Form 6-K
Table of Contents

 

 

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

July 18, 2012

 

 

LM ERICSSON TELEPHONE COMPANY

(Translation of registrant’s name into English)

 

 

Torshamnsgatan 23, 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 whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934. Yes  ¨    No  x

 

 

THIS REPORT ON FORM 6-K SHALL BE DEEMED TO BE INCORPORATED BY REFERENCE IN THE REGISTRATION STATEMENT ON FORM F-3 (NO. 333-180880) OF TELEFONAKTIEBOLAGET LM ERICSSON (PUBL.) AND TO BE A PART THEREOF FROM THE DATE ON WHICH THIS REPORT IS FURNISHED, TO THE EXTENT NOT SUPERSEDED BY DOCUMENTS OR REPORTS SUBSEQUENTLY FILED OR FURNISHED.

 

 

 


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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: July 18, 2012


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This report on Form 6-K shall be deemed to be incorporated by reference in the registration statement on Form F-3 (No. 333-180880) of Telefonaktiebolaget LM Ericsson (publ.) and to be a part thereof from the date on which this report is furnished, to the extent not superseded by documents or reports subsequently filed or furnished.

Ericsson SECOND QUARTER report ADJUSTED for registration statement on Form F-3 (No. 333.180880) July 18, 2012

 

 

Sales increased 1% YoY and showed a good performance QoQ, +9%.

 

 

Networks sales decreased YoY due to the expected decline in CDMA equipment sales as well as weaker sales in China and Russia.

 

 

Global Services and Support Solutions showed strong performance YoY and QoQ.

 

 

The underlying business mix, with higher share of coverage projects than capacity projects, was unchanged in the quarter and is expected to prevail short-term. The negative gross margin impact from the network modernization projects in Europe will start to gradually decline end 2012.

 

 

Cash flow from operations SEK -1.4 b. impacted by high working capital mainly due to late invoicing.

 

 

Net income SEK 1.2 b., down from SEK 3.2 b. YoY, impacted by lower profitability in Network and increased loss in ST-Ericsson.

 

 

EPS diluted SEK 0.34 (0.96).

 

SEK b.

   Q2
2012
    Q2
2011
    YoY
Change
    Q1
2012
    QoQ
Change
    Six m.
2012
    Six m.
2011
 

Net sales

     55.3        54.8        1     51.0        9     106.3        107.7   

Of which Networks

     27.8        33.4        -17     27.3        2     55.1        66.6   

Of which Global Services

     24.1        19.0        26     20.6        17     44.7        36.5   

Of which Support Solutions

     3.5        2.4        47     3.0        15     6.5        4.7   

Gross margin

     32.0     37.8     —          33.3     —          32.6     38.1

Operating income excl JVs

     3.3        5.0        -35     10.5        —          13.8        11.3   

Operating margin excl JVs

     5.9     9.2     —          20.6     —          13.0     10.5

Of which Networks

     5     14     —          6     —          5     16

Of which Global Services

     6     5     —          6     —          6     6

Of which Support Solutions

     12     -11     —          -1     —          6     -13

Operating income incl JVs

     2.1        4.3        -51     9.1        —          11.2        10.1   

Income after financial items

     1.8        4.6        —          9.1        —          10.8        10.4   

Net income

     1.2        3.2        -63     8.8        —          10.0        7.3   

EPS diluted, SEK

     0.34        0.96        -65     2.76        -88     3.10        2.23   

Cash flow from operations

     -1.4        5.8        —          0.7        —          -0.6        2.9   

Q112 includes a gain from the divestment of Sony Ericsson of SEK 7.7 b.

COMMENTS FROM HANS VESTBERG, PRESIDENT AND CEO

“In the quarter, demand for Global Services and Support Solutions was strong, while Networks sales decreased YoY mainly due to the expected decline in CDMA equipment sales as well as lower business activity in China, including weaker sales of GSM and lower 3G sales in Russia,” says Hans Vestberg, President and CEO of Ericsson (NASDAQ:ERIC). “In Global Services all areas showed good growth in the quarter due to operators’ focus on operational efficiency and high project activities. The strong development for Support Solutions was driven by billing systems and TV solutions. Global Services and Support Solutions together represented about half of the Group’s revenues. The growing Global Services business has a dilutive impact on gross margin.

 

 

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NET SALES, SEK b.

 

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OPERATING INCOME INCL. JVs, SEK b.

 

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* excl SEK 7.7 b. gain from Sony Ericson divestment

NET INCOME, SEK b.

 

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* excl SEK 7.7 b. gain from Sony Ericson divestment

CASH FLOW FROM OPERATIONS, SEK b.

 

LOGO

We continue to stay close to our customers to monitor the impacts of macroeconomic development and political uncertainty in certain regions on their investments. In customer conversations it is clear that the fundamental drivers for increased data traffic are unchanged. Today there are more than 700 million smartphone subscriptions and according to our estimates this number will increase to three billion in 2017. Based on these drivers, we see an increasing focus from our customers on network performance and quality of service. This will require continuous operator investments in hardware, software and services.

Our joint venture ST-Ericsson is still in a challenging situation due to a significant drop in sales of new products to one of the largest customers and continued decline in legacy products. The company continues to focus on securing the successful execution and delivery of its NovaThor ModAp platforms and Thor modems to customers while executing on company transformation aiming at lowering its break-even point.

In 2010 we made a conscious decision to gain market share and increase technology and services leadership, well aware of the short-term profitability pressure. Our focus is now on translating these gains into sustainable profitable growth,” concludes Vestberg.

Financial Highlights

INCOME STATEMENT AND CASH FLOW

Sales in the quarter increased 1% YoY and 9% QoQ. The acquired Telcordia operation added sales of SEK 1.1 b. in the quarter, split 50/50 between segments Global Services and Support Solutions.

Networks sales decreased -17% YoY primarily due to the expected decline in CDMA equipment sales as well as weaker development for GSM sales in China and slower operator investments in Russia. Networks sales increased 2% QoQ. CDMA equipment sales declined close to -50% YoY to SEK 2 b. and are expected to continue its rapid decline in H212.

Global Services continued to show strong momentum with growth of 26% YoY and 17% QoQ and all areas grew. Global Services represented 44% (35%) of total sales in the quarter compared to 40% in Q112. Support Solutions sales were strong with 47% growth YoY and 15% QoQ driven by strong demand for billing systems and TV solutions. Both Global Services and Support Solutions were positively impacted by the added sales from the acquired Telcordia.

Ericsson restructuring charges amounted to SEK 0.6 (1.7) b., mainly related to execution of the service delivery strategy through transformation from local to global resource centers. As previously communicated, restructuring charges are estimated to approximately SEK 4 b. for the FY12.

Gross margin was down YoY to 32.0% (37.8%), and from 33.3% QoQ. The YoY decrease is due to the increased Global Services share as well as a higher proportion of coverage projects and network modernization projects in Europe. Approximately half of the YoY gross margin percentage decline is related to the increased services mix. The QoQ gross margin reduction is due to a higher Global Services share and lower sales of mobile broadband capacity than in Q112.

The underlying business mix, with higher share of coverage projects, was unchanged in the quarter and is expected to prevail short-term. The negative gross margin impact from the network modernization projects in Europe will start to gradually decline end 2012.

 

 

Ericsson Second Quarter Report 2012    2


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The modernization of networks in Europe became an opportunity for us mid-2010 when operators in Europe started to evaluate potential swaps of older 2G and 3G equipment to new multi-standard radio equipment. Ericsson, who had lost out on market share in the 3G race compared to its strong 2G position, identified this as an opportunity to regain footprint. Competition for new footprint is always tough and a strategic decision was taken to accept short-term pressure on margins to increase market share. As a result, market share has increased and the Company has restored its leading market position in Europe. Average project duration for these modernization projects are 18-24 months and the margin effects will start to gradually decline late 2012. In Q411, all projects were up to full speed.

Total operating expenses amounted to SEK 15.0 (15.8) b. R&D expenses amounted to SEK 8.1 (8.1) b. and increased slightly QoQ due to restructuring. Full year R&D expenses is now expected to be SEK 30-32 b. compared to previous estimate of SEK 29-31 b. The increase is due to selective investments in key radio technology areas to extend technology leadership and FX. Selling and general administrative expenses (SG&A) amounted to SEK 6.9 (7.7) b. SG&A is down -8% YTD, excluding restructuring charges and the impact from the acquisition of Telcordia. In Q211, SG&A was impacted by restructuring charges of SEK 1.2 b. vs. restructuring charges of SEK 0.1 b. in Q212.

Other operating income and expenses was SEK 0.5 (0.2) b. and decreased SEK -7.2 b. QoQ due to the gain of SEK 7.7 b. from the divestment of Sony Ericsson that was reported in Q112. The SEK 0.3 b. in segment Sony Ericsson relates to a resolved dispute from a litigation process with a third party.

Operating income, excluding JVs, decreased to SEK 3.3 (5.0) b. due to lower profitability in Networks but with a positive impact from lower restructuring costs. Operating margin was 5.9% (9.2%) compared to 5.5% (excl. gain from divestment of Sony Ericsson) in Q112.

Ericsson’s share in ST-Ericsson’s income before tax was SEK -1.3 (-0.7) b.

Financial net amounted to SEK -0.3 (0.3) b. and decreased QoQ from SEK 0.0 b. mainly related to negative currency exchange revaluation effects.

