SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN ISSUER
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
April 27, 2015
Commission File Number
000-12033
LM ERICSSON TELEPHONE COMPANY
(Translation of registrant’s name into English)
Torshamnsgatan 21, Kista
SE-164 83, Stockholm, Sweden
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.
Form 20-F x Form 40-F ¨
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ¨
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ¨
THIS REPORT ON FORM 6-K SHALL BE DEEMED TO BE INCORPORATED BY REFERENCE IN THE REGISTRATION STATEMENTS ON FORM F-3 (NO. 333-180880) AND ON FORM S-8 (Nos. 333-196453, 333-161683 AND 333-161684) OF TELEFONAKTIEBOLAGET LM ERICSSON (PUBL) AND TO BE A PART THEREOF FROM THE DATE ON WHICH THIS REPORT IS FURNISHED TO THE SECURITIES AND EXCHANGE COMMISSION TO THE EXTENT NOT SUPERSEDED BY DOCUMENTS OR REPORTS SUBSEQUENTLY FILED WITH OR FURNISHED TO THE SECURITIES AND EXCHANGE COMMISSION.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| TELEFONAKTIEBOLAGET LM ERICSSON (publ) | ||
| By: | /S/ NINA MACPHERSON | |
| Nina Macpherson | ||
| Senior Vice President and | ||
| General Counsel | ||
| By: | /S/ HELENA NORRMAN | |
| Helena Norrman | ||
| Senior Vice President | ||
| Corporate Communications |
Date: April 27, 2015
First quarter report 2015
as adjusted for incorporation by reference.
Stockholm, April 23, 2015
FIRST QUARTER HIGHLIGHTS
> Sales in the quarter increased by 13% reaching SEK 53.5 (47.5) b. Significant currency movements impacted sales positively. Sales, adjusted for comparable units and currency decreased by –6% YoY,
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driven by slower mobile broadband activity in North America. 3
> With current visibility we anticipate the fast pace of 4G deployments in Mainland China to continue and
the North American mobile broadband business to remain slow in the short term. 2
> Professional Services had a strong quarter. 7
> Gross margin decreased YoY to 35.4% (36.5%), due to lower capacity business in North America and continued fast pace of 4G coverage deployments in Mainland China, increased restructuring charges
and a higher share of Global Services sales. 3
> The cost and efficiency program, announced in November 2014, is progressing according to plan.
Savings of SEK 9 b. is expected, with full effect during 2017. 3
> Operating income was SEK 2.1 (2.6) b. Excluding restructuring charges of SEK –0.6 (–0.1) b., the oper-
ating income was flat YoY. 4
> The net currency effect contributed positively to the operating income, despite a negative currency
hedge effect of SEK –1.4 (–0.1) b. 4
> Cash flow from operating activities was SEK –5.9 (9.4) b. mainly due to increased working capital. 9
SEK b. Q1 2015 Q1 2014 YoY change Q4 2014 QoQ change
Net sales 53.5 47.5 13% 68.0 –21%
Gross margin 35.4% 36.5% – 36.6% –
Operating income 2.1 2.6 –19% 6.3 –66%
Operating margin 4.0% 5.5% – 9.3% –
Net income 1.5 1.7 –14% 4.2 –65%
EPS diluted, SEK 0.40 0.65 –38% 1.29 –69%
Cash flow from operating activities –5.9 9.4 – 8.6 –
Net cash, end of period(1) 15.6 43.6 –64% 27.6 –44%
(1) Reconciliation of non-IFRS financial measures to the most directly comparable IFRS financial measures can be found on page
CEO Comments
Sales increased by 13% in the quarter. Significant currency movements impacted sales positively and Professional Services had a strong quarter. Profit- ability improved in segment Global Services while it declined in segment Networks due to changed busi- ness mix.
Business
In the quarter, sales growth was strong in India and North East
Asia.
Professional Services sales increased YoY with a continued good global demand for our services offering. We signed 27 managed services contracts in the quarter, including a major multi-country contract in Europe.
As anticipated, segment Networks mobile broadband business in North America continued to be slow in the quarter as opera- tors remained focused on cash flow optimization in order to finance major acquisitions and spectrum auctions. The decline in North America was partly offset by a continued fast pace of
4G deployments in Mainland China. As a consequence, the business mix shifted to a higher share of coverage projects in the quarter.
Consumer demand and mobile data traffic growth continued to be strong in North America, creating further need for quality and capacity investments. However, with current visibility, we antici- pate the fast pace of 4G deployments in Mainland China to con- tinue and the North American mobile broadband business to remain slow in the short term.
Profitability
Operating income declined YoY, primarily driven by lower profit- ability in segment Networks due to the above mentioned change in business mix and increased operating expenses. This was partly offset by significantly improved operating income in seg- ment Global Services, mainly driven by Network Rollout. There were no losses related to the modems business in the quarter.
The underlying margin, excluding restructuring charges and hedge losses, improved YoY. The net currency effect contrib- uted positively to the operating income, considering transaction and translation exposure as well as the negative currency hedge effect.
IPR revenues
As a consequence of the ongoing dispute with a major cus- tomer, the IPR licensing revenues declined in constant curren- cies. Reported IPR revenues were stable in the quarter as a majority of these contracts are in USD.
Cost and efficiency program
As part of improving the profitability, we continue to proactively identify efficiency opportunities. The cost and efficiency pro- gram is progressing according to plan. The ambition is to achieve savings of approximately SEK 9 b., with full effect during
2017. The program primarily relates to five key areas: portfolio streamlining and ways of working in R&D; structural enhance- ments in IS/IT; accelerated service delivery transformation; sup- ply chain efficiencies; and structural efficiency gains in G&A.
In the quarter we announced, as part of the program, that 2,200 positions in Sweden, are subject to notice. In addition we will reduce the number of consultants in Sweden by 850.
Cash flow
We ended the quarter with a negative cash flow from operating activities of SEK –5.9 b. mainly due to a change in business mix with less capacity business in North America and a higher share of coverage business in Mainland China. This impacted working capital negatively.
Targeted areas
In line with our strategy, we are investing in our targeted areas; IP networks, Cloud, OSS & BSS, TV & Media and Industry & Soci- ety. Sales in targeted areas continued to show good growth. At the Mobile World Congress (MWC) in Barcelona, in February, we saw an increased interest from non-operator customers, espe- cially within the area of Industry & Society. Most of our key launches at MWC were related to the targeted areas, including the new Router 6000 Series, the Hyperscale Cloud Solution, Expert Analytics 15.0, a new Media Delivery Network solution and Digital Telco Transformation.
In addition to the launches in the targeted areas we announced the new Ericsson Radio System. The system has an innovative modular architecture, delivering three times the capacity density with 50% improvement in energy efficiency. With the launches at the MWC, we have further strengthened our leadership and abil- ity to deliver on our growth ambitions.
Hans Vestberg
President and CEO
Financial highlights
SEK b.
Q1
2015
Q1
2014
YoY
change
Q4
2014
QoQ
change
Net sales 53.5 47.5 13% 68.0 –21%
Of which Networks 26.4 24.4 8% 34.1 –22%
Of which Global Services 23.9 20.4 17% 29.8 –20%
Of which Support Solutions 3.1 2.8 11% 4.0 –23%
Of which Modems 0.1 0.0 – 0.1 –
Gross income 19.0 17.3 9% 24.9 –24%
Gross margin (%) 35.4% 36.5% – 36.6% –
Research and development expenses –8.5 –8.3 3% –9.7 –12%
Selling and administrative expenses –7.1 –6.5 11% –8.1 –12%
Other operating income and expenses –1.2 0.0 – –0.8 –
Operating income 2.1 2.6 –19% 6.3 –66%
Operating margin 4.0% 5.5% – 9.3% –
for Networks 2% 10% – 13% –
for Global Services 7% 5% – 7% –
for Support Solutions 3% 0% – 11% –
for Modems 0% – – – –
Financial net –0.1 –0.2 –73% –0.5 –88%
Taxes –0.6 –0.7 –14% –1.7 –63%
Net income 1.5 1.7 –14% 4.2 –65%
Restructuring charges –0.6 –0.1 – –0.8 –
Net sales
Sales in the quarter increased by 13% YoY. Significant currency effect impacted sales positively, mainly due to a continued strengthening of the USD towards the SEK. Professional Ser- vices had a strong quarter.
