Edgar Filing: ERICSSON LM TELEPHONE CO

6-K

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

October 24, 2014

Commission File Number

000-12033

LM ERICSSON TELEPHONE COMPANY

(Translation of registrant’s name into English)

Torshamnsgatan 21, Kista

SE-164 83, Stockholm, Sweden

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

Form 20-F x Form 40-F ¨

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ¨

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ¨

Announcement of LM Ericsson Telephone Company, dated Octob 24, 2014 regarding “Ericsson reports third quarter 2014”

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: October 24, 2014

LOGO

Third quarter report 2014

Stockholm, October 24, 2014


THIRD QUARTER HIGHLIGHTS	Read more (page)

• Sales in the quarter were SEK 57.6 (53.0) b., a growth of 9% YoY and 5% QoQ. Sales for comparable units, adjusted for currency, grew by 3% YoY and 2% QoQ		3

• The sales growth YoY, mainly driven by growth in the Middle East, China, India and Russia was partly offset by sales decline in North America		2, 9

• Gross margin increased YoY to 35.2% (32.0%), driven by improved business mix, higher IPR revenues and lower restructuring charges		3

• Profitability showed stable improvement across all segments		4

• Operating income amounted to SEK 3.9 (4.2) b. The decline was mainly driven by revaluation of unrealized hedge contracts of SEK -1.0 (0.8) b.		4

• Cash flow from operating activities was SEK -1.4 (1.5) b.		10


SEK b.	Q3 2014			Q3 2013			YoY change			Q2 2014			QoQ change			9 months 2014			9 months 2013
Net sales		57.6			53.0			9	%		54.8			5	%		160.0			160.3
Sales growth adj. for comparable units and currency		—			—			3	%		—			2	%		-2	%		5	%
Gross margin		35.2	%		32.0	%		—			36.4	%		—			36.0	%		32.1	%
Operating income		3.9			4.2			-8	%		4.0			-3	%		10.5			8.8
Operating margin		6.7	%		8.0	%		—			7.3	%		—			6.6	%		5.5	%
Net income		2.6			3.0			-13	%		2.7			-1	%		7.0			5.7
EPS diluted, SEK		0.81			0.90			-10	%		0.79			3	%		2.25			1.72
EPS (Non-IFRS), SEK ¹⁾		1.11			1.31			-15	%		1.07			4	%		3.08			3.19
Cash flow from operating activities		-1.4			1.5			-193	%		2.1			-166	%		10.1			2.8
Net cash, end of period		29.4			24.7			19	%		32.5			-9	%		29.4			24.7

¹⁾	EPS, diluted, excl. amortizations and write-downs of acquired intangible assets, and restructuring


Ericsson Third Quarter Report 2014		1

CEO Comments

Reported sales increased by 9% year-over-year and sales for comparable units, adjusted for currency, grew by 3% with stable operating income.

The sales growth year-over-year was mainly driven by the Middle East, China, India and Russia, but was partly offset by lower sales in North America.

Mobile broadband sales increased both year-over-year and quarter-over-quarter as we have started to deliver on previously communicated key contracts. We are executing on 4G/LTE contracts in Mainland China and Taiwan and improving sales in Japan. Furthermore, the investment climate in India continues to improve. Sales in parts of Europe, mainly UK and Germany, showed growth year-over-year while the development in southern Europe continued to be weak.

Sales in North America continued to be driven by operator investments in capacity and quality enhancements. However, business activity slowed down during the quarter as operators currently focus on cash flow optimization.

The momentum for Professional Services continued and generated organic growth in the quarter driven by managed services sales and systems integration. The acquired Red Bee Media was successfully integrated and fully consolidated in the third quarter.

Political unrest prevails in many parts of the world, especially in the Middle East and Northern Africa. The quarter shows that our global footprint, with customer in 180 countries, gives us the scale and strength to manage regional variations.

Profitability showed stable improvement across all segments. This was primarily driven by favorable

business mix, higher IPR revenues as well as efficiency enhancements. Operating income was negatively impacted by effects from hedge contracts, higher operating expenses related to modems and the acquired Mediaroom business as well as planned ramp up of investments in IP.