Net income decreased to SEK 1.2 (3.2) b. due to lower profitability in Networks and increased loss in ST-Ericsson.

EPS diluted was SEK 0.34 (0.96). Cash flow from operations was negative SEK -1.4 (5.8) b., mainly due to late invoicing in the quarter. Cash outlays for restructuring amounted to SEK 0.3 (1.2) b. Cash outlays of SEK 1.0 b. remain to be made from the restructuring provision.

 

 

Ericsson Second Quarter Report 2012    3


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DAYS SALES OUTSTANDING

 

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INVENTORY DAYS

 

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PAYABLE DAYS

 

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BALANCE SHEET AND OTHER PERFORMANCE INDICATORS

Trade receivables increased QoQ to SEK 67.3 (60.7) b., reflecting changes in FX and late invoicing in the quarter. As a result, days sales outstanding (DSO) increased from 104 to 111 days QoQ due to the increase in trade receivables and change in FX.

Inventory increased QoQ to SEK 33.1 (32.5) b. Inventory turnover days decreased from 88 to 84 days.

During the quarter, Ericsson has performed refinancing activities to extend the average debt maturity profile and to further diversify funding sources:

 

   

Issue of a USD denominated 1 b. 10-year bond in order to refinance debt maturing in 2012 to 2014 and to diversify the funding resources.

 

   

Repurchase of EUR 441 m. related to the 2013 and 2014 EMTN bonds in order to reduce gross debt and optimize net interest.

 

   

During the quarter, two SEK denominated bonds with a total of SEK 3 b. were repaid at maturity.

Cash, cash equivalents and short-term investments amounted to SEK 66.4 (75.6) b. Capex investments amounted to SEK 1.6 (1.0) b.

During the quarter, approximately SEK 0.9 b. of provisions was utilized, of which SEK 0.3 b. related to restructuring. Additions of SEK 0.6 b. were made, of which SEK 0.2 b. related to restructuring. Reversals of SEK 0.5 b. were made.

Total number of employees at the end of the quarter decreased to 108,095 (108,551). The reduction is mainly related to efficiency programs in service delivery and within sales and administration.

 

 

Ericsson Second Quarter Report 2012    4


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SEGMENT SALES, SEK b.

 

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NETWORKS QUARTERLY SALES, SEK b.

 

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Segment Results

NETWORKS

 

SEK b.

   Q2
2012
    Q2
2011
    YoY
Change
    Q1
2012
    QoQ
Change
    Six m.
2012
    Six m.
2011
 

Network sales

     27.8        33.4        -17     27.3        2     55.1        66.6   

Operating margin

     5     14     —          6     —          5     16

CDMA equipment sales decreased -50% YoY to SEK 2 b. in the quarter. CDMA equipment sales are expected to continue its rapid decline in H212. YoY sales were negatively impacted by lower business activity in China, including weaker sales of GSM as well as lower 3G sales in Russia and reduced operator investments in India.

In 2010, we acquired Nortel’s CDMA business in order to strengthen our position in North America. We were quickly established as the market leader in North America. Already at the acquisition, CDMA equipment sales were expected to decline due to the subsequent rapid shift to LTE. The CDMA acquisition has created substantial value for the company.

Ericsson has made good inroads in the converged IP Edge market with seven contracts for the Smart Services Router (SSR) signed to date.

Operating margin was negatively impacted YoY by lower volumes as well as the underlying business mix, with more coverage than capacity projects, and the European network modernization projects. The QoQ decline is also impacted by lower sales of mobile broadband capacity than in Q112.

After the initial large scale LTE rollouts in the US, Japan and Korea, we now start to see other countries following and we expect LTE deployments to commence on a broader scale also in e.g. Europe and Latin America. We have a well proven LTE solution, outperforming competition, and according to measurements end of 2011, we have a 60% market share measured in LTE volumes.

Focus is on improving profitability and leveraging the installed base. Other key priorities are to grow IP sales and secure contracts for Voice over LTE. In CDMA, the priority is to support customers’ migration to our LTE solution and excel in life cycle management.

 

 

Ericsson Second Quarter Report 2012    5


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GLOBAL SERVICES QUARTERLY SALES, SEK b.

 

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GLOBAL SERVICES

 

SEK b.

   Q2
2012
    Q2
2011
    YoY
Change
    Q1
2012
    QoQ
Change
    Six m.
2012
    Six m.
2011
 

Global Services sales

     24.1        19.0        26     20.6        17     44.7        36.5   

Of which Professional Services

     16.9        13.5        26     14.9        14     31.8        26.0   

Of which Managed Services

     6.5        4.7        37     5.7        13     12.2        9.6   

Of which Network Rollout

     7.1        5.6        28     5.7        24     12.9        10.4   

Operating margin

     6     5     —          6     —          6     6

Of which Professional Services

     13     12     —          13     —          13     12

Of which Network Rollout

     -11     -11     —          -11     —          -11     -9

All areas showed strong growth in the quarter and business momentum remains. The increase in Professional Services is to a large extent driven by Managed Services and Consulting & Systems Integration. The demand for Professional Services is driven by operators’ focus on increasing operational efficiency and reducing opex through transformation activities in the voice, IP and OSS/BSS domains as well as outsourcing. Also this quarter, Network Rollout sales increased YoY, driven by high volumes of network modernization in Europe and coverage projects in other regions.

Global Services operating margin increased YoY due to increased profitability in Professional Services, positively impacted by an improvement in all areas as a result of increased sales and lower restructuring charges. Network Rollout operating margin continued to be negatively impacted by the network modernization projects in Europe. The margin impact from restructuring charges was 2%-points Q212 for Global Services as well as Professional Services, compared to 3%-points in Q211.

Ericsson now supports networks with more than 2.5 billion subscribers.

 

Other information

   Q2
2012
     Q1
2012
     Full year
2011
 

No. of signed managed services contracts

     17         9         70   

Of which expansions/extensions

     5         4         32   

No. of signed significant consulting & systems integration contracts1)

     7         6         33   

Number of subscribers in networks managed by Ericsson, end of period 2)

     > 900 m.         > 900 m.         900 m.   

Of which in network operations contracts

     500 m.         500 m.         500 m.   

Number of Ericsson services professionals, end of period

     57,000         57,000         56,000   

 

1) In the areas of OSS/BSS, IP, Service Delivery Platforms and data center build projects.
2) The figure includes network operations contracts and field operation contracts.
 

 

Ericsson Second Quarter Report 2012    6


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SUPPORT SOLUTIONS QUARTERLY SALES, SEK b.

 

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SUPPORT SOLUTIONS

 

SEK b.

   Q2
2012
    Q2
2011
    YoY
Change
    Q1
2012
    QoQ
Change
    Six m.
2012
    Six m.
2011
 

Support Solutions sales

     3.5        2.4        47     3.0        15     6.5        4.7   

Operating margin

     12     -11     —          -1     —          6     -13

The acquired Telcordia operation added sales of SEK 0.55 b. in the quarter. The strong YoY development in the quarter is related to billing solutions in Middle East and Sub-Saharan Africa. The solid growth in TV is especially related to IPTV and compression.

Operating margins improved YoY due to increased volumes and favorable product mix. Focus continues to be on transforming the business for sustainable profit generation as well as integrating Telcordia. Support Solutions is a software business with a high fixed cost base, which makes profitability volume driven.

Number of subscribers served by our charging and billing solutions were 1.7 billion at end of period.

ST-ERICSSON

 

USD m.

   Q2
2012
     Q2
2011
     YoY
Change
    Q1
2012
     QoQ
Change
 

Net sales

     344         385         -11     290         19

Operating income

     -309         -222         -39     -326         5

Net income

     -318         -221         -44     -312         -2

ST-Ericsson’s sales increased 19% QoQ, reflecting a significant ramp-up of volumes of NovaThor platforms shipping to its major customers. The net debt at the end of the quarter was USD -1.2 b. Last quarter net debt was USD -1.0 b. ST-Ericsson is reported in US GAAP and Ericsson’s share in ST-Ericsson’s income before tax, adjusted to IFRS, was SEK -1.3 (-0.7) b. in the quarter. By the end of the quarter, ST-Ericsson had utilized USD 1.2 b. of a short-term credit facility of USD 1.4 b. granted on a 50/50 basis by the parent companies, which corresponds to an increase of USD 260 m. since Q112.

Ericsson Group balance sheet items related to its investment in ST-Ericsson (IFRS);

 

SEK m.

   March 31, 2012      June 30, 2012  

Investment in ST-Ericsson

     1,982         767   

Loans to ST-Ericsson

     3,241         4,311   

Total

     5,223         5,078   
  

 

 

    

 

 

 

Though their path to success is challenging, ST-Ericsson continues to focus on securing the successful execution and delivery of its NovaThor ModAp platforms and Thor modems to customers while executing a company transformation aiming at lowering its break-even point.

Ericsson accounts for ST- Ericsson in accordance with the equity method which means that Ericsson share of income after tax in ST-Ericsson increases or decreases the carrying investment amount.

 

 

Ericsson Second Quarter Report 2012    7


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Regional Overview

 

     Second quarter 2012      Growth  

SEK b.