Growth in India, North East Asia, South East Asia and Oceania as well as the Middle East was partly offset by anticipated lower broadband business activity in North America, where operators remained focused on cash flow optimization to finance major acquisitions and spectrum auctions. As a consequence of the ongoing dispute with a major customer, the IPR licensing reve- nues declined in constant currencies. Reported IPR revenues were stable in the quarter as a majority of these contracts are in USD.
Sales declined sequentially following a seasonally strong Q4.
Gross margin
The gross margin decreased YoY. This was primarily due to lower capacity business in North America and continued fast pace of 4G coverage business in Mainland China. In addition, higher restructuring charges and a higher share of Global Ser- vices sales impacted gross margin negatively. Currency effects contributed positively to gross margin.
The gross margin decreased sequentially following a strong Q4
2014 with high software sales and strong IPR revenues.
Restructuring charges and cost and efficiency program Restructuring charges for the Group increased YoY and were stable QoQ. Restructuring charges in the quarter were primarily related to Service Delivery. The activities in the cost and effi- ciency program are progressing according to plan and work to proactively identify efficiency opportunities continues.
As part of the program, restructuring activities were announced in Sweden. These will impact 2,200 positions and approximately
850 consultants, mainly in R&D and Supply and are estimated to result in restructuring charges of approximately SEK –2 b. in Q2
2015. Related savings will start to impact results towards the end of 2015.
Operating expenses
Total operating expenses increased YoY, mainly driven by increased selling expenses due to negative currency effects and acquisitions.
Quarterly sales and reported sales growth year over year
SEK b. %
Quarterly sales
Reported sales growth
Operating expenses and operating expense, % of sales
SEK b. %
Operating expenses
Operating expenses of sales
Operating income and operating margin
SEK b. %
Operating income
Operating margin
Other operating income and expenses
The revaluation and realization effects from currency hedge contracts were SEK –1.4 b., of which SEK –1.1 b. was realized. This is to be compared with the total impact from hedges of SEK
–1.0 b. in Q4 2014 and SEK –0.1 b. in Q1 2014.
The negative effect derives mainly from the hedge contract bal- ance in USD, which has further decreased in value. The SEK has weakened towards the USD between December 31, 2014 (SEK/ USD rate 7.79) and March 31, 2015 (SEK/USD rate 8.64).
Operating income
Operating income decreased YoY due to higher operating expenses and increased restructuring charges. This was partly offset by higher sales. The net currency effect had a positive impact on operating income.
Operating income decreased QoQ primarily due to seasonally weaker sales and a lower gross margin. This was partly offset by lower operating expenses.
Financial net
The financial net improved YoY and QoQ, mainly related to posi- tive foreign currency revaluation effects and positive interest revaluation effects.
Net income and EPS
Net income and EPS diluted decreased following the lower operating income.
Employees
The number of employees on March 31, 2015 is 118,706 com- pared with 118,055 on Dec 31, 2014. The majority of the increase is related to India, following a large new countrywide managed services contract. The number of Ericsson services professionals on March 31, 2015 was 66,000 (65,000 Dec 31,
2014).
MODEMS
Net Sales
The discontinuation of the modems business is now almost completed. Net sales in the quarter of SEK 0.1 b., are related to earlier signed contracts that all have end-of-life agreements.
Operating income
Operating income for the modems business was SEK 0.0 b.
| 4 |
|
Ericsson | First Quarter Report 2015
Regional sales
First quarter 2015 Change
SEK b.
North America 5.2 6.3 0.8 12.2 0% –6%
Latin America 2.1 2.2 0.2 4.6 –3% –30%
Northern Europe and Central Asia 1.8 0.8 0.1 2.7 12% –33%
Western and Central Europe 1.6 2.9 0.2 4.7 8% –22%
Mediterranean 1.9 2.9 0.1 5.0 4% –34%
Middle East 2.4 1.9 0.2 4.5 17% –34%
Sub-Saharan Africa 0.8 1.2 0.2 2.2 19% –17%
India 2.1 1.1 0.3 3.5 108% 49%
North East Asia 4.0 2.0 0.1 6.0 23% –35%
South East Asia and Oceania 2.4 1.8 0.1 4.3 24% –14%
Other 1) 2.1 0.7 0.8 3.8 15% –19%
Total 26.4 23.9 3.1 53.5 13% –21%
1) Region “Other” includes licensing revenues, broadcast services, power modules, mobile broadband modules, Ericsson-LG Enterprise and other businesses.
North America
Networks sales in the quarter continued to be slow as operators remained focused on cash flow optimization in order to finance major acquisitions and spectrum auctions. ICT transformation related business as well as TV & Media developed favorably in the quarter.
Latin America
Sales decreased slightly YoY. Business continued to be driven primarily by related services for mobile broadband coverage projects and BSS transformations projects. Currency restric- tions impacted investments in some parts of the region.
Northern Europe and Central Asia
Sales grew in the quarter, primarily driven by continued mobile broadband infrastructure investments in Russia, however at a slower pace than previous quarters. Support Solutions devel- oped favorably in the quarter, both in TV & Media and OSS & BSS.
Western and Central Europe
Sales increased YoY, driven by managed services, as operators seek network quality and operational efficiencies. TV compres- sion as well as OSS & BSS sales added to the growth in Support Solutions. Mobile broadband deployments and investments in network quality continued.
Mediterranean
Sales growth YoY was driven by Global Services where man- aged services sales were the main contributor. Continued capacity business contributed positively to Networks sales.
Middle East
Sales growth YoY was driven by increased mobile broadband projects while sales in Global Services and Support Solutions remained flat.
Sub-Saharan Africa
Sales increased YoY in key markets, for both Networks and Global Services, driven by strong data growth in mobile net- works as well as regulatory quality requirements.
India
Sales increased YoY, mainly due to continued operator spending driven by growth in mobile data traffic. Global Services sales showed a strong development, mainly as a result of the first
pan-India managed services contract. Spectrum auctions were conducted in the quarter.
North East Asia
Sales growth YoY was mainly driven by a continued fast pace of deployment of previously awarded 4G contracts in Mainland China.
South East Asia and Oceania
Sales increased YoY, primarily driven by continued mobile broadband projects. Professional Services showed good momentum.
Other
As a consequence of the ongoing dispute with a major cus- tomer, the IPR licensing revenues declined in constant curren- cies. Reported IPR revenues were stable in the quarter as a majority of these contracts are in USD.
Broadcast services continued to grow, following the Red Bee Media acquisition. Sales of power modules and other busi- nesses are also included in “Other”.
Segment results
NET WORKS
Segment sales
[GRAPHIC APPEARS HERE]
Networks Global Services Support Solutions
Quarterly sales and sales growth year over year
SEK b. %
[GRAPHIC APPEARS HERE]
Quarterly sales
Sales growth
Operating income and operating margin
SEK b. %
[GRAPHIC APPEARS HERE]
Operating income
Operating margin
SEK b. Q1 2015 Q1 2014 YoY change Q4 2014 QoQ change
Net sales 26.4 24.4 8% 34.1 –22%
Operating income 0.6 2.5 –76% 4.3 –86%
Operating margin 2% 10% – 13% –
Restructuring charges –0.2 –0.1 87% –0.1 23%
Net sales
Reported sales in segment Networks grew by 8% YoY with strong sales related to mobile broadband deployments in Main- land China, India, the Middle East as well as South East Asia and Oceania. As anticipated, business activity in North America con- tinued to be slow in the quarter as operators remained focused on cash flow optimization in order to finance major acquisitions and spectrum auctions.
Sales declined QoQ following a seasonally strong Q4 2014. Sales related to the IP business showed growth both YoY and QoQ.