We continue to execute on our strategic agenda; to improve our profitability in the core business in order to invest in targeted areas such as IP networks, Cloud, TV & Media and OSS & BSS. Three important acquisitions were made in the quarter:

•

MetraTech accelerates our cloud and enterprise billing capabilities within BSS

•

Fabrix Systems extends our overall leadership position in TV & Media

•

Majority stake in Apcera that strengthens our position in enterprise cloud

During the quarter we took the strategic decision to stop all further development of modems and shift some R&D resources from segment Modems to Networks to pursue growth opportunities in the radio business.

Through our technology and services leadership we are well positioned to continue to be a strategic partner to our customers as they move to capture new market opportunities.

Hans Vestberg

President and CEO


Ericsson Third Quarter Report 2014		2

Financial highlights


SEK b.	Q3 2014			Q3 2013			YoY change			Q2 2014			QoQ change			9 months 2014			9 months 2013
Net sales		57.6			53.0			9	%		54.8			5	%		160.0			160.3
Of which Networks		*30.0*			26.7			13	%		29.0			4	%		*83.4*			82.9
Of which Global Services		*24.5*			24.0			2	%		23.1			6	%		*67.9*			70.3
Of which Support Solutions		*3.1*			2.4			30	%		2.8			8	%		*8.6*			7.1
Of which Modems		*0.1*			0.0			—			0.0			—			*0.1*			0.0
Gross income		20.3			17.0			20	%		19.9			2	%		57.5			51.5
Gross margin (%)		35.2	%		32.0	%		—			36.4	%		—			36.0	%		32.1	%
Research and development expenses		-9.3			-7.7			20	%		-9.1			2	%		-26.6			-23.3
Selling and administrative expenses		-6.0			-5.8			4	%		-6.5			-8	%		-19.0			-19.1
Other operating income and expenses		-1.1			0.8			-241	%		-0.2			450	%		-1.3			-0.2
Operating income		3.9			4.2			-8	%		4.0			-3	%		10.5			8.8
Operating margin		6.7	%		8.0	%		—			7.3	%		—			6.6	%		5.5	%
for Networks		11	%		10	%		—			12	%		—			11	%		7	%
for Global Services		7	%		8	%		—			6	%		—			6	%		6	%
for Support Solutions		-4	%		-5	%		—			-13	%		—			-5	%		-6	%
for Modems		—			—			—			—			—			—			—
Financial net		-0.1			0.1			-254	%		-0.2			-35	%		-0.5			-0.6
Taxes		-1.1			-1.3			-13	%		-1.1			-1	%		-3.0			-2.5
Net income		2.6			3.0			-13	%		2.7			-1	%		7.0			5.7
Restructuring charges		*-0.3*			-0.7			-61	%		-0.2			15	%		*-0.7*			-3.5

Net sales

The USD has strengthened towards many currencies, including the SEK, which impacted sales positively in the quarter.

Sales for comparable units, adjusted for currency, increased by 3% YoY. Growth was driven by stronger sales in the Middle East, China, India and Russia. This was partly offset by lower sales in North America.

Reported sales for segments Support Solutions and Networks showed good growth YoY. Sales for Global Services grew slightly especially in Professional Services while Network Rollout continued to decline. IPR revenues grew YoY following the Samsung license agreement which was reached in January 2014.

Sales increased sequentially driven by strong mobile broadband sales in the Middle East, Russia, China and India. This offset a decline in capacity sales in North America.

Gross margin

Gross margin increased YoY driven by improved business mix with higher hardware margins, increased IPR revenues, a lower share of Global Services sales and lower restructuring charges.

During the quarter we have executed on previously awarded contracts. This has, in combination with lower capacity business, led to a lower gross margin QoQ.

Restructuring charges

Restructuring charges decreased YoY and remained flat QoQ, however at a low level. The execution on the service delivery strategy, to move local service delivery resources to global centers, continues, but at slower pace compared to last year.