   Net-
works
     Global
Services
     Support
Solutions
     Total      YoY     QoQ  

North America

     6.1         6.1         0.7         13.0         5     2

Latin America

     2.3         2.5         0.4         5.2         6     9

Northern Europe and Central Asia

     2.1         1.2         0.1         3.4         -26     47

Western and Central Europe

     1.3         2.6         0.2         4.1         -6     -5

Mediterranean

     2.7         3.3         0.2         6.2         12     35

Middle East

     1.6         1.8         0.3         3.7         4     17

Sub-Saharan Africa

     1.6         0.9         0.3         2.8         26     27

India

     0.9         0.6         0.1         1.7         -39     20

China and North East Asia

     5.2         3.1         0.1         8.4         -7     -8

South East Asia and Oceania

     1.9         1.6         0.1         3.7         21     9

Other

     2.1         0.2         0.8         3.1         27     10
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total

     27.8         24.1         3.5         55.3         1     9
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

In Segment Networks “Other” includes licensing revenues, sales of cables, power modules and other businesses. Revenue from the acquired Telcordia business operation, consolidated January 2012, is reported 50/50 between segments Global Services and Support Solutions. In the regional dimension, all of the Telcordia sales are reported in the Support Solution segment except for North America where it is split 50/50 between Global Services and Support Solutions. Multimedia brokering (IPX) was previously reported in each region in segment Support Solution. As of Q112 it is part of region “Other” in segment Support Solutions.

North America. Network sales were negatively impacted by the decline in CDMA sales, however, partly offset by the continued transition to LTE. Major wireless network expansion and transformation projects contributed to the growth in Global Services sales. The acquisition of Telcordia has generated momentum in OSS/BSS.

Latin America. The YoY increase was driven by services. Network Rollout sales increased due to project executions in Brazil, Chile and Mexico. Support Solutions increased due to Telcordia acquisition and strong sales in charging. Operators in Brazil and Mexico are preparing for LTE deployments.

Northern Europe and Central Asia. Sales of Networks decreased YoY mainly due to continued low investment levels in Russia. Solid increase in sequential sales due to continued modernization projects and the win of a WCDMA contract with pan-Russian operator Rostelecom. In the Nordics, all major operators have now launched LTE services.

Western and Central Europe. The region sees some impact from the macroeconomic environment causing cautious operator capex spending and focus on measures to improve efficiency. Most operators are looking at transformation of their OSS/BSS environments. As a result, sales of Global Services and Support Solutions represent more than 60% of the sales in the region and there is continued good momentum for managed services.

Mediterranean. Sales growth is mainly driven by network modernization projects, which drive both sales of networks and services. In Global Services, both Network Rollout and Systems Integration sales contributed to the positive development. Operators focus on mobile broadband in order to meet traffic growth, quality demands and secure network performance.

Middle East. YoY sales growth was mainly driven by sales in Global Services and Support Solutions. Political unrest is still impacting the region and operators in those countries continue to be cautious with infrastructure investments. Services grew, especially in Managed Services and Systems Integration, as operators are looking into network performance quality and operational efficiencies.

Sub-Saharan Africa. Sales increased YoY and QoQ, driven by increased investments in 2G. 2G investments are expected to level out, while 3G will increase. Mobile broadband penetration is slowly expanding from its low level of 4% today, as low cost smartphones enter the market and the internet connectivity is improving.

 

 

Ericsson Second Quarter Report 2012    8


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India. Some recovery in network capex spend as operators have started focused investments in areas where data traffic is growing. YoY sales decreased due to the strong H111, when the initial 3G deployments peaked. Regulatory uncertainties continue in India.

China and North East Asia. The YoY decrease in Networks is mainly related to lower sales of GSM and generally lower business activity in China, as well as continued transition to LTE in Korea, impacting 3G sales. Services sales were driven by more turnkey projects in Japan. The product mix is rapidly changing towards more of initial LTE deployments and a larger share of services.

South East Asia and Oceania. Networks sales increased YoY in several countries, driven by 3G investments and initial LTE deployments. The QoQ increase is due to capacity investments in Indonesia and deployments in other markets. Global Services reported an increase YoY driven by network rollout and support services aligned with infrastructure investments.

Other. Licensing revenues continued to show a stable development YoY. Also sales of cables, power modules and other businesses are included in “Other”. Multimedia brokering (IPX) was previously reported in each region, but from Q112 it is part of “Other”, under Support Solutions.

Market data

GROWTH RATES ARE BASED ON ERICSSON AND MARKET ESTIMATES

 

     Q2      Q2            FULL YEAR      Ericsson
forecast
 
   2012      2011      Change     2009      2010      2011      2012  

Mobile subscriptions, billion

     6.3         5.7         11     4.6         5.3         6.0         6.7   

Net additions, million

     140         150         -8     640         700         650         700   

Mobile broadband, million 1)

     1,250         800         56     360         620         1,000         1,400   

Net additions, million

     110         100         15     150         260         400         450   

 

1)

Mobile broadband includes handsets, tablets and mobile PCs for the following technologies: HSPA, LTE, CDMA2000 EV-DO, TD-SCDMA and WiMAX. Note: due to continuous improvements in reported data from operators, historical subscriptions figures might have changed compared to previously reported, affecting comparison of net additions and total figures. All figures are approximates.

 

 

Ericsson Second Quarter Report 2012    9


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Parent Company Information

Income after financial items was SEK 7.0 (4.7) b. Major changes in the Parent Company’s financial position for the six month period; decreased cash, cash equivalents and short-term investments of SEK 12.8 b., and increased current and non-current receivables from subsidiaries of SEK 10.6 b. During the quarter, the dividend payment of SEK 8.0 b., as decided by the Annual General Meeting, was made. At the end of the quarter, cash, cash equivalents and short-term investments amounted to SEK 43.3 (56.1) b. In the quarter, the Parent Company Telefonaktiebolaget LM Ericsson, borrowed USD 1.0 b. through a SEC-registered bond. Two loans of SEK 1.0 b. and SEK 2.0 b. matured in the quarter. The Parent Company also repurchased two EMTN bonds of EUR 441 m. The net change in gross debt is close to zero. By the end of the quarter, ST-Ericsson had utilized USD 619 million of a short-term credit facility.

In accordance with the conditions of the long-term variable compensation program (LTV) for Ericsson employees, 2,483,350 shares from treasury stock were sold or distributed to employees during the second quarter. The holding of treasury stock at June 30, 2012, was 89,695,956 Class B shares. During the quarter, a stock issue of SEK 0.2 b. and a subsequent repurchase was made for the share-based employee remuneration program. 31.7 million Class C shares were issued and later repurchased as treasury stock. The shares were converted into Class B shares.

Other Information

ERICSSON’S NOMINATION COMMITTEE APPOINTED

On June 27, 2012, Ericsson announced the appointment of the Nomination Committee for the Annual General Meeting 2013, in accordance with the Instruction for the Nomination Committee resolved by the Annual General Meeting 2012.

ERICSSON RESOLVES ON AN ACQUISITION OFFER FOR C-SHARES FOR LTV 2012

On May 18, 2012, Ericsson announced that, in accordance with the resolution by the Annual General Meeting 2012, the company would expand its treasury stock in order to provide shares for the Long-Term variable Remuneration Program (LTV) 2012 for employees in Ericsson.

COMPOSITION OF THE BOARD OF DIRECTORS

On May 3, 2012, Ericsson announced that in accordance with the proposal of the Nomination Committee, the Annual General Meeting resolved to re-elect Leif Johansson as Chairman of the Board of Directors and Roxanne S. Austin, Sir Peter L. Bonfield, Börje Ekholm, Ulf J Johansson, Sverker Martin-Löf, Nancy McKinstry, Anders Nyrén, Hans Vestberg, Michelangelo Volpi and Jacob Wallenberg were re-elected as members of the Board of Directors. Alexander Izosimov was elected new member of the Board of Directors. Board members appointed by the unions are Pehr Claesson, Kristina Davidsson and Karin Åberg. Deputy board members appointed by the unions are Rickard Fredriksson, Karin Lennartsson and Roger Svensson.

POST-CLOSING EVENT: CLOSING OF TECHNICOLOR ACQUISITION

On July 3, 2012 Ericsson announced the closing of the acquisition of Technicolor’s Broadcast Services Division. The acquisition brings leading broadcast customers, approximately 900 highly skilled professionals and playout services in France, UK and Netherlands. Purchase price amounted to EUR 19 million and a potential earn-out based on 2015 revenues of the Broadcast Services activity up to EUR 9 million.

 

 

Ericsson Second Quarter Report 2012    10


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LOGO

 

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 2011. Compared to the risks described in the Annual Report 2011, 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 upgrades and expansions (mainly software) and new buildouts of coverage (mainly hardware);

 

 

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 Support Solutions 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;

 

 

Execution of the business plan and related capital need of our joint venture 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 and other events, affecting business, 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 monitor the compliance with all relevant regulations and trade embargos applicable to us in our dealings with customers operating in such countries. Moreover, Ericsson operates globally in accordance with Group level policies and directives for business ethics and conduct. In no way should our business activities in these countries be construed as supporting a particular political agenda or regime.

Stockholm, July 18, 2012

Telefonaktiebolaget LM Ericsson (publ)

Hans Vestberg, President and CEO

Date for next report: October 26, 2012

 

 

Ericsson Second Quarter Report 2012    11


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BOARD ASSURANCE

The Board of Directors and the CEO certify that the financial report for the six months gives a fair view of the performance of the business, position and profit or loss of the Company and the Group, and describes the principal risks and uncertainties that the Company and the companies in the Group face.