Operating income and margin
The operating income and margin declined YoY following lower capacity business in North America and continued fast pace of
4G deployments in Mainland China. In addition, operating expenses increased YoY after a gradual increase in R&D activi- ties in IP networks and Cloud last year. Expenses were also neg- atively impacted by the Q4 2014 transfer of resources from the modems business, adding competence to capture opportuni- ties in radio. The negative effect from currency hedge contracts was SEK –1.1 (–0.1) b.
Sequentially, the decline in operating income and margin was mainly due to lower sales.
GLOBAL SERVICES
Segment sales
[GRAPHIC APPEARS HERE]
Networks Global Services Support Solutions
Quarterly sales and sales growth year over year
SEK b. %
[GRAPHIC APPEARS HERE]
Quarterly sales
Sales growth
Operating income and operating margin
SEK b. %
[GRAPHIC APPEARS HERE]
Operating income
Operating margin
SEK b. Q1 2015 Q1 2014 YoY change Q4 2014 QoQ change
Net sales 23.9 20.4 17% 29.8 –20%
Of which Professional Services 18.1 15.1 20% 21.4 –15%
Of which Managed Services 7.5 5.8 30% 7.7 –3%
Of which Network Rollout 5.8 5.3 9% 8.4 –31%
Operating income 1.7 1.0 62% 1.9 –13%
Of which Professional Services 2.1 1.9 11% 2.5 –15%
Of which Network Rollout –0.4 –0.9 –50% –0.5 –20%
Operating margin 7% 5% – 7% –
for Professional Services 12% 13% – 12% –
for Network Rollout –7% –16% – –6% –
Restructuring charges –0.4 –0.0 – –0.6 –30%
Net sales
Reported sales in Global Services grew by 17% YoY driven by Professional Services and in particular Managed Services. In the quarter, 27 Managed Services contracts were signed. The growth in Network Rollout sales YoY was entirely related to cur- rencies. After a seasonally strong Q4, sales declined QoQ.
Operating income and margin
Operating income in Global Services improved YoY driven by reduced losses in Network Rollout and increased sales in Pro- fessional Services. This was partly offset by higher restructuring charges.
Operating margin in Professional Services declined slightly YoY due to a higher share of new managed services contracts. There is continued good progress in returning the Network Rollout business to profitability and its operating margin, excluding restructuring charges, improved YoY to –3% (–16%). The nega- tive effect from currency hedge contracts in Global Services
was SEK –0.2 (–0.1) b.
Global Services operating income declined QoQ due to lower sales.
SEK b. Q1 2015 Q1 2014
Number of signed Managed Services contracts 27 16
Number of signed significant consulting & systems integration contracts 1) 13 9
1) In the areas of OSS and BSS, IP, Service Delivery Platforms and data center build projects.
SUPPORT SOLUTIONS
Segment sales
[GRAPHIC APPEARS HERE]
Networks Global Services Support Solutions
Quarterly sales and sales growth year over year
SEK b. %
[GRAPHIC APPEARS HERE]
Quarterly sales
Sales growth
Operating income and operating margin
SEK b. %
[GRAPHIC APPEARS HERE]
Operating income
Operating margin
SEK b. Q1 2015 Q1 2014 YoY change Q4 2014 QoQ change
Net sales 3.1 2.8 11% 4.0 –23%
Operating income 0.1 0.0 – 0.4 –81%
Operating margin 3% 0% – 11% –
Restructuring charges 0.0 0.0 – 0.0 –
Net sales
Reported sales in Support Solutions grew by 11% YoY with con- tinued good development in OSS & BSS. The overall transition from traditional telecom software license business models to recurrent license revenue deals continues. Sales declined QoQ after a seasonally strong Q4.
Operating income and margin
Operating income and margin improved YoY primarily due to continued good progress in OSS & BSS.
The negative effect from currency hedge contracts was SEK
–0.1 (0.0) b.
Operating income and margin declined QoQ due to lower sales.
SEK b. Q1 2015 Q1 2014 Q4 2014
Net income reconciled to cash 3.1 3.2 8.3
Changes in operating net assets –9.0 6.2 0.3
Cash flow from operating activities –5.9 9.4 8.6
Cash flow from investing activities –2.1 –8.8 –1.7
Cash flow from financing activities 0.9 –5.1 0.4
Net change in cash and cash equivalents –5.7 –4.0 8.9
Cash conversion (%)(1) –188% 290% 104%
The negative cash flow from operating activities was mainly due to change of business mix with less capacity business in North America and a higher share of coverage business in Mainland China. This impacted working capital negatively.
As previously communicated, Ericsson is building three global ITC centers and investing approximately SEK 7 b. between 2014 to 2018. The investing activities in the quarter primarily related to the construction of these centers in Sweden and Canada.
Cash flow from financing activities was positively impacted by increased local borrowings of SEK 0.8 b.
Payments for ongoing restructuring amounted to approximately
SEK –0.4 b. in the quarter.
Working capital KPIs, number of days Jan-Mar 2015 Jan-Dec 2014 Jan-Sep 2014 Jan-Jun 2014 Jan-Mar 2014
Sales outstanding 125 105 111 113 112
Inventory 82 64 69 70 72
Payable 64 56 57 61 62
Days sales outstanding increased mainly due to seasonality and change in business mix with less capacity business in North America and a higher share of coverage business in Mainland China. Inventory days increased as an effect of the above men- tioned shift in business mix. Payable days increased due to sea- sonality. Efforts continue in order to reduce working capital through a better order-to-cash process.
CASH flow
Reconciliation of non-IFRS financial measures to the most directly comparable IFRS financial measures can be found on page
FINANCIAL POSITION
SEK b. Mar 31 2015 Mar 31 2014 Dec 31 2014
+ Short-term investments 30.8 41.8 31.2
+ Cash and cash equivalents 35.3 38.1 41.0
Gross cash 66.1 79.9 72.2
– Interest bearing liabilities and post-employment benefits 50.5 36.3 44.5
Net cash(1) 15.6 43.6 27.6
Equity 149.1 142.6 145.3
Total assets 303.0 267.2 293.6
Capital turnover (times) 1.1 1.1 1.2
Equity ratio (%) 49.2% 53.4% 49.5%
Net cash decreased in the quarter as a result of a negative cash flow from operating activities, increased post-employment ben- efits as well as increased capex related to the construction of three global ICT centers in Sweden and Canada. The post-em- ployment benefits increased by SEK 3.8 b. mainly due to lower discount rates in Sweden. The net cash position, excluding
post-employment benefits, was SEK 39.7 b.
The average maturity of long-term borrowings as of March 31,
2015, was 5.6 years, compared to 5.7 years 12 months earlier. Ericsson has an unutilized Revolving Credit Facility of USD 2.0 b.
Debt maturity profile, Parent Company
SEK b.
[GRAPHIC APPEARS HERE]
Swedish Export Credit Corporation MTN Bond
Nordic Investment Bank European Investment Bank Notes and Bonds
Reconciliation of non-IFRS financial measures to the most directly comparable IFRS financial measures can be found on page
Other information
Modems ceased to exist as a Business unit
On January 1, 2015, the Business unit Modems was discontin- ued, following the decision announced on September 18, 2014, that Ericsson would discontinue development of modems and shift part of investment into radio network R&D to better capture growth opportunities in this area. The change in strategy for modems came as the company completed its evaluation of the future of the modems business. Segment Modems will remain as a reporting unit for 2015.
Ericsson took legal action against Apple
On January 12, 2015, Apple filed a lawsuit asking the United States District Court for the Northern District of California to find that it does not infringe a small subset of Ericsson’s patents. On January 14, 2015, following Apple’s legal action, Ericsson filed a complaint in the United States District Court for the Eastern Dis- trict of Texas requesting a ruling on Ericsson’s proposed global licensing fees with Apple. During the past two years of negotia- tions, the companies have not been able to reach an agreement on licensing of Ericsson’s patents that enable Apple’s mobile devices to connect with the world and power many of their appli- cations. Ericsson filed the suit in order to receive an independent assessment on whether Ericsson’s global licensing offer com- plies with Ericsson’s FRAND commitment.