Operating expenses

Total operating expenses increased YoY due to higher R&D expenses. This relates to segment Modems and acquisitions such as the Mediaroom business. As anticipated, the run rate for organic investment in IP and Cloud has also increased compared to the first half of 2014.


Ericsson Third Quarter Report 2014		3

Quarterly sales, SEK b.

and reported sales growth year over year, percent

Operating expenses, SEK b.

and operating expenses as percentage of sales

Operating income SEK b.

and operating margin, percent

Other operating income and expenses

The revaluation and realization effects from hedge contracts were SEK -1.3 b. compared to SEK -0.5 b. in Q2 2014 and SEK 0.8 b. in Q3 2013.

The revaluation effect of SEK -1.0 (0.8) b. derives mainly from our unrealized hedge contract balance in USD, which has decreased in value. The USD has strengthened towards the SEK between June 30 and September 30, 2014. Ericsson’s USD closing rate on September 30, 2014, was SEK 7.27 (6.72 on June 30).

Operating income

Operating income was stable YoY. Improvement was driven by higher sales, favorable business mix, higher IPR revenues, lower restructuring charges and a positive effect from foreign exchange.

The improvement in operating income was more than offset by a negative effect from hedge contracts and increased operating expenses.

Financial net

Financial net decreased YoY mainly due to foreign currency revaluation effects. Financial net improved sequentially as an effect of currency revaluation effects.

Net income and EPS

Net income and EPS diluted decreased following the lower operating income.


Ericsson Third Quarter Report 2014		4

Segment results

NETWORKS

Segment sales, SEK b.

Quarterly sales, SEK b.

and sales growth year over year

Operating income, SEK b.

and operating margin, percent


SEK b.	Q3 2014			Q3 2013			YoY change			Q2 2014			QoQ change			9 months 2014			9 months 2013
Net sales		30.0			26.7			13	%		29.0			4	%		83.4			82.9
Sales growth adj. for comparable units and currency		—			—			7	%		—			-2	%		0	%		6	%
Operating income		3.2			2.6			24	%		3.6			-11	%		9.2			5.5
Operating margin		11	%		10	%		—			12	%		—			11	%		7	%
EBITA margin		13	%		12	%		—			14	%		—			13	%		9	%
Restructuring charges		*-0.1*			-0.3			-73	%		-0.1			-38	%		*-0.3*			-1.9

Net sales

Sales, adjusted for comparable units and currency, showed YoY growth driven by high mobile broadband activities in the Middle East, China and India. In addition, sales in IP Multimedia Subsystem (IMS) solutions continued to grow driven by Voice over LTE (VoLTE).

Sales increased QoQ driven by growth in China, Russia as well as the Middle East. This was partly offset by lower capacity sales in North America. Sales related to Packet Core showed high growth sequentially.

Operating income and margin

The operating margin improved YoY. The increase was supported by improved business mix, IPR revenues and earlier actions to improve commercial and operational effectiveness. This was partly offset by higher operating expenses in IP and Cloud. The revaluation effect from unrealized hedge contracts had a negative impact on the result of SEK -0.8 (0.8) b. YoY. In Q2 the revaluation effect from unrealized hedge contracts was SEK -0.3 b.

Business update

The solid business results were driven by continued mobile broadband demand and operator focus on performance as a differentiator.

Ericsson small cell portfolio is now complete with the launch of new base station RBS 6402, which is intended to address smaller commercial buildings. Ericsson Radio Dot system, for mid to large sized commercial buildings, will start to be commercially deployed in US, Europe and Asia during Q4 2014.

Ericsson Software model was launched with new subscription models and simplified pricing. The new software release, 15A, includes functionality which increases performance and energy saving.

Our position in Cloud business was strengthened with the strategic investment in Apcera (enterprise cloud). The momentum for the multi-application IP router, SSR 8000, continued with 134 contracts signed since the launch in December 2011. During the quarter, 14 new contracts were signed of which 6 were for fixed networks.