Stockholm, July 18, 2012

Telefonaktiebolaget LM Ericsson (publ)

Org. Nr. 556016-0680

 

Sverker Martin-Löf
Deputy chairman
  Leif Johansson
Chairman
  Jacob Wallenberg
Deputy chairman
Roxanne S. Austin
Member of the board
  Sir Peter L. Bonfield
Member of the board
  Anders Nyrén
Member of the board
Börje Ekholm
Member of the board
  Ulf J. Johansson
Member of the board
  Nancy McKinstry
Member of the board
Alexander Izosimov
Member of the board
    Michelangelo Volpi
Member of the board
Pehr Claesson
Member of the board
  Kristina Davidsson
Member of the board
  Karin Åberg
Member of the board
  Hans Vestberg
Member of the board and
President and CEO
 
 

 

Ericsson Second Quarter Report 2012    12


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LOGO

 

Editor’s Note

Ericsson invites media, investors and analysts to a press conference at the Ericsson Studio, Grönlandsgången 4, Stockholm, at 09.00 (CET), July 18, 2012. An analysts, investors and media conference call will begin at 14.00 (CET).

FOR FURTHER INFORMATION, PLEASE CONTACT

Helena Norrman, Senior Vice President, Communications

Phone: +46 10 719 3472

E-mail: investor.relations@ericsson.com or media.relations@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@ericsson.com

 

Stefan Jelvin, Director,

Investor Relations

Phone: +46 10 714 2039

+46 709 860 227

E-mail: investor.relations@ericsson.com

 

Åsa Konnbjer, Director,

Investor Relations

Phone: +46 10 713 3928

+46 730 825 928

E-mail: investor.relations@ericsson.com

 

Rikard Tunedal, Director,

Investor Relations

Phone: +46 10 714 5400

+46 761 005 400

E-mail: investor.relations@ericsson.com

 

MEDIA

 

Ola Rembe, Vice President,

Head of Corporate Public & Media

Relations

Phone: +46 10 719 9727

+46 730 244 873

E-mail: media.relations@ericsson.com

 

Corporate Public & Media Relations

Phone: +46 10 719 69 92

E-mail: media.relations@ericsson.com

 

Telefonaktiebolaget LM Ericsson (publ)

Org. number: 556016-0680

Torshamnsgatan 23

SE-164 83 Stockholm

Phone: +46 10 719 0000

 

 

Ericsson Second Quarter Report 2012    13


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LOGO

 

 

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.

 

 

Ericsson Second Quarter Report 2012    14


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LOGO

 

Financial Statements and Additional Information

 

Financial statements    Page  

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

     20   

Consolidated statement of cash flows - isolated quarters

     21   
Additional information    Page  

Accounting policies

     22   

Net sales by segment by quarter

     23   

Operating income by segment by quarter

     24   

Operating margin by segment by quarter

     24   

Net sales by region by quarter

     25   

Net sales by region by quarter (cont.)

     26   

Top 5 countries in sales

     26   

Net sales by region by segment

     27   

Provisions

     28   

Number of employees

     28   

Information on investments in assets subject to depreciation, amortization and impairment and write-downs

     28   

Other information

     29   

Ericsson planning assumptions for year 2012

     29   

Restructuring charges by function

     30   

Restructuring charges by segment

     30   
 

 

Ericsson Second Quarter Report 2012    15


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CONSOLIDATED INCOME STATEMENT

 

     Apr - Jun           Jan - Jun        

SEK million

   2011     2012     Change     2011     2012     Change  

Net sales

     54,770        55,319        1     107,736        106,293        -1

Cost of sales

     -34,064        -37,611        10     -66,642        -71,596        7
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross income

     20,706        17,708        -14     41,094        34,697        -16

Gross margin (%)

     37.8     32.0       38.1     32.6  

Research and development expenses

     -8,108        -8,097        0     -16,099        -16,113        0

Selling and administrative expenses

     -7,741        -6,855        -11     -14,182        -13,087        -8
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses

     -15,849        -14,952        -6     -30,281        -29,200        -4

Other operating income and expenses 1)

     166        530          509        8,279     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income before shares in earnings of JV and associated companies

     5,023        3,286        -35     11,322        13,776        22

Operating margin before shares in earnings of JV and associated companies (%)

     9.2     5.9       10.5     13.0  

Shares in earnings of JV and associated companies

     -771        -1,208        57     -1,239        -2,611        111
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     4,252        2,078        -51     10,083        11,165        11

Financial income

     977        618          1,279        880        -31

Financial expenses

     -636        -924          -942        -1,197        27
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income after financial items

     4,593        1,772        -61     10,420        10,848        4

Taxes

     -1,377        -567          -3,124        -839     

Net income

     3,216        1,205        -63     7,296        10,009        37
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to:

            

- Stockholders of the Parent Company

     3,116        1,110          7,219        10,060     

- Non-controlling interests

     100        95          77        -51     

Other information

            

Average number of shares, basic (million)

     3,204        3,215          3,203        3,213     

Earnings per share, basic (SEK) 2)

     0.97        0.35          2.25        3.13     

Earnings per share, diluted (SEK) 2)

     0.96        0.34          2.23        3.10     

STATEMENT OF COMPREHENSIVE INCOME

 

     Apr - Jun      Jan - Jun  

SEK million

   2011      2012      2011      2012  

Net income

     3,216         1,205         7,296         10,009   

Other comprehensive income

           

Actuarial gains and losses, and the effect of the asset ceiling, related to pensions

     -1,737         -1,201         -1,349         -765   

Revaluation of other investments in shares and participations

           

Fair value remeasurement

     1         1         —           1   

Cash flow hedges

           

Gains/losses arising during the period

     138         -586         1,762         199   

Reclassification adjustments for gains/losses included in profit or loss

     -1,198         70         -2,119         -143   

Adjustments for amounts transferred to initial carrying amount of hedged items

     —           —           —           92   

Changes in cumulative translation adjustments

     1,143         1,323         -2,274         -681   

Share of other comprehensive income on JV and associated companies

     128         34         -616         -18   

Tax on items relating to components of other comprehensive income

     666         545         444         153   

Total other comprehensive income

     -859         186         -4,152         -1,162   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total comprehensive income

     2,357         1,391         3,144         8,847   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total comprehensive income attributable to:

           

Stockholders of the Parent Company

     2,211         1,229         3,117         8,879   

Non-controlling interests

     146         162         27         -32   

 

1) 

Includes gain on sale of Sony Ericsson SEK 7.7 b. in Q1 2012

2) 

Based on Net income attributable to stockholders of the Parent Company

 

Ericsson Second Quarter Report 2012    16


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CONSOLIDATED BALANCE SHEET

 

     Dec 31      Mar 31      Jun 30  

SEK million

   2011      2012      2012  

ASSETS

        

Non-current assets

        

Intangible assets

        

Capitalized development expenses

     3,523         3,529         3,795   

Goodwill

     27,438         31,245         31,342   

Intellectual property rights, brands and other intangible assets

     13,083         17,263         17,616   

Property, plant and equipment

     10,788         11,268         11,435   

Financial assets

        

Equity in JV and associated companies

     5,965         3,271         2,110   

Other investments in shares and participations

     2,199         2,122         2,207   

Customer financing, non-current

     1,400         1,139         1,340   

Other financial assets, non-current

     4,117         5,747         4,932   

Deferred tax assets

     13,020         13,231         14,164   
  

 

 

    

 

 

    

 

 

 
     81,533         88,815         88,941   

Current assets

        

Inventories

     33,070         32,546         33,118   

Trade receivables

     64,522         60,695         67,320   

Customer financing, current

     2,845         2,798         2,581   

Other current receivables

     17,837         20,333         19,337   

Short-term investments 1)

     41,866         44,992         37,674   

Cash and cash equivalents

     38,676         30,638         28,707   
  

 

 

    

 

 

    

 

 

 
     198,816         192,002         188,737   

Total assets

     280,349         280,817         277,678   
  

 

 

    

 

 

    

 

 

 

EQUITY AND LIABILITIES

        

Equity

        

Stockholders’ equity

     143,105         150,506         143,827   

Non-controlling interest in equity of subsidiaries

     2,165         1,962         1,920   
  

 

 

    

 

 

    

 

 

 
     145,270         152,468         145,747   

Non-current liabilities

        

Post-employment benefits

     10,016         9,339         9,859   

Provisions, non-current

     280         208         205   

Deferred tax liabilities

     2,250         3,749         3,732   

Borrowings, non-current

     23,256         22,969         23,033   

Other non-current liabilities

     2,248         2,590         2,534   
  

 

 

    

 

 

    

 

 

 
     38,050         38,855         39,363   

Current liabilities

        

Provisions, current

     5,985         5,722         5,113   

Borrowings, current

     7,765         6,229         7,583   

Trade payables

     25,309         22,283         24,410   

Other current liabilities

     57,970         55,260         55,462   
  

 

 

    

 

 

    

 

 

 
     97,029         89,494         92,568   

Total equity and liabilities

     280,349         280,817         277,678   
  

 

 

    

 

 

    

 

 

 