The global license agreement for mobile technology between Ericsson and Apple has expired and Apple has declined to take a new license on offered FRAND terms.
Ericsson announced change in executive leadership team On January 15, 2015, Ericsson announced that Johan Wibergh, Executive Vice President and Head of Segment Networks, will leave his position to take on a role outside of Ericsson. Wibergh joined Ericsson in 1996 and has since held a number of executive positions within the company. Since 2008, Wibergh has also
been part of Ericsson’s Executive Leadership Team. Although stepping down from his position immediately, Wibergh will remain available to Ericsson until April 30, 2015 when he formally leaves the company.
Effective January 15, 2015, Hans Vestberg will, in addition to his role as President and CEO, assume the role as Head of Segment Networks.
Ericsson sued Apple for patent infringement to defend fair licensing system
Ericsson announced on February 27, that it had filed two com- plaints with the International Trade Commission (ITC) and seven complaints in the United States District Court for the Eastern Dis- trict of Texas against Apple asserting 41 patents covering many aspects of Apple’s iPhones and iPads after Apple refused Erics- son’s offer to have a court determine fair licensing terms by which both companies would be bound. The patents include standard essential patents related to the 2G and 4G/LTE standards as well as other patents that are critical to features and functionality of Apple devices. Ericsson seeks exclusion orders in the ITC pro-
ceedings and damages and injunctions in the District Court actions.
The global cost and efficiency program
On March 11, Ericsson announced that 2,200 positions in Swe- den, mainly in R&D and Supply, are subject to notice. This is part of the the cost and efficiency program. The program activities in
2015 will mainly target structural improvements in R&D, Service Delivery and Supply globally.The program includes both head- count reductions and savings in external costs across the com- pany’s operations.
As announced at Ericsson’s Capital Markets Day on November
13, 2014, accelerated efficiency measures will run globally through 2017. The program targets savings of approximately SEK 9 b. with full effect during 2017.
Ericsson announced the intention to acquire telecom IT ser- vices business in Mainland China
On March 16, Ericsson announced that it has signed a definitive agreement to acquire the telecom business of Sunrise Technol- ogy, a provider of IT services in the operations and business sup- port systems (OSS & BSS) domain. Sunrise Technology, which is headquartered in Guangzhou, China, will continue to exist as a separate entity—serving customers in sectors other than telecom. The acquisition of Sunrise Technology strengthens Ericsson’s position in OSS & BSS, which is one of the targeted growth areas where Ericsson aims to establish leadership.
Approximately 1,000 employees—almost all of whom are based in Guangzhou—will join Ericsson by Q2 2015, subject to customary closing conditions. The employees have expertise in IT consult- ing; systems integration for charging and billing systems; cus- tomer relationship management; business intelligence/analytics solutions as well as in application development and maintenance.
POST-CLOSING EVENTS Resolutions at the AGM
On April 14, 2015, Ericsson held its AGM in Stockholm. The pro- posed dividend of SEK 3.40 per share was approved by the AGM.
In accordance with the proposal of the Nomination Committee, Leif Johansson was reelected Chairman of the Board of Direc- tors. Roxanne S. Austin, Nora Denzel, Börje Ekholm, Alexander Izosimov, Ulf J. Johansson, Kristin Skogen Lund, Hans Vestberg and Jacob Wallenberg were re-elected to the Board and Anders Nyrén and Sukhinder Singh Cassidy were elected new Board members. In accordance with the Board of Directors’ proposal, the AGM resolved to approve the Guidelines for remuneration to Group management.
Disclosure pursuant to section 2019 of the Iran threat reduction and Syria Human rights Act of 2012 (ITRA)
11
Ericsson’s operational and financial risk factors and uncertain- ties along with our strategies and tactics to mitigate risk expo- sures or limit unfavorable outcomes are described in our Annual Report 2014. Compared to the risks described in the Annual Report 2014, no material, new or changed risk factors or uncer- tainties have been identified in the year.
Risk factors and uncertainties in focus short-term for the Parent
Company and the Ericsson Group include:
> Potential negative effects on operators’ willingness to invest in network development due to uncertainty in the financial markets and a weak economic business environment, or reduced consumer telecom spending, or increased pressure on us to provide financing, or delayed auctions of spectrums;
> Uncertainty regarding the financial stability of suppliers, for example due to lack of financing;
> Effects on gross margins and/or working capital of the busi- ness mix in the Networks segment between capacity sales and new coverage build-outs;
> Effects on gross margins of the business mix in the Global Services segment including proportion of new network build- outs and share of new managed services deals with initial transition costs;
> Effects of the ongoing industry consolidation among our cus- tomers 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;
> 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;
> No guarantees that specific restructuring or cost-savings ini- tiatives will be sufficient, successful or executed in time to deliver any improvements in short-term earnings.
Ericsson stringently monitors the compliance with all relevant trade regulations and trade embargos applicable to dealings with customers operating in countries where there are trade restrictions or trade restrictions are discussed. Moreover, Erics- son operates globally in accordance with Group policies and directives for business ethics and conduct.
Stockholm, April 23, 2015
Telefonaktiebolaget LM Ericsson Hans Vestberg, President and CEO Org. Nr. 556016-0680
This report has not been reviewed by Telefonaktiebolaget LM Ericsson’s auditors.
Date for next report: July 17, 2015
12
For further information, please contact:
Helena Norrman, Senior Vice President, Marketing and
Communications
Phone: +46 10 719 34 72
E-mail: investor.relations@ericsson.com or media.relations@ericsson.com
Telefonaktiebolaget LM Ericsson
Org. number: 556016-0680
Torshamnsgatan 21
SE-164 83 Stockholm Phone: +46 10 719 00 00
Investors
Peter Nyquist, Vice President, Investor Relations
Phone: +46 10 714 64 49, +46 70 575 29 06
E-mail: peter.nyquist@ericsson.com
Stefan Jelvin, Director, Investor Relations
Phone: +46 10 714 20 39, +46 70 986 02 27
E-mail: stefan.jelvin@ericsson.com
Åsa Konnbjer, Director, Investor Relations
Phone: +46 10 713 39 28, +46 73 082 59 28
E-mail: asa.konnbjer@ericsson.com
Rikard Tunedal, Director, Investor Relations
Phone: +46 10 714 54 00, +46 761 005 400
E-mail: rikard.tunedal@ericsson.com
Media
Ola Rembe, Vice President,
Head of External Communications
Phone: +46 10 719 97 27, +46 73 024 48 73
E-mail: media.relations@ericsson.com
Corporate Communications
Phone: +46 10 719 69 92
E-mail: media.relations@ericsson.com
13
Safe harbor statement
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 projec- tions 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 varia- tions or negatives of these words, and include, among others, statements regarding: (i) strategies, outlook and growth pros- pects; (ii) positioning to deliver future plans and to realize poten- tial 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) eco- nomic 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 competi- tors; (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, projec- tions or other characterizations of future events or circum- stances, including any underlying assumptions, are for-
ward-looking statements. These forward-looking statements speak only as of the date hereof and are based upon the infor- mation 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 diffi- cult to predict. Therefore, our actual results could differ materi- ally 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 prod- uct 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) sig- nificant 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.