Ericsson Third Quarter Report 2014		5

GLOBAL SERVICES

Segment sales, SEK b.

Quarterly sales, SEK b.

and sales growth year over year

Operating income, SEK b.

and operating margin, percent


SEK b.	Q3 2014			Q3 2013			YoY change			Q2 2014			QoQ change			9 months 2014			9 months 2013
Net sales		24.5			24.0			2	%		23.1			6	%		67.9			70.3
Of which Professional Services		*17.8*			16.2			10	%		16.6			7	%		*49.4*			47.6
Of which Managed Services		*7.2*			6.3			15	%		6.5			11	%		*19.4*			18.9
Of which Network Rollout		*6.7*			7.7			-14	%		6.5			3	%		*18.5*			22.6
Sales growth adj. for comparable units and currency		—			—			-2	%		—			5	%		-4	%		7	%
Operating income		1.6			1.8			-11	%		1.5			8	%		4.1			4.1
Of which Professional Services		*2.1*			2.3			-10	%		2.1			-2	%		*6.0*			6.4
Of which Network Rollout		*-0.5*			-0.5			-4	%		-0.6			-26	%		*-1.9*			-2.3
Operating margin		7	%		8	%		—			6	%		—			6	%		6	%
for Professional Services		12	%		14	%		—			13	%		—			12	%		13	%
for Network Rollout		-7	%		-6	%		—			-9	%		—			*-10*	%		-10	%
EBITA margin		8	%		9	%		—			8	%		—			7	%		7	%
Restructuring charges		*-0.1*			-0.4			-70	%		-0.1			51	%		*-0.2*			-1.4

Net sales

Sales, adjusted for comparable units and currency, declined slightly YoY due to reduced Network Rollout sales with lower mobile broadband activities in North America and Japan. Reported sales in Professional Services showed double digit growth driven by Consulting and Systems Integration and Managed Services.

Global Services sales increased QoQ driven by Professional Services sales in Japan and the Middle East. Network rollout sales increased QoQ due to higher project activities in Russia, the Middle East and Germany.

Operating income and margin

Global Services operating margin declined slightly YoY negatively impacted by revaluation of hedge contracts. Network Rollout profitability improved sequentially due to a reduced negative impact from the European modernization projects.

Excluding the negative impact from hedges Professional Services margin remained stable YoY despite a larger share of Managed Services sales.

Business update

Business momentum in Professional Services continues to be good with several new contracts in the quarter for both Managed Services and Consulting and Systems Integration. In Broadcast Services we now serve more than 500 channels.


Other information	Q3 2014		Q2 2014		Q1 2014		Full year 2013
Number of signed Managed Services contracts		17		21		16		84
Number of signed significant consulting & systems integration contracts ¹⁾		13		12		9		31
Number of Ericsson services professionals, end of period		65,000		64,000		61,000		64,000

¹⁾	In the areas of OSS and BSS, IP, Service Delivery Platforms and data center build projects.


Ericsson Third Quarter Report 2014		6

SUPPORT SOLUTIONS

Segment sales, SEK b.

Quarterly sales, SEK b.

and sales growth year over year

Operating income, SEK b.

and operating margin, percent


SEK b.	Q3 2014			Q3 2013			YoY change			Q2 2014			QoQ change			9 months 2014			9 months 2013
Net sales		3.1			2.4			30	%		2.8			8	%		8.6			7.1
Sales growth adj. for comparable units and currency		—			—			10	%		—			6	%		5	%		-13	%
Operating income		-0.1			-0.1			-4	%		-0.4			-71	%		-0.5			-0.4
Operating margin		-4	%		-5	%		—			-13	%		—			-5	%		-6	%
EBITA margin		3	%		2	%		—			-7	%		—			1	%		0	%
Restructuring charges		*-0.1*			0.0			—			0.0			—			*-0.1*			-0.2

Net sales

Reported sales, and sales adjusted for comparable units and currency, increased YoY. Reported sales grew in seven out of ten regions.

Sales increased QoQ with good development in OSS and BSS.