Of which interest-bearing liabilities and post-employment benefits

     41,037         38,537         40,475   

Of which net cash

     39,505         37,093         25,906   

Assets pledged as collateral

     452         403         530   

Contingent liabilities

     609         581         518   

 

1)

Including loan to ST-Ericsson of SEK 4,311 million as of June 30, 2012

(SEK 3,241 million as of March 31, 2012, SEK 2,759 million as of December 31, 2011)

 

Ericsson Second Quarter Report 2012    17


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CONSOLIDATED STATEMENT OF CASH FLOWS

 

     Apr - Jun      Jan - Jun      Jan - Dec  

SEK million

   2011      2012      2011      2012      2011  

Operating activities

              

Net income

     3,216         1,205         7,296         10,009         12,569   

Adjustments to reconcile net income to cash

              

Taxes

     -29         -1,185         692         -2,303         1,994   

Earnings/dividends in JV and associated companies

     783         1,193         1,235         2,483         3,710   

Depreciation, amortization and impairment losses

     2,172         2,401         4,381         4,716         9,036   

Other

     -1,107         -466         -2,308         -7,488         -2,127   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     5,035         3,148         11,296         7,417         25,182   

Changes in operating net assets

              

Inventories

     -2,370         43         -5,832         -16         -3,243   

Customer financing, current and non-current

     195         0         391         282         74   

Trade receivables

     2,114         -5,427         504         -1,705         -1,700   

Trade payables

     -834         1,717         -1,089         -996         -1,648   

Provisions and post-employment benefits

     -485         -353         -1,237         -2,124         -5,695   

Other operating assets and liabilities, net

     2,126         -492         -1,158         -3,491         -2,988   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     746         -4,512         -8,421         -8,050         -15,200   

Cash flow from operating activities

     5,781         -1,364         2,875         -633         9,982   

Investing activities

              

Investments in property, plant and equipment

     -1,196         -994         -2,176         -2,642         -4,994   

Sales of property, plant and equipment

     58         -10         155         299         386   

Acquisitions/divestments of subsidiaries and other operations, net 1)

     -507         -110         -962         -1,840         -3,128   

Product development

     -429         -525         -698         -776         -1,515   

Other investing activities

     -100         -520         79         -325         -900   

Short-term investments

     3,196         8,133         6,902         4,134         14,692   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Cash flow from investing activities

     1,022         5,974         3,300         -1,150         4,541   

Cash flow before financing activities

     6,803         4,610         6,175         -1,783         14,523   

Financing activities

              

Dividends paid

     -7,209         -8,252         -7,209         -8,252         -7,455   

Other financing activities

     -1,097         1,112         143         -206         961   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Cash flow from financing activities

     -8,306         -7,140         -7,066         -8,458         -6,494   

Effect of exchange rate changes on cash

     211         599         -509         272         -217   

Net change in cash

     -1,292         -1,931         -1,400         -9,969         7,812   

Cash and cash equivalents, beginning of period

     30,756         30,638         30,864         38,676         30,864   

Cash and cash equivalents, end of period

     29,464         28,707         29,464         28,707         38,676   

 

1) 

Includes payment of external loan of SEK -6.2 b. attributable to the acquisition of Telcordia in Q1 2012

 

Ericsson Second Quarter Report 2012    18


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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

 

     Jan - Jun      Jan - Jun      Jan - Dec  

SEK million

   2011      2012      2011  

Opening balance

     146,785         145,270         146,785   

Total comprehensive income

     3,144         8,847         5,506   

Stock issue

     —           159         —     

Sale/Repurchase of own shares

     45         -126         92   

Stock purchase

     213         218         413   

Dividends paid

     -7,209         -8,252         -7,455   

Transactions with non-controlling interests

     -88         -369         -71   
  

 

 

    

 

 

    

 

 

 

Closing balance

     142,890         145,747         145,270   
  

 

 

    

 

 

    

 

 

 

 

Ericsson Second Quarter Report 2012    19


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CONSOLIDATED INCOME STATEMENT - ISOLATED QUARTERS

 

     2011     2012  

Isolated quarters, SEK million

   Q1     Q2     Q3     Q4     Q1     Q2  

Net sales

     52,966        54,770        55,518        63,667        50,974        55,319   

Cost of sales

     -32,578        -34,064        -36,095        -44,463        -33,985        -37,611   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross income

     20,388        20,706        19,423        19,204        16,989        17,708   

Gross margin (%)

     38.5     37.8     35.0     30.2     33.3     32.0

Research and development expenses

     -7,991        -8,108        -7,824        -8,715        -8,016        -8,097   

Selling and administrative expenses

     -6,441        -7,741        -5,664        -6,837        -6,232        -6,855   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses

     -14,432        -15,849        -13,488        -15,552        -14,248        -14,952   

Other operating income and expenses 1)

     343        166        366        403        7,749        530   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income before shares in earnings of JV and associated companies

     6,299        5,023        6,301        4,055        10,490        3,286   

Operating margin before shares in earnings of JV and associated companies (%)

     11.9     9.2     11.3     6.4     20.6     5.9

Shares in earnings of JV and associated companies

     -468        -771        -640        -1,899        -1,403        -1,208   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     5,831        4,252        5,661        2,156        9,087        2,078   

Financial income

     302        977        1,198        405        262        618   

Financial expenses

     -306        -636        -987        -732        -273        -924   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income after financial items

     5,827        4,593        5,872        1,829        9,076        1,772   

Taxes

     -1,747        -1,377        -2,090        -338        -272        -567   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     4,080        3,216        3,782        1,491        8,804        1,205   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to:

            

- Stockholders of the Parent Company

     4,103        3,116        3,821        1,154        8,950        1,110   

- Non-controlling interests

     -23        100        -39        337        -146        95   

Other information

            

Average number of shares, basic (million)

     3,202        3,204        3,207        3,209        3,212        3,215   

Earnings per share, basic (SEK) 2)

     1.28        0.97        1.19        0.36        2.79        0.35   

Earnings per share, diluted (SEK) 2)

     1.27        0.96        1.18        0.36        2.76        0.34   

 

1)

Includes gain on sale of Sony Ericsson SEK 7.7 b. in Q1 2012

2) 

Based on Net income attributable to stockholders of the Parent Company

 

Ericsson Second Quarter Report 2012    20


Table of Contents

CONSOLIDATED STATEMENT OF CASH FLOWS - ISOLATED QUARTERS

 

 

     2011      2012  

Isolated quarters, SEK million

   Q1      Q2      Q3      Q4      Q1      Q2  

Operating activities

                 

Net income

     4,080         3,216         3,782         1,491         8,804         1,205   

Adjustments to reconcile net income to cash

                 

Taxes

     721         -29         550         752         -1,118         -1,185   

Earnings/dividends in JV and associated companies

     452         783         658         1,817         1,290         1,193   

Depreciation, amortization and impairment losses

     2,209         2,172         2,227         2,428         2,315         2,401   

Other

     -1,201         -1,107         -291         472         -7,022         -466   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     6,261         5,035         6,926         6,960         4,269         3,148   

Changes in operating net assets

                 

Inventories

     -3,462         -2,370         -2,619         5,208         -59         43   

Customer financing, current and non-current

     196         195         -607         290         282         0   

Trade receivables

     -1,610         2,114         -2,769         565         3,722         -5,427   

Trade payables

     -255         -834         -805         246         -2,713         1,717   

Provisions and post-employment benefits

     -752         -485         -2,180         -2,278         -1,771         -353   

Other operating assets and liabilities, net

     -3,284         2,126         3,694         -5,524         -2,999         -492   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     -9,167         746         -5,286         -1,493         -3,538         -4,512   

Cash flow from operating activities

     -2,906         5,781         1,640         5,467         731         -1,364   

Investing activities

                 

Investments in property, plant and equipment

     -980         -1,196         -1,294         -1,524         -1,648         -994   

Sales of property, plant and equipment

     97         58         59         172         309         -10   

Acquisitions/divestments of subsidiaries and other operations, net 1)

     -455         -507         -1,931         -235         -1,730         -110   

Product development

     -269         -429         -257         -560         -251         -525   

Other investing activities

     179         -100         -769         -210         195         -520   

Short-term investments

     3,706         3,196         9,323         -1,533         -3,999         8,133   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Cash flow from investing activities

     2,278         1,022         5,131         -3,890         -7,124         5,974   

Cash flow before financing activities

     -628         6,803         6,771         1,577         -6,393         4,610   

Financing activities

                 

Dividends paid

     —           -7,209         -241         -5         —           -8,252   

Other financing activities

     1,240         -1,097         -10         828         -1,318         1,112   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Cash flow from financing activities

     1,240         -8,306         -251         823         -1,318         -7,140   

Effect of exchange rate changes on cash

     -720         211         278         14         -327         599   

Net change in cash

     -108         -1,292         6,798         2,414         -8,038         -1,931   

Cash and cash equivalents, beginning of period

     30,864         30,756         29,464         36,262         38,676         30,638   

Cash and cash equivalents, end of period

     30,756         29,464         36,262         38,676         30,638         28,707   

 

1) 

Includes payment of external loan of SEK -6.2 b. attributable to the acquisition of Telcordia in Q1 2012

 

Ericsson Second Quarter Report 2012    21


Table of Contents

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, 2011, and should be read in conjunction with that annual report.

