Beachten Sie bitte die weiteren Informationen zum Haftungsauschluß (gemäß TMG - TeleMedianGesetz) und dem Datenschutz (gemäß der DSGVO).