Operating income and margin

Operating income was negative at SEK -0.1 b. and flat YoY. Higher sales were offset by R&D investments in next-generation TV solutions and by a negative revaluation effect from hedges.

Operating income improved QoQ due to a better business mix and higher sales.

Business update

The acquisitions of Fabrix Systems and MetraTech were announced in the quarter. Fabrix Systems adds video cloud storage and computing to Ericsson’s TV & Media offering. Expected closing is in Q4 2014.

The acquisition of MetraTech accelerates cloud and enterprise billing capabilities within BSS. The deal was closed in Q3 2014.

Ericsson’s MediaFirst TV Platform was announced in September. The cloud-based TV platform will be commercially available on the market in Q2 2015.

The overall transition from traditional telecom software license business models to recurrent license revenue deals continues.


Ericsson Third Quarter Report 2014		7

MODEMS


SEK b.	Q3 2014		Q2 2014		QoQ change			Q1 2014
Net sales		0.1		0.0		—			0.0
Sales growth for comparable units and currency		—		—		—			—
Operating income		-0.7		-0.5		62	%		-0.7
Operating margin		—		—		—			—
EBITA margin		—		—		—			—
Restructuring charges		*0.0*		0.0		—			0.0

Background

Ericsson took over the LTE thin modem operations as part of the breakup of the joint venture with STMicroelectronics in August 2013. Since integration, the modems market has developed in a direction that has reduced the addressable market for thin modems. In addition, there is strong competition, price erosion and an accelerating pace of technology innovation. Success in this evolved market requires significant R&D investments. As a consequence, Ericsson announced, on September 18 2014, the discontinuation of further development of modems and shift some R&D resources to Networks to better pursue growth opportunities in the radio business.

The change is in line with previously communicated statement to evaluate success of Modems within 18-24 months from integration.

Operating income

Operating income was SEK -0.7 b. in the quarter and SEK -1.9 b. year to date 2014. Total operating expenses for the modems business in 2014 are estimated to SEK -2.6 b. Modems continue to support key M7450 customer engagements.

The discontinuation of the modems business will lead to a significant reduction in costs related to the modems business in the first half of 2015. Modems will have no impact on Group P&L from the second half of 2015.


Ericsson Third Quarter Report 2014		8

Regional Sales


					Third quarter 2014									Change
SEK b.	Networks		Global Services		Support Solutions		Modems		Total		YoY			QoQ
North America		6.8		6.5		0.8		—		14.0		-3	%		-8	%
Latin America		2.7		2.9		0.3		—		5.9		11	%		9	%
Northern Europe and Central Asia		2.1		0.9		0.1		—		3.2		7	%		16	%
Western and Central Europe		1.8		2.7		0.2		—		4.6		6	%		1	%
Mediterranean		2.1		2.9		0.2		—		5.2		-8	%		-5	%
Middle East		3.7		2.0		0.3		—		6.0		38	%		34	%
Sub-Saharan Africa		1.2		1.1		0.1		—		2.4		-9	%		30	%
India		1.1		0.7		0.2		—		2.0		56	%		22	%
North East Asia		4.5		2.3		0.3		—		7.0		16	%		10	%
South East Asia and Oceania		2.0		1.7		0.1		—		3.8		5	%		4	%
Other ¹⁾		1.9		0.7		0.7		0.1		3.4		55	%		1	%
Total		30.0		24.5		3.1		0.1		57.6		9	%		5	%

¹⁾	Region “Other” includes licensing revenues, broadcast services, power modules, mobile broadband modules, Ericsson-LG Enterprise and other businesses.

North America

Sales during the quarter continued to be driven by network quality and capacity expansion business, although at lower levels than previous quarters as operators currently focus on cash-flow optimization. Recent network ICT transformation contracts, including the modernization of OSS and BSS, drove the Professional Services business.

Latin America

Growth continues to be driven by mobile broadband and related services. Currency restrictions impacts investments in parts of the region.