14
fINANCIAL STATEMENTS AND ADDITIONAL INFORMATION
Contents
Financial statements
Consolidated income statement 16
Statement of comprehensive income 16
Consolidated balance sheet 17
Consolidated statement of cash flows 18
Consolidated statement of changes in equity 19
Consolidated income statement – isolated quarters 19
Consolidated statement of cash flows – isolated quarters 20
Additional information
Accounting policies 21
Net sales by segment by quarter 22
Operating income by segment by quarter 23
Operating margin by segment by quarter 23
Net sales by region by quarter 24
Net sales by region by quarter (cont.) 25
Top 5 countries in sales 25
Net sales by region by segment 26
Provisions 27
Information on investments 27
Reconciliation table, non-IFRS measurements 28
Net cash – end of period 28
Other information 29
Number of employees 29
Restructuring charges by function 30
Restructuring charges by segment 30
15
CONSOLIDATED INCOME STATEMENT
Jan–Mar Jan–Dec
SEK million 2014 2015 Change 2014
Net sales 47,505
53,520
13% 227,983
Cost of sales –30,184 –34,556 14% –145,556
Gross income 17,321 18,964 9% 82,427
Gross margin (%) 36.5% 35.4% 36.2%
Research and development expenses –8,275
–8,487
3% –36,308
Selling and administrative expenses –6,452 –7,131 11% –27,100
Operating expenses –14,727 –15,618 6% –63,408
Other operating income and expenses 21
–1,240
–2,156
Shares in earnings of JV and associated companies 15 27 –56
Operating income 2,630 2,133 –19% 16,807
Financial income 401
684
1,277
Financial expenses –612 –740 –2,273
Income after financial items 2,419 2,077 –14% 15,811
Taxes –727
–623
–4,668
Net income 1,692 1,454 –14% 11,143
Net income attributable to:
Stockholders of the Parent Company 2,120 1,319 11,568
Non–controlling interests –428 135 –425
Other information
Average number of shares, basic (million) 3,233 3,244 3,237
Earnings per share, basic (SEK) 1) 0.66 0.41 3.57
Earnings per share, diluted (SEK) 1) 0.65 0.40 3.54
1) Based on Net income attributable to stockholders of the Parent Company.
STATEMENT OF COMPREHENSIVE INCOME
Jan
–Mar Jan–Dec
SEK million 2014 2015 2014
Net income 1,692
1,454
11,143
Other comprehensive income
Items that will not be reclassified to profit or loss
Remeasurements of defined benefits pension plans incl. asset ceiling –1,622 –3,211 –10,017
Tax on items that will not be reclassified to profit or loss 329 694 2,218
Items that may be reclassified to profit or loss
Cash flow hedges
Gains/losses arising during the period – –
Reclassification adjustments for gains/losses included in profit or loss – –
Revaluation of other investments in shares and participations
Fair value remeasurement 0 181 47
Changes in cumulative translation adjustments 401 4,409 8,734
Share of other comprehensive income on JV and associated companies 11 –4 579
Tax on items that may be reclassified to profit or loss – – 5
Total other comprehensive income, net of tax –881 2,069 1,566
Total comprehensive income 811 3,523 12,709
Total comprehensive income attributable to:
Stockholders of the Parent Company 1,240 3,305 12,981
Non–controlling interest –429 218 –272
16
CONSOLIDATED BALANCE SHEET
SEK million
Dec 31
2014
Mar 31
2015
ASSETS
Non-current assets
Intangible assets
Capitalized development expenses 3,570 3,522
Goodwill 38,330 41,140
Intellectual property rights, brands and other intangible assets 12,534 12,238
Property, plant and equipment 13,341
14,947
Financial assets
Equity in JV and associated companies 2,793 1,783
Other investments in shares and participations 591 836
Customer finance, non-current 1,932 2,311
Other financial assets, non-current 5,900 6,505
Deferred tax assets 12,778
14,274
91,769 97,556
Current assets
Inventories 28,175 33,657
Trade receivables 77,893
80,334
Customer finance, current 2,289 2,633
Other current receivables 21,273 22,700
Short-term investments 31,171
30,776
Cash and cash equivalents 40,988 35,311
201,789 205,411
Total assets 293,558 302,967
EQUITY AND LIABILITIES
Consolidated balance sheet
Equity
Stockholders’ equity 144,306
147,855
Non-controlling interest in equity of subsidiaries 1,003
1,196
145,309
149,051
Non-current liabilities
Post-employment benefits 20,385
24,163
Provisions, non-current 202
198
Deferred tax liabilities 3,177
3,156
Borrowings, non-current 21,864
23,496
Other non-current liabilities 1,797
1,815
47,425
52,828
Current liabilities
Provisions, current 4,225
3,858
Borrowings, current 2,281
2,847
Trade payables 24,473
24,266
Other current liabilities 69,845
70,117
100,824
101,088
Total equity and liabilities 293,558
302,967
Of which interest-bearing liabilities and post-employment benefits 44,530
50,506
Of which net cash 1) 27,629
15,581
Assets pledged as collateral 2,525
2,590
Contingent liabilities 737
721
1) Reconciliation of non-IFRS financial measures to the most directly comparable IFRS financial measures can be found on page 2.8.
17
OF CASH FLOWS
Jan–Mar Jan–Dec
2014 2015 2014
SEK million
Operating activities
Net income 1,692 1,454 11,143
Adjustments to reconcile net income to cash
Taxes –1,348 –1,921 –1,235
Earnings/dividends in JV and associated companies –16 –22 305
Depreciation, amortization and impairment losses 2,360 2,681 9,945
Other 549 944 2,185
3,237 3,136 22,343
Changes in operating net assets
Inventories –2,099 –4,019 –2,924
Customer finance, current and non–current 558 –258 –710
Trade receivables 7,957 2,037 1,182
Trade payables –110 –1,668 1,265
Provisions and post–employment benefits –464 –166 –859
Other operating assets and liabilities, net 323 –4,962 –1,595
6,165 –9,036 –3,641
Cash flow from operating activities 9,402
–5,900
18,702
Investing activities
Investments in property, plant and equipment –1,034 –2,367 –5,322
Sales of property, plant and equipment 274 75 522
Acquisitions/divestments of subsidiaries and other operations, net –849 –58 –4,394
Product development –197 –294 –1,523
Other investing activities –169 118 –3,392
Short–term investments –6,790 399 6,596
Cash flow from investing activities –8,765 –2,127 –7,513
Cash flow before financing activities 637
–8,027
11,189
Financing activities
Dividends paid – –25 –9,846
Other financing activities –5,069 899 –8,379
Cash flow from financing activities –5,069 874 –18,225
Effect of exchange rate changes on cash 433
1,476
5,929
Net change in cash and cash equivalents –3,999 –5,677 –1,107
Cash and cash equivalents, beginning of period 42,095 40,988 42,095
Cash and cash equivalents, end of period 38,096 35,311 40,988
CONSOLIDATED STATEMENT
18
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
SEK million
Jan–Mar
2014
Jan–Mar
2015
Jan–Dec
2014
Opening balance 141,623
145,309
141,623
Total comprehensive income 811 3,523 12,709
Sale/repurchase of own shares 24 46 106
Stock purchase plan 175 198 717
Dividends paid – –25 –9,846
Transactions with non–controlling interests – – –
Closing balance 142,633 149,051 145,309
CONSOLIDATED INCOME STATEMENT
– ISOLATED QUARTERS
Isolated quarters, SEK million
Net sales 47,505 54,849 57,643 67,986
53,520
Cost of sales –30,184 –34,910 –37,362 –43,100 –34,556
Gross income 17,321 19,939 20,281 24,886 18,964
Gross margin (%) 36.5% 36.4% 35.2% 36.6% 35.4%
Research and development expenses –8,275 –9,084 –9,281 –9,668
–8,487
Selling and administrative expenses –6,452 –6,541 –6,000 –8,107 –7,131
Operating expenses –14,727 –15,625 –15,281 –17,775 –15,618
Other operating income and expenses 21 –206 –1,134 –837
–1,240
Shares in earnings of JV and associated companies 15 –109 10 28 27
Operating income 2,630 3,999 3,876 6,302 2,133
Financial income 401 268 429 179
684
Financial expenses –612 –465 –557 –639 –740
Income after financial items 2,419 3,802 3,748 5,842 2,077
Taxes –727 –1,140 –1,124 –1,677
–623
Net income 1,692 2,662 2,624 4,165 1,454
Net income attributable to:
Stockholders of the Parent Company 2,120 2,579 2,646 4,223 1,319
Non–controlling interests –428 83 –22 –58 135
Other information
Average number of shares, basic (million) 3,233 3,235 3,238 3,241 3,244
Earnings per share, basic (SEK) 1) 0.66 0.80 0.82 1.30 0.41
Earnings per share, diluted (SEK) 1) 0.65 0.79 0.81 1.29 0.40
1) Based on Net income attributable to stockholders of the Parent Company.