As from January 1, 2012, the Company has applied the following new or amended IFRSs and IFRICs:

 

   

Amendment to IAS 12, income taxes: deferred tax: recovery of underlying assets (not yet endorsed by the EU)

 

   

Amendments to IFRS 7, Financial instruments, disclosures: transfers of Financial Assets

None of the new or amended standards and interpretations has had any significant impact on the financial result or position of the Company. There is no difference between IFRS effective as per June 30, 2012 and IFRS as endorsed by the EU, except for IAS 12 above.

 

Ericsson Second Quarter Report 2012    22


Table of Contents

NET SALES BY SEGMENT BY QUARTER

Segments Sony Ericsson and ST-Ericsson are reported in accordance with the equity method, thus their sales are not included.

 

     2011     2012  

Isolated quarters, SEK million

   Q1     Q2     Q3     Q4     Q1     Q2  

Networks

     33,249        33,360        32,506        33,280        27,314        27,766   

Global Services

     17,435        19,036        20,438        26,975        20,631        24,074   

Of which Professional Services

     12,571        13,463        14,719        18,081        14,884        16,947   

Of which Managed Services

     4,924        4,724        5,304        6,046        5,708        6,468   

Of which Network Rollout

     4,864        5,573        5,719        8,894        5,747        7,127   

Support Solutions

     2,282        2,374        2,574        3,412        3,029        3,479   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     52,966        54,770        55,518        63,667        50,974        55,319   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     2011     2012  

Sequential change, percent

   Q1     Q2     Q3     Q4     Q1     Q2  

Networks

     -9     0     -3     2     -18     2

Global Services

     -24     9     7     32     -24     17

Of which Professional Services

     -25     7     9     23     -18     14

Of which Managed Services

     -8     -4     12     14     -6     13

Of which Network Rollout

     -21     15     3     56     -35     24

Support Solutions

     -34     4     8     33     -11     15
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     -16     3     1     15     -20     9
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     2011     2012  

Year over year change, percent

   Q1     Q2     Q3     Q4     Q1     Q2  

Networks

     35     31     25     -9     -18     -17

Global Services

     -4     -5     7     18     18     26

Of which Professional Services

     -5     -9     7     8     18     26

Of which Managed Services

     1     -16     1     13     16     37

Of which Network Rollout

     0     6     7     44     18     28

Support Solutions

     -1     -2     11     -2     33     47
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     17     14     17     1     -4     1
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     2011     2012  

Year to date, SEK million

   Jan - Mar     Jan - Jun     Jan - Sep     Jan - Dec     Jan - Mar     Jan - Jun  

Networks

     33,249        66,609        99,115        132,395        27,314        55,080   

Global Services

     17,435        36,471        56,909        83,884        20,631        44,705   

Of which Professional Services

     12,571        26,034        40,753        58,834        14,884        31,830   

Of which Managed Services

     4,924        9,648        14,952        20,998        5,708        12,176   

Of which Network Rollout

     4,864        10,437        16,156        25,050        5,747        12,875   

Support Solutions

     2,282        4,656        7,230        10,642        3,029        6,508   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     52,966        107,736        163,254        226,921        50,974        106,293   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
Year to date,    2011     2012  

year over year change, percent

   Jan - Mar     Jan - Jun     Jan - Sep     Jan - Dec     Jan - Mar     Jan - Jun  

Networks

     35     33     30     17     -18     -17

Global Services

     -4     -4     -1     5     18     23

Of which Professional Services

     -5     -7     -3     1     18     22

Of which Managed Services

     1     -8     -5     -1     16     26

Of which Network Rollout

     0     3     5     16     18     23

Support Solutions

     -1     -2     3     1     33     40
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     17     16     16     12     -4     -1
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

Ericsson Second Quarter Report 2012    23


Table of Contents

OPERATING INCOME BY SEGMENT BY QUARTER

 

     2011     2012  

Isolated quarters, SEK million

   Q1     Q2     Q3     Q4     Q1     Q2  

Networks

     5,744        4,599        4,277        2,675        1,649        1,255   

Global Services

     1,146        1,030        1,757        1,611        1,267        1,362   

Of which Professional Services

     1,486        1,661        2,023        2,498        1,908        2,142   

Of which Network Rollout

     -340        -631        -266        -887        -641        -780   

Support Solutions

     -338        -267        90        11        -28        420   

Unallocated 1)

     -228        -204        164        -233        -97        -43   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Subtotal Segments excluding Sony Ericsson and ST-Ericsson

     6,324        5,158        6,288        4,064        2,791        2,994   

Sony Ericsson 2)

     71        -208        75        -1,137        7,691        347   

ST-Ericsson

     -564        -698        -702        -771        -1,395        -1,263   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Subtotal Sony Ericsson and ST-Ericsson

     -493        -906        -627        -1,908        6,296        -916   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     5,831        4,252        5,661        2,156        9,087        2,078   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     2011     2012  

Year to date, SEK million

   Jan - Mar     Jan - Jun     Jan - Sep     Jan - Dec     Jan - Mar     Jan-Jun  

Networks

     5,744        10,343        14,620        17,295        1,649        2,904   

Global Services

     1,146        2,176        3,933        5,544        1,267        2,629   

Of which Professional Services

     1,486        3,147        5,170        7,668        1,908        4,050   

Of which Network Rollout

     -340        -971        -1,237        -2,124        -641        -1,421   

Support Solutions

     -338        -605        -515        -504        -28        392   

Unallocated 1)

     -228        -432        -268        -501        -97        -140   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Subtotal Segments excluding Sony Ericsson and ST-Ericsson

     6,324        11,482        17,770        21,834        2,791        5,785   

Sony Ericsson 2)

     71        -137        -62        -1,199        7,691        8,038   

ST-Ericsson

     -564        -1,262        -1,964        -2,735        -1,395        -2,658   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Subtotal Sony Ericsson and ST-Ericsson

     -493        -1,399        -2,026        -3,934        6,296        5,380   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     5,831        10,083        15,744        17,900        9,087        11,165   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
OPERATING MARGIN BY SEGMENT BY QUARTER   
     2011     2012  

As percentage of net sales,

isolated quarters

   Q1     Q2     Q3     Q4     Q1     Q2  

Networks

     17     14     13     8     6     5

Global Services

     7     5     9     6     6     6

Of which Professional Services

     12     12     14     14     13     13

Of which Network Rollout

     -7     -11     -5     -10     -11     -11

Support Solutions

     -15     -11     3     0     -1     12
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Subtotal excluding Sony Ericsson and ST-Ericsson

     12     9     11     6     5     5
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     2011     2012  

As percentage of net sales,

Year to date

   Jan - Mar     Jan - Jun     Jan - Sep     Jan - Dec     Jan - Mar     Jan - Jun  

Networks

     17     16     15     13     6     5

Global Services

     7     6     7     7     6     6

Of which Professional Services

     12     12     13     13     13     13

Of which Network Rollout

     -7     -9     -8     -8     -11     -11

Support Solutions

     -15     -13     -7     -5     -1     6
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Subtotal excluding Sony Ericsson and ST-Ericsson

     12     11     11     10     5     5
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

1) 

“Unallocated” consists mainly of costs for corporate staff, non-operational capital gains and losses

2) 

Includes gain on sale of Sony Ericsson SEK 7.7 b. in Q1 2012

 

Ericsson Second Quarter Report 2012    24


Table of Contents

NET SALES BY REGION BY QUARTER

 

     2011     2012  

Isolated quarters, SEK million

   Q1     Q2     Q3     Q4     Q1     Q2  

North America

     13,162        12,324        12,096        11,203        12,775        12,987   

Latin America

     4,015        4,927        6,012        7,028        4,822        5,243   

Northern Europe & Central Asia 1) 2)

     3,365        4,552        3,527        3,781        2,292        3,358   

Western & Central Europe 2)

     4,806        4,342        4,612        5,270        4,306        4,094   

Mediterranean 2)

     4,799        5,543        5,225        8,240        4,620        6,214   

Middle East

     3,070        3,546        3,650        5,195        3,157        3,701   

Sub Saharan Africa

     2,212        2,214        2,519        3,218        2,200        2,791   

India

     3,169        2,798        2,273        1,522        1,421        1,700   

China & North East Asia

     8,633        9,025        9,662        10,889        9,154        8,423   

South East Asia & Oceania

     3,108        3,033        3,720        4,009        3,374        3,674   

Other 1) 2)

     2,627        2,466        2,222        3,312        2,853        3,134   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     52,966        54,770        55,518        63,667        50,974        55,319   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

1)        Of which Sweden

     927        1,103        944        908        834        1,282   

2)        Of which EU

     10,020        10,317        10,195        13,428        9,502        11,201   
     2011     2012  

Sequential change, percent

   Q1     Q2     Q3     Q4     Q1     Q2  

North America

     -6     -6     -2     -7     14     2

Latin America

     -34     23     22     17     -31     9

Northern Europe & Central Asia 1) 2)

     -30     35     -23     7     -39     47

Western & Central Europe 2)

     -19     -10     6     14     -18     -5

Mediterranean 2)

     -31     16     -6     58     -44     35

Middle East

     -34     16     3     42     -39     17

Sub Saharan Africa

     9     0     14     28     -32     27

India

     11     -12     -19     -33     -7     20

China & North East Asia

     -9     5     7     13     -16     -8

South East Asia & Oceania

     -21     -2     23     8     -16     9

Other 1) 2)