CONSOLIDATED STATEMENT
20142015
Q1Q2Q3Q4Q1
19
CONSOLIDATED STATEMENT OF CASH FLOWS – ISOLATED QUARTERS
Isolated quarters, SEK million
Operating activities
Net income 1,692 2,662 2,624 4,165 1,454
Adjustments to reconcile net income to cash
Taxes –1,348 26 –388 475 –1,921
Earnings/dividends in JV and associated companies –16 356 –10 –25 –22
Depreciation, amortization and impairment losses 2,360 2,414 2,481 2,690 2,681
Other 549 404 267 965 944
3,237 5,862 4,974 8,270 3,136
Changes in operating net assets
Inventories –2,099 –1,188 –840 1,203 –4,019
Customer finance, current and non–current 558 –341 –1,101 174 –258
Trade receivables 7,957 –892 –1,222 –4,661 2,037
Trade payables –110 1,644 –1,519 1,250 –1,668
Provisions and post–employment benefits –464 –225 –18 –152 –166
Other operating assets and liabilities, net 323 –2,806 –1,624 2,512 –4,962
6,165 –3,808 –6,324 326 –9,036
Cash flow from operating activities 9,402 2,054 –1,350 8,596
–5,900
Investing activities
Investments in property, plant and equipment –1,034 –1,320 –1,415 –1,553 –2,367
Sales of property, plant and equipment 274 53 139 56 75
Acquisitions/divestments of subsidiaries and other operations, net –849 –1,512 –286 –1,747 –58
Product development –197 –185 –155 –986 –294
Other investing activities –169 –388 –1,302 –1,533 118
Short–term investments –6,790 7,012 2,308 4,066 399
Cash flow from investing activities –8,765 3,660 –711 –1,697 –2,127
Cash flow before financing activities 637 5,714 –2,061 6,899
–8,027
Financing activities
Dividends paid – –9,828 –3 –15 –25
Other financing activities –5,069 –2,393 –1,288 371 899
Cash flow from financing activities –5,069 –12,221 –1,291 356 874
Effect of exchange rate changes on cash 433 1,499 2,306 1,691
1,476
Net change in cash and cash equivalents –3,999 –5,008 –1,046 8,946 –5,677
Cash and cash equivalents, beginning of period 42,095 38,096 33,088 32,042 40,988
Cash and cash equivalents, end of period 38,096 33,088 32,042 40,988 35,311
20142015
Q1Q2Q3Q4Q1
CONSOLIDATED STATEMENT
20
Accounting policies
The Group
This interim report is prepared in accordance with IAS 34. The term “IFRS” used in this document refers to the application of IAS and IFRS as well as interpretations of these standards as issued by IASB’s Standards Interpretation Committee (SIC) and IFRS Interpretations Committee (IFRIC). The accounting policies adopted are consistent with those of the annual report for the year ended December 31, 2014, and should be read in conjunc- tion with that annual report.
There is no significant difference between IFRS effective as per
March 31, 2015 and IFRS as endorsed by the EU.
21
NET SALES BY SEGMENT BY QUARTER
Isolated quarters, SEK million
Networks 24,383 28,964 30,030 34,110
26,436
Global Services 20,356 23,059 24,467 29,777 23,901
Of which Professional Services 15,078 16,554 17,794 21,405 18,131
Of which Managed Services 5,754 6,485 7,175 7,741 7,501
Of which Network Rollout 5,278 6,505 6,673 8,372 5,770
Support Solutions 2,765 2,824 3,057 4,009 3,074
Modems 1 2 89 90 109
Total 47,505 54,849 57,643 67,986 53,520
Sequential change, percent
Networks –30% 19% 4% 14%
–22%
Global Services –25% 13% 6% 22% –20%
Of which Professional Services –20% 10% 7% 20% –15%
Of which Managed Services –12% 13% 11% 8% –3%
Of which Network Rollout –37% 23% 3% 25% –31%
Support Solutions –46% 2% 8% 31% –23%
Modems – – – – –
Total –29% 15% 5% 18% –21%
Year over year change, percent
Networks –13% 3% 13% –2%
8%
Global Services –5% –7% 2% 10% 17%
Of which Professional Services 3% –1% 10% 14% 20%
Of which Managed Services –2% –4% 15% 18% 30%
Of which Network Rollout –23% –19% –14% 0% 9%
Support Solutions 13% 21% 30% –21% 11%
Modems – – – – –
Total –9% –1% 9% 1% 13%
Year to date, SEK million
Networks 24,383 53,347 83,377 117,487
26,436
Global Services 20,356 43,415 67,882 97,659 23,901
Of which Professional Services 15,078 31,632 49,426 70,831 18,131
Of which Managed Services 5,754 12,239 19,414 27,155 7,501
Of which Network Rollout 5,278 11,783 18,456 26,828 5,770
Support Solutions 2,765 5,589 8,646 12,655 3,074
Modems 1 3 92 182 109
Total 47,505 102,354 159,997 227,983 53,520
Year to date, year over year change, percent
Networks –13% –5% 1% 0%
8%
Global Services –5% –6% –3% 0% 17%
Of which Professional Services 3% 1% 4% 7% 20%
Of which Managed Services –2% –3% 3% 7% 30%
Of which Network Rollout –23% –21% –19% –14% 9%
Support Solutions 13% 17% 21% 3% 11%
Modems – – – – –
Total –9% –5% 0% 0% 13%
20142015Q1Q2Q3Q4Q1
20142015
Q1Q2Q3Q4Q1
20142015
Q1Q2Q3Q4Q1
20142015
Jan–MarJan–JunJan–SepJan–DecJan–Mar
20142015
Jan–MarJan–JunJan–SepJan–DecJan–Mar
25
Ericsson | First Quarter Report 2015
OPERATING INCOME
BY SEGMENT BY QUARTER
2014 2015
Isolated quarters, SEK million Q1 Q2 Q3 Q4 Q1
Networks 2,476 3,574 3,175 4,319
590
Global Services 1,036 1,487 1,607 1,937 1,681
Of which Professional Services 1,893 2,095 2,059 2,472 2,109
Of which Network Rollout –857 –608 –452 –535 –428
Support Solutions 12 –378 –108 443 82
Modems –745 –456 –739 –85 0
Unallocated 1) –149 –228 –59 –312 –220
Total 2,630 3,999 3,876 6,302 2,133
Year to date, SEK million
Networks 2,476 6,050 9,225 13,544
590
Global Services 1,036 2,523 4,130 6,067 1,681
Of which Professional Services 1,893 3,988 6,047 8,519 2,109
Of which Network Rollout –857 –1,465 –1,917 –2,452 –428
Support Solutions 12 –366 –474 –31 82
Modems
–745 –1,201 –1,940 –2,025 0
Unallocated 1) –149 –377 –436 –748 –220
Total 2,630 6,629 10,505 16,807 2,133
1) “Unallocated” consists mainly of costs for corporate staff, non–operational capital gains and losses.
OPERATING margin
BY SEGMENT BY QUARTER
As percentage of net sales, isolated quarters
Networks 10% 12% 11% 13%
2%
Global Services 5% 6% 7% 7% 7%
Of which Professional Services 13% 13% 12% 12% 12%
Of which Network Rollout –16% –9% –7% –6% –7%
Support Solutions 0% –13% –4% 11% 3%
Modems – – – – –
Total 6% 7% 7% 9% 4%
Networks 10% 11% 11% 12%
2%
Global Services 5% 6% 6% 6%
7%
Of which Professional Services 13% 13% 12% 12%
12%
Of which Network Rollout –16% –12% –10% –9%
–7%
Support Solutions 0% –7% –5% 0%
3%
Modems – – – –
–
Total 6% 6% 7% 7%
4%
20142015
Jan–MarJan–JunJan–SepJan–DecJan–Mar
20142015
Q1Q2Q3Q4Q1
2014
2015
Jan–Mar
Jan–Jun
Jan–Sep
Jan–Dec
Jan–Mar
23
Ericsson | First Quarter Report 2015
NET SALES BY REGION BY QUARTER
Isolated quarters, SEK million
North America 12,215 15,179 14,033 13,082
12,246
Latin America 4,710 5,414 5,882 6,564 4,574
Northern Europe & Central Asia 1) 2) 2,436 2,717 3,151 4,069 2,726
Western & Central Europe 2) 4,381 4,582 4,646 6,097 4,741
Mediterranean 2) 4,785 5,487 5,218 7,513 4,982
Middle East 3,859 4,514 6,039 6,865 4,517
Sub Saharan Africa 1,813 1,886 2,447 2,603 2,158
India 1,695 1,645 2,000 2,362 3,531
North East Asia 4,908 6,406 7,033 9,225 6,030
South East Asia & Oceania 3,446 3,662 3,794 4,956 4,259
Other 1) 2) 3,257 3,357 3,400 4,650 3,756
Total 47,505 54,849 57,643 67,986 53,520
1) Of which in Sweden 999 1,008 1,090 1,047 1,091
2) Of which in EU 9,720 10,320 10,736 14,325 10,904
Sequential change, percent
North America –11% 24% –8% –7%
–6%
Latin America –30% 15% 9% 12% –30%
Northern Europe & Central Asia 1) 2) –34% 12% 16% 29% –33%
Western & Central Europe 2) –16% 5% 1% 31% –22%
Mediterranean 2) –32% 15% –5% 44% –34%
Middle East –35% 17% 34% 14% –34%
Sub Saharan Africa –30% 4% 30% 6% –17%
India –14% –3% 22% 18% 49%
North East Asia –43% 31% 10% 31% –35%
South East Asia & Oceania –20% 6% 4% 31% –14%
Other 1) 2) –55% 3% 1% 37% –19%
Total –29% 15% 5% 18% –21%
1) Of which in Sweden –25% 1% 8% –4% 4%
2) Of which in EU –24% 6% 4% 33% –24%
Year–over–year change, percent
North America –23% –1% –3% –5%
0%
Latin America 8% –3% 11% –3% –3%
Northern Europe & Central Asia 1) 2) 7% 0% 7% 11% 12%
Western & Central Europe 2) 1% 1% 6% 17% 8%
Mediterranean 2) –9% –11% –8% 6% 4%
Middle East 22% 13% 38% 16% 17%
Sub Saharan Africa –15% –29% –9% 1% 19%
India 6% 29% 56% 20% 108%
North East Asia –19% –4% 16% 7% 23%
South East Asia & Oceania –17% –3% 5% 16% 24%
Other 1) 2) 12% 23% 55% –35% 15%
Total –9% –1% 9% 1% 13%
1) Of which in Sweden –2% –21% 37% –21% 9%
2) Of which in EU –1% –5% 6% 12% 12%
20142015
Q1Q2Q3Q4Q1
20142015
Q1Q2Q3Q4Q1
20142015
Q1Q2Q3Q4Q1
NET SALES
24
BY REGION BY QUARTER, cont.
Year to date, SEK million
North America 12,215 27,394 41,427 54,509
12,246
Latin America 4,710 10,124 16,006 22,570 4,574
Northern Europe & Central Asia 1) 2) 2,436 5,153 8,304 12,373 2,726
Western & Central Europe 2) 4,381 8,963 13,609 19,706 4,741
Mediterranean 2) 4,785 10,272 15,490 23,003 4,982
Middle East 3,859 8,373 14,412 21,277 4,517
Sub Saharan Africa 1,813 3,699 6,146 8,749 2,158
India 1,695 3,340 5,340 7,702 3,531
North East Asia 4,908 11,314 18,347 27,572 6,030
South East Asia & Oceania 3,446 7,108 10,902 15,858 4,259
Other 1) 2) 3,257 6,614 10,014 14,664 3,756
Total 47,505 102,354 159,997 227,983 53,520
1) Of which in Sweden 999 2,007 3,097 4,144 1,091
2) Of which in EU 9,720 20,040 30,776 45,101 10,904
Year to date, year–over–year change, percent
North America –23% –12% –9% –8%
0%
Latin America 8% 2% 5% 3% –3%
Northern Europe & Central Asia 1) 2) 7% 3% 5% 6% 12%
Western & Central Europe 2) 1% 1% 3% 7% 8%
Mediterranean 2) –9% –10% –9% –5% 4%
Middle East 22% 17% 25% 22% 17%
Sub Saharan Africa –15% –23% –18% –13% 19%
India 6% 16% 28% 25% 108%
North East Asia –19% –11% –2% 1% 23%
South East Asia & Oceania –17% –10% –5% 0% 24%
Other 1) 2) 12% 18% 28% –2% 15%
Total –9% –5% 0% 0% 13%
1) Of which in Sweden –2% –13% 0% –6% 9%
2) Of which in EU –1% –3% 0% 4% 12%
TOP 5 COUNTRIES IN SALES
Q1 Jan–Mar
Country 2014 2015 2014 2015
United States 26%
23%
26%
23%
China 5% 8% 5% 8%
India 4% 7% 4% 7%
United Kingdom 3% 4% 3% 4%
Japan 4% 3% 4% 3%
20142015
Jan–MarJan–JunJan–SepJan–DecJan–Mar
20142015
Jan–MarJan–JunJan–SepJan–DecJan–Mar
NET SALES
25
Ericsson | First Quarter Report 2015
NET SALES BTY REGION BY SEGMENT
Q1 2015 Jan–Mar 2015
SEK milion Networks
Global
Services
Support
Solutions Modems Total Networks
Global
Services
Support
Solutions Modems Total
North America 5,151 6,300 795 –
12,246
5,151 6,300 795 –
12,246
Latin America 2,142 2,215 217 – 4,574 2,142 2,215 217 – 4,574
Northern Europe & Central Asia 1,814 838 74 – 2,726 1,814 838 74 – 2,726
Western & Central Europe 1,639 2,935 167 – 4,741 1,639 2,935 167 – 4,741
Mediterranean 1,915 2,920 147 – 4,982 1,915 2,920 147 – 4,982
Middle East 2,397 1,937 183 – 4,517 2,397 1,937 183 – 4,517
Sub Saharan Africa 757 1,164 237 – 2,158 757 1,164 237 – 2,158
India 2,103 1,104 324 – 3,531 2,103 1,104 324 – 3,531
North East Asia 3,961 2,009 60 – 6,030 3,961 2,009 60 – 6,030
South East Asia & Oceania 2,415 1,764 80 – 4,259 2,415 1,764 80 – 4,259
Other 2,142 715 790 109 3,756 2,142 715 790 109 3,756
Total 26,436 23,901 3,074 109 53,520 26,436 23,901 3,074 109 53,520
Share of Total 49% 45% 6% – 100% 49% 45% 6% – 100%
Sequential change, percent Networks
Global
Services
Q1 2015
Support
Solutions Modems Total
North America 3% –12% –19% –
–6%
Latin America –28% –33% –29% – –30%
Northern Europe & Central Asia –33% –34% –28% – –33%
Western & Central Europe –39% –10% –5% – –22%
Mediterranean –38% –30% –44% – –34%
Middle East –32% –31% –64% – –34%
Sub Saharan Africa –31% –15% 69% – –17%
India 76% 12% 83% – 49%
North East Asia –39% –22% –67% – –35%
South East Asia & Oceania –9% –16% –61% – –14%
Other –23% –12% –18% – –19%
Total –22% –20% –23% – –21%
Year over year change, percent Networks
Global
Services
Q1 2015
Support
Solutions Modems Total
North America –21% 25% 26% –
0%
Latin America –12% 9% –8% – –3%
Northern Europe & Central Asia 32% –17% 25% – 12%
Western & Central Europe –9% 19% 29% – 8%
Mediterranean –4% 12% –23% – 4%
Middle East 33% 3% 2% – 17%
Sub Saharan Africa 4% 40% –8% – 19%
India 137% 58% 200% – 108%
North East Asia 43% –1% –47% – 23%
South East Asia & Oceania 30% 18% –13% – 24%
Other –2% 143% 3% – 15%