     25     -6     -10     49     -14     10
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     -16     3     1     15     -20     9
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

1)        Of which Sweden

     -21     19     -14     -4     -8     54

2)        Of which EU

     -20     3     -1     32     -29     18
     2011     2012  

Year-over-year change, percent

   Q1     Q2     Q3     Q4     Q1     Q2  

North America

     39     -6     -6     -20     -3     5

Latin America

     1     17     64     16     20     6

Northern Europe & Central Asia 1) 2)

     46     70     49     -22     -32     -26

Western & Central Europe 2)

     -8     -2     7     -11     -10     -6

Mediterranean 2)

     -5     -2     4     19     -4     12

Middle East

     -22     -7     34     12     3     4

Sub Saharan Africa

     -9     -25     40     59     -1     26

India

     38     107     7     -46     -55     -39

China & North East Asia

     74     96     39     15     6     -7

South East Asia & Oceania

     -12     -17     -3     2     9     21

Other 1) 2)

     37     49     19     57     9     27
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     17     14     17     1     -4     1
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

1)        Of which Sweden

     -11     11     -8     -22     -10     16

2)        Of which EU

     -9     -1     5     7     -5     9

 

Ericsson Second Quarter Report 2012    25


Table of Contents

NET SALES BY REGION BY QUARTER (continued)

     2011     2012  

Year to date, SEK million

   Jan - Mar     Jan - Jun     Jan - Sep     Jan - Dec     Jan - Mar     Jan - Jun  

North America

     13,162        25,486        37,582        48,785        12,775        25,762   

Latin America

     4,015        8,942        14,954        21,982        4,822        10,065   

Northern Europe & Central Asia 1) 2)

     3,365        7,917        11,444        15,225        2,292        5,650   

Western & Central Europe 2)

     4,806        9,148        13,760        19,030        4,306        8,400   

Mediterranean 2)

     4,799        10,342        15,567        23,807        4,620        10,834   

Middle East

     3,070        6,616        10,266        15,461        3,157        6,858   

Sub Saharan Africa

     2,212        4,426        6,945        10,163        2,200        4,991   

India

     3,169        5,967        8,240        9,762        1,421        3,121   

China & North East Asia

     8,633        17,658        27,320        38,209        9,154        17,577   

South East Asia & Oceania

     3,108        6,141        9,861        13,870        3,374        7,048   

Other 1) 2)

     2,627        5,093        7,315        10,627        2,853        5,987   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     52,966        107,736        163,254        226,921        50,974        106,293   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

1)        Of which Sweden

     927        2,030        2,974        3,882        834        2,116   

2)        Of which EU

     10,020        20,337        30,532        43,960        9,502        20,703   
Year to date,    2011     2012  

year-over-year change, percent

   Jan - Mar     Jan - Jun     Jan - Sep     Jan - Dec     Jan - Mar     Jan - Jun  

North America

     39     13     6     -1     -3     1

Latin America

     1     10     26     23     20     13

Northern Europe & Central Asia1) 2)

     46     59     56     25     -32     -29

Western & Central Europé 2)

     -8     -5     -1     -4     -10     -8

Mediterranean2)

     -5     -3     -1     5     -4     5

Middle East

     -22     -15     -2     2     3     4

Sub Saharan Africa

     -9     -18     -3     11     -1     13

India

     38     63     42     13     -55     -48

China & North East Asia

     74     85     66     47     6     0

South East Asia & Oceania

     -12     -14     -10     -7     9     15

Other1) 2)

     37     43     35     41     9     18
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     17     16     16     12     -4     -1
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

1)        Of which Sweden

     -11     -1     -3     -8     -10     4

2)        Of which EU

     -9     -5     -2     1     -5     2

TOP 5 COUNTRIES IN SALES

 

     Q2     Jan - Jun  

Country

   2011     2012     2011     2012  

UNITED STATES

     22     23     23     24

JAPAN

     5     7     7     8

CHINA

     8     6     7     5

ITALY

     4     4     4     4

BRAZIL

     3     4     3     4

 

Ericsson Second Quarter Report 2012    26


Table of Contents

NET SALES BY REGION BY SEGMENT

Since the segment ST-Ericsson is reported in accordance with the equity method, their sales are not included below. Net sales related to these segments are disclosed under SEGMENT RESULTS. Net sales related to other segments are set out below.

Revenue from Telcordia is reported 50/50 between Segments Global Services and Support Solutions. In the regional dimension, all of Telcordia sales is reported in Support Solutions, except for North America where it is split 50/50. Multimedia brokering (IPX) was previously reported in each region in Segment Support Solutions, from Q112 it is part of region “Other” in Segment Support Solutions.

 

Isolated quarter    Q2 2012, SEK million     Accumulated Jan - Jun 2012, SEK million  
     Net-
works
    Global
Services
    Support
Solutions
    Total     Net-
works
    Global
Services
    Support
Solutions
    Total  

North America

     6,122        6,131        734        12,987        13,607        10,833        1,322        25,762   

Latin America

     2,293        2,505        445        5,243        4,357        5,029        679        10,065   

Northern Europe & Central Asia

     2,059        1,208        91        3,358        3,251        2,228        171        5,650   

Western & Central Europe

     1,346        2,579        169        4,094        2,881        5,155        364        8,400   

Mediterranean

     2,737        3,308        169        6,214        4,763        5,732        339        10,834   

Middle East

     1,561        1,796        344        3,701        2,878        3,448        532        6,858   

Sub Saharan Africa

     1,555        939        297        2,791        2,812        1,732        447        4,991   

India

     936        645        119        1,700        1,596        1,268        257        3,121   

China & North East Asia

     5,154        3,132        137        8,423        11,434        5,884        259        17,577   

South East Asia & Oceania

     1,885        1,650        139        3,674        3,705        3,068        275        7,048   

Other

     2,118        181        835        3,134        3,796        328        1,863        5,987   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     27,766        24,074        3,479        55,319        55,080        44,705        6,508        106,293   

Share of Total

     50     44     6     100     52     42     6     100
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     Q2 2012                          

Sequential change, percent

   Net-
works
    Global
Services
    Support
Solutions
    Total                          

North America

     -18     30     25     2        

Latin America

     11     -1     90     9        

Northern Europe & Central Asia

     73     18     14     47        

Western & Central Europe

     -12     0     -13     -5        

Mediterranean

     35     36     -1     35        

Middle East

     19     9     83     17        

Sub Saharan Africa

     24     18     98     27        

India

     42     4     -14     20        

China & North East Asia

     -18     14     12     -8        

South East Asia & Oceania

     4     16     2     9        

Other

     26     23     -19     10        
  

 

 

   

 

 

   

 

 

   

 

 

         

Total

     2     17     15     9        
  

 

 

   

 

 

   

 

 

   

 

 

         
     Q2 2012                          

Year over year change, percent

   Net-
works
    Global
Services
    Support
Solutions
    Total                          

North America

     -22     47     170     5        

Latin America

     -19     33     100     6        

Northern Europe & Central Asia

     -36     0     -33     -26        

Western & Central Europe

     -21     7     -25     -6        

Mediterranean

     10     18     -35     12        

Middle East

     -4     6     60     4        

Sub Saharan Africa

     31     7     95     26        

India

     -46     -21     -52     -39        

China & North East Asia

     -25     49     104     -7        

South East Asia & Oceania

     11     40     -5     21        

Other

     -2     -234     94     27        
  

 

 

   

 

 

   

 

 

   

 

 

         

Total

     -17     26     47     1        
  

 

 

   

 

 

   

 

 

   

 

 

         
     Accumulated Jan - Jun 2012                          

Year over year change, percent

   Net-
works
    Global
Services
    Support
Solutions
    Total                          

North America

     -20     35     154     1        

Latin America

     -10     37     56     13        

Northern Europe & Central Asia

     -42     9     -35     -29        

Western & Central Europe

     -25     7     -18     -8        

Mediterranean

     0     13     -37     5        

Middle East

     -13     16     56     4        

Sub Saharan Africa

     18     1     37     13        

India

     -60     -17     -40     -48        

China & North East Asia

     -14     42     45     0        

South East Asia & Oceania

     8     27     -10     15        

Other

     -9     865     114     18        
  

 

 

   

 

 

   

 

 

   

 

 

         

Total

     -17     23     40     -1        
  

 

 

   

 

 

   

 

 

   

 

 

         

 

Ericsson Second Quarter Report 2012    27


Table of Contents

PROVISIONS

 

     2011      2012  

Isolated quarters, SEK million

   Q1      Q2      Q3      Q4      Q1      Q2  

Opening balance

     9,744         9,529         9,335         8,065         6,265         5,930   

Additions

     1,304         2,032         633         838         1,003         616   

Utilization/Cash out

     -1,091         -1,908         -1,464         -1,524         -980         -850   

Of which restructuring

     -762         -1,220         -747         -494         -401         -342   

Reversal of excess amounts

     -88         -451         -556         -824         -370         -453   

Reclassification, translation difference and other

     -340         133         117         -290         12         75   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Closing balance

     9,529         9,335         8,065         6,265         5,930         5,318   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     2011      2012  

Year to date, SEK million

   Jan - Mar      Jan - Jun      Jan - Sep      Jan - Dec      Jan - Mar      Jan - Jun  

Opening balance

     9,744         9,744         9,744         9,744         6,265         6,265   

Additions

     1,304         3,336         3,969         4,807         1,003         1,619   

Utilization/Cash out

     -1,091         -2,999         -4,463         -5,987         -980         -1,830   

Of which restructuring

     -762         -1,982         -2,729         -3,223         -401         -743   

Reversal of excess amounts

     -88         -539         -1,095         -1,919         -370         -823   

Reclassification, translation difference and other

     -340         -207         -90         -380         12         87   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Closing balance

     9,529         9,335         8,065         6,265         5,930         5,318   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

NUMBER OF EMPLOYEES

 

     2011      2012  

End of period

   Mar 31      Jun 30      Sep 30      Dec 31      Mar 31      Jun 30  

North America

     13,531         14,553         14,782         14,801         16,281         15,872   

Latin America

     7,394         9,875         10,315         11,191         11,538         11,176   

Northern Europe & Central Asia 1)

     21,339         21,451         21,083         20,987         21,341         21,457   

Western & Central Europe

     10,629         10,518         10,601         10,806         10,900         10,837   

Mediterranean

     10,907         11,069         11,521         11,645         11,858         11,986   

Middle East

     4,057         4,160         4,304         4,336         4,361         4,231   

Sub Saharan Africa

     1,644         1,637         1,891         2,283         2,317         2,277   

India

     7,448         8,563         9,672         11,535         12,567         12,644   

China & North East Asia

     10,111         11,601         12,313         12,567         13,016         13,233   

South East Asia & Oceania

     4,486         4,502         4,408         4,374         4,372         4,382   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     91,546         97,929         100,890         104,525         108,551         108,095   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

1)        Of which Sweden

     17,771         17,930         17,588         17,500         17,767         17,890   

INFORMATION ON INVESTMENTS IN ASSETS SUBJECT TO DEPRECIATION, AMORTIZATION, IMPAIRMENT AND WRITE-DOWNS

 

     2011      2012  

Isolated quarters, SEK million

   Q1      Q2      Q3      Q4      Q1      Q2  

Additions

                 

Property, plant and equipment

     980         1,196         1,294         1,524         1,648         994   

Capitalized development expenses

     269         429         257         560         251         525   

IPR, brands and other intangible assets

     359         29         488         97         5,570         992   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     1,608         1,654         2,039         2,181         7,469         2,511   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Depreciation, amortization and impairment losses

                 

Property, plant and equipment

     841         821         827         1,057         914         982   

Capitalized development expenses

     232         240         263         267         245         259   

IPR, brands and other intangible assets, etc.

     1,136         1,111         1,137         1,104         1,156         1,160   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     2,209         2,172         2,227         2,428         2,315         2,401   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

Ericsson Second Quarter Report 2012    28


Table of Contents

OTHER INFORMATION

 

     Apr - Jun      Jan - Jun     Jan - Dec  
     2011      2012      2011     2012     2011  

Number of shares and earnings per share

            

Number of shares, end of period (million)

     3,273         3,305         3,273        3,305        3,273   

Of which class A-shares (million)

     262         262         262        262        262   

Of which class B-shares (million)

     3,011         3,043         3,011        3,043        3,011   

Number of treasury shares, end of period (million)

     68         90         68        90        63   

Number of shares outstanding, basic, end of period (million)

     3,205         3,215         3,205        3,215        3,211   

Numbers of shares outstanding, diluted, end of period (million)

     3,232         3,245         3,232        3,245        3,238   

Average number of treasury shares (million)

     69         69         70        65        68   

Average number of shares outstanding, basic (million)

     3,204         3,215         3,203        3,213        3,206   

Average number of shares outstanding, diluted (million) 1)

     3,231         3,245         3,230        3,243        3,233   

Earnings per share, basic (SEK)

     0.97         0.35         2.25        3.13        3.80   

Earnings per share, diluted (SEK) 1)

     0.96         0.34         2.23        3.10        3.77   

1)        Potential ordinary shares are not considered when their conversion to ordinary shares would increase earnings per share

           

Ratios

            

Days sales outstanding

     —           —           99        111        91   

Inventory turnover days

     90         80         89        84        78   

Payable days

     67         57         68        63        62   

Equity ratio (%)

     —           —           51.9     52.5     51.8

Capital turnover (times)

     1.2         1.2         1.2        1.1        1.2   

Payment readiness, end of period

     —           —           84,637        72,727        86,570   

Payment readiness, as percentage of sales

     —           —           39.3     34.2     38.1

Exchange rates used in the consolidation

            

SEK/EUR - average rate

     —           —           8.94        8.87        9.02   

        - closing rate

     —           —           9.16        8.77        8.92   

SEK/USD - average rate

     —           —           6.35        6.82        6.48   

        - closing rate

     —           —           6.33        6.96        6.90   

Other

            

Regional inventory, end of period,

     22,485         22,266         22,485        22,266        19,921   

Export sales from Sweden

     30,006         25,794         64,050        52,988        116,507   

ERICSSON PLANNING ASSUMPTIONS FOR YEAR 2012

Research and development expenses

We estimate R&D expenses for the full year 2012 to be at around SEK 30-32 b. The estimate includes amortizations/write-downs of intangible assets related to major acquisitions previously made. However, currency effects may cause this to change.

Capital expenditures

Excluding acquisitions, the capital expenditures in relation to sales are not expected to be significantly different in 2012, remaining at roughly two percent of sales.

Utilization of provisions

The expected utilization of provisions for year 2012 is stated in the Annual Report 2011.

 

Ericsson Second Quarter Report 2012    29


Table of Contents

RESTRUCTURING CHARGES BY FUNCTION

 

     2011      2012  

Isolated quarters, SEK million

   Q1      Q2      Q3      Q4      Q1      Q2  

Cost of sales

     -185         -257         -283         -506         -496         -389   

Research and development expenses

     -180         -208         -115         -58         -19         -107   

Selling and administrative expenses

     -8         -1,236         22         -170         -54         -98   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Subtotal Ericsson excluding Sony Ericsson and ST-Ericsson

     -373         -1,701         -376         -734         -569         -594   

Share in Sony Ericsson charges

     —           —           —           -419         —           —     

Share in ST-Ericsson charges

     -15         -77         -17         -31         -30         -190   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Subtotal Sony Ericsson and ST-Ericsson

     -15         -77         -17         -450         -30         -190   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     -388         -1,778         -393         -1,184         -599         -784   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     2011      2012  

Year to date, SEK million

   Jan - Mar      Jan - Jun      Jan - Sep      Jan - Dec      Jan - Mar      Jan - Jun  

Cost of sales

     -185         -442         -725         -1,231         -496         -885   

Research and development expenses

     -180         -388         -503         -561         -19         -126   

Selling and administrative expenses

     -8         -1,244         -1,222         -1,392         -54         -152   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Subtotal Ericsson excluding Sony Ericsson and ST-Ericsson

     -373         -2,074         -2,450         -3,184         -569         -1,163   

Share in Sony Ericsson charges

     —           —           —           -419         —           —     

Share in ST-Ericsson charges

     -15         -92         -109         -140         -30         -220   

Subtotal Sony Ericsson and ST-Ericsson

     -15         -92         -109         -559         -30         -220   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     -388         -2,166         -2,559         -3,743         -599         -1,383   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

RESTRUCTURING CHARGES BY SEGMENT

 

     2011      2012  

Isolated quarters, SEK million

   Q1      Q2      Q3      Q4      Q1      Q2  

Networks

     -205         -1,039         -121         -235         -87         -167   

Global Services

     -166         -487         -254         -456         -473         -415   

Of which Professional Services

     -145         -361         -225         -264         -358         -302   

Of which Network Rollout

     -21         -126         -29         -192         -115         -113   

Support Solutions

     -2         -119         -6         -16         -9         -12   

Unallocated

     —           -56         5         -27         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Subtotal Ericsson excluding Sony Ericsson and ST-Ericsson

     -373         -1,701         -376         -734         -569         -594   

Sony Ericsson

     —           —           —           -419         —           —     

ST-Ericsson

     -15         -77         -17         -31         -30         -190   

Subtotal Sony Ericsson and ST-Ericsson

     -15         -77         -17         -450         -30         -190   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     -388         -1,778         -393         -1,184         -599         -784   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     2011      2012  

Year to date, SEK million

   Jan - Mar      Jan - Jun      Jan - Sep      Jan - Dec      Jan - Mar      Jan - Jun  

Networks

     -205         -1,244         -1,365         -1,600         -87         -254   

Global Services

     -166         -653         -907         -1,363         -473         -888   

Of which Professional Services

     -145         -506         -731         -995         -358         -660   

Of which Network Rollout

     -21         -147         -176         -368         -115         -228   

Support Solutions

     -2         -121         -127         -143         -9         -21   

Unallocated

     —           -56         -51         -78         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Subtotal Ericsson excluding Sony Ericsson and ST-Ericsson

     -373         -2,074         -2,450         -3,184         -569         -1,163   

Sony Ericsson

     —           —           —           -419         —           —     

ST-Ericsson

     -15         -92         -109         -140         -30         -220   

Subtotal Sony Ericsson and ST-Ericsson

     -15         -92         -109         -559         -30         -220   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     -388         -2,166         -2,559         -3,743         -599         -1,383   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

Ericsson Second Quarter Report 2012    30