Total 8% 17% 11% – 13%
Year over year change, percent Networks
Global
Services
Jan–Mar 2015
Support
Solutions Modems Total
North America –21% 25% 26% –
0%
Latin America –12% 9% –8% – –3%
Northern Europe & Central Asia 32% –17% 25% – 12%
Western & Central Europe –9% 19% 29% – 8%
Mediterranean –4% 12% –23% – 4%
Middle East 33% 3% 2% – 17%
Sub Saharan Africa 4% 40% –8% – 19%
India 137% 58% 200% – 108%
North East Asia 43% –1% –47% – 23%
South East Asia & Oceania 30% 18% –13% – 24%
Other –2% 143% 3% – 15%
Total 8% 17% 11% – 13%
NET SALES BY REGION BY segment
26
PROVISIONS
Isolated quarters, SEK million
Opening balance 5,362 4,928 4,579 4,567
4,427
Additions 625 430 675 996 915
Utilization/Cash out –977 –642 –648 –794 –1,204
Of which restructuring –512 –246 –231 –213 –437
Reversal of excess amounts –88 –298 –132 –420 –236
Reclassification, translation difference and other 6 161 93 78 154
Closing balance 4,928 4,579 4,567 4,427 4,056
Year to date, SEK million
Opening balance 5,362 5,362 5,362 5,362
4,427
Additions 625 1,055 1,730 2,726 915
Utilization/Cash out –977 –1,619 –2,267 –3,061 –1,204
Of which restructuring –512 –758 –989 –1,202 –437
Reversal of excess amounts –88 –386 –518 –938 –236
Reclassification, translation difference and other 6 167 260 338 154
Closing balance 4,928 4,579 4,567 4,427 4,056
information on INVESTMENTS
Investments in assets subject to depreciation, amortization, impairment and write-downs
Isolated quarters, SEK million
Additions
Property, plant and equipment 1,034 1,320 1,415 1,553 2,367
Capitalized development expenses 197 185 155 986 294
IPR, brands and other intangible assets 77 621 935 1,014 11
Total 1,308 2,126 2,505 3,553 2,672
Depreciation, amortization and impairment losses
Property, plant and equipment 1,004 1,048 1,078 1,187 1,214
Capitalized development expenses 333 315 311 342 342
IPR, brands and other intangible assets, etc. 1,023 1,051 1,092 1,161 1,125
Total 2,360 2,414 2,481 2,690 2,681
20142015
Q1Q2Q3Q4Q1
20142015
Jan–MarJan–JunJan–SepJan–DecJan–Mar
20142015
Q1Q2Q3Q4Q1
PROVISIONS
27
RECONCILIATION TABLE, NON-IFRS MEASUREMENTS – CASH CONVERSION
Isolated quarters, SEK million
Net income 1,692 2,662 2,624 4,165
1,454
Net income reconciled to cash 3,237 5,862 4,974 8,270 3,136
Cash flow from operating activities 9,402 2,054 –1,350 8,596 –5,900
Cash conversion 290.5% 35.0% –27.1% 103.9% –188.1%
net cash – end of period
SEK million
Dec 31
2014
Mar 31
2015
Cash and cash equivalents 40,988
35,311
+ Short term investments 31,171 30,776
– Borrowings, non-current 21,864 23,496
– Borrowings, current
2,281 2,847
– Post employment benefits 20,385 24,163
Net cash, end of period 27,629 15,581
20142015Q1Q2Q3Q4Q1
28
OTHER INFORMATION
SEK million
Number of shares and earnings per share
Number of shares, end of period (million) 3,305 3,305 3,305
Of which class A–shares (million) 262 262 262
Of which class B–shares (million) 3,043 3,043 3,043
Number of treasury shares, end of period (million) 71 60 63
Number of shares outstanding, basic, end of period (million) 3,234 3,245 3,242
Numbers of shares outstanding, diluted, end of period (million) 3,265 3,277 3,275
Average number of treasury shares (million) 72 61 68
Average number of shares outstanding, basic (million) 3,233 3,244 3,237
Average number of shares outstanding, diluted (million) 1) 3,264 3,276 3,270
Earnings per share, basic (SEK) 0.66 0.41 3.57
Earnings per share, diluted (SEK) 1) 0.65 0.40 3.54
Ratios
Days sales outstanding 112 125 105
Inventory turnover days 72 82 64
Payable days 62 64 56
Equity ratio (%) 53.4% 49.2% 49.5%
Capital turnover (times) 1.1 1.1 1.2
Cash conversion (%)(2) 290.5% –188.1% 83.7%
Exchange rates used in the consolidation 3)
SEK/EUR– closing rate 8.95 9.29 9.47
SEK/USD– closing rate 6.48 8.64 7.79
Other
Regional inventory, end of period 16,456 20,000 17,142
Export sales from Sweden 24,078 26,151 113,734
1) Potential ordinary shares are not considered when their conversion to ordinary shares would increase earnings per share.
2) Reconciliation of non-IFRS financial measures to the most directly comparable IFRS financial measures can be found on page 28
3) Translation method changed from 2015. Monthly rates used to translate transactions are available on www.ericsson.com/thecompany/investors
NUMBER OF EMPLOYEES
SEK million
North America 14,902 15,306 15,554 15,516
15,156
Latin America 9,731 11,179 10,901 11,066 10,970
Northern Europe & Central Asia 1) 21,484 21,476 21,691 21,633 21,556
Western & Central Europe 11,455 12,624 12,606 12,617 12,575
Mediterranean 12,253 12,475 13,306 13,387 13,363
Middle East 3,749 3,736 3,831 3,858 3,813
Sub Saharan Africa 2,094 2,284 2,288 2,406 2,442
India 17,991 18,495 19,413 19,971 21,215
North East Asia 13,490 13,448 13,653 13,464 13,488
South East Asia & Oceania 4,234 4,359 4,265 4,137 4,128
Total 111,383 115,382 117,508 118,055 118,706
1) Of which in Sweden 17,545 17,497 17,655 17,580 17,569
Jan–MarJan–Dec
201420152014
20142015
Mar 31Jun 31Sep 31Dec 31Mar 31
OTHER INFORMATIOn
29
RESTRUCTURING CHAREGES BY FUNCTION
Isolated quarters, SEK million
Cost of sales –82 –116 –168 –663
–484
Research and development expenses –19 –80 –92 –113 –51
Selling and administrative expenses –29 –47 –19 –28 –79
Total –130 –243 –279 –804 –614
Year to date, SEK million
Cost of sales –82 –198 –366 –1,029
–484
Research and development expenses –19 –99 –191 –304 –51
Selling and administrative expenses –29 –76 –95 –123 –79
Total –130 –373 –652 –1,456 –614
RESTRUCTURING CHARGES BY SEGMENt
Isolated quarters, SEK million
Networks –93 –128 –80 –142
–173
Global Services –32 –81 –122 –600 –419
Of which Professional Services –25 –63 –85 –435 –140
Of which Network Rollout –7 –18 –37 –165 –279
Support Solutions –5 –34 –77 –30 –19
Modems – – – –32 –3
Unallocated – – – – –
Total –130 –243 –279 –804 –614
Year to date, SEK million
Networks –93 –221 –301 –443
–174
Global Services –32 –113 –235 –835 –419
Of which Professional Services –25 –88 –173 –608 –140
Of which Network Rollout –7 –25 –62 –227 –279
Support Solutions –5 –39 –116 –146 –19
Modems – – – –32 –3
Unallocated – – – – –
Total –130 –373 –652 –1,456 –614
20142015
Q1Q2Q3Q4Q1
20142015
Jan–MarJan–JunJan–SepJan–DecJan–Mar
20142015
Q1Q2Q3Q4Q1
20142015
Jan–MarJan–JunJan–SepJan–DecJan–Mar
RESTRUCTURING CHARGES BY FUNCTION