Northern Europe and Central Asia

Sales grew predominantly driven by mobile broadband infrastructure investments in Russia. Professional Services sales increased in the quarter mainly due to operator focus on network quality. TV & Media developed favorably in the quarter, contributing to growth in Support Solutions.

Western and Central Europe

Sales increased YoY mainly driven by Network Rollout. Investments in network quality and capacity, together with managed services, continue to be the main drivers for the business.

Mediterranean

Sales in the region declined YoY due to modernization projects that peaked during 2013. Managed services continue to be an important driver of growth.

Middle East

Sales continued to show good growth YoY mainly driven by 3G deployments. Overall demand for network infrastructure is driven by the rapid increase in data traffic as well as coverage requirements for new mobile licenses.

Sub-Saharan Africa

In certain markets across the region operators are starting to increase their network investments as they focus on network performance. There is a continued demand for managed services.

India

Since end of last year, sales in the region has recovered, mainly driven by an increase in operator capex spending in response to greater data uptake. The YoY growth in Support Solutions is driven by OSS and BSS and TV & Media.

North East Asia

Sales increased YoY as a result of execution on previously awarded 4G/LTE contracts in Mainland China and Taiwan. This was partly offset by reduced network investment levels in Japan and Korea. Sales in Japan improved QoQ

South East Asia and Oceania

Sales increased YoY mainly driven by mobile broadband investments in the region, compensating for a further decline in Indonesia as major 3G projects peaked in 2013. Several markets have commenced LTE trials.

Other

Licensing revenues showed good development YoY, following the Samsung agreement. Broadcast services continued to grow as the acquired Red Bee Media business was fully consolidated in the quarter.


Ericsson Third Quarter Report 2014		9

CASH flow


SEK b.	Q3 2014			Q3 2013			Q2 2014
Net income reconciled to cash		5.0			4.4			5.9
Changes in operating net assets		-6.3			-2.9			-3.8
Cash flow from operating activities		-1.4			1.5			2.1
Cash flow from investing activities		-0.7			-3.1			3.7
Cash flow from financing activities		-1.3			0.0			-12.2
Net change in cash and cash equivalents		-1.0			-3.3			-5.0
*Cash conversion (%)*		*-27*	%		33	%		35	%

The negative cash flow from operating activities was due to increased working capital, mainly as a result of increased sales and seasonal build-up of inventory. Execution on previously awarded contracts impacted working capital negatively during the quarter.

Investing activities were predominantly acquisitions of SEK -0.3 b. and normal capex investments of SEK -1.4 b. mainly related to test equipment.

Short-term investments decreased by SEK 2.3 b.

Cash flow from financing activities was mainly related to repayment of debt of SEK -1.3 b.

Cash outlays regarding restructuring amounted to approximately SEK 0.2 b. in the quarter.


Working capital KPIs, number of days	Jan-Sep 2014		Jan-Jun 2014		Jan-Mar 2014		Jan-Dec 2013		Jan-Sep 2013		Jan-Jun 2013
Sales outstanding		111		113		112		97		109		103
Inventory		69		70		72		62		72		73
Payable		57		61		62		53		53		55

Days of sales outstanding and inventory days decreased slightly.

Payable days decreased somewhat due to increased services sales with shorter payments days.


Ericsson Third Quarter Report 2014		10

FINANCIAL POSITION


SEK b.	Sep 30 2014			Jun 30 2014			Mar 31 2014			Dec 31 2013
+ Short-term investments		34.0			35.3			41.8			35.0
+ Cash and cash equivalents		32.0			33.1			38.1			42.1
Gross cash		66.1			68.4			79.9			77.1
- Interest bearing liabilities and post-employment benefits		36.6			35.9			36.3			39.3
Net cash		29.4			32.5			43.6			37.8
Equity		143.4			138.0			142.6			141.6
Total assets		274.0			265.5			267.2			269.2
Capital turnover (times)		1.2			1.2			1.1			1.3
Return on capital employed (%)		8.6	%		8.2	%		6.7	%		10.7	%
Equity ratio (%)		52.3	%		52.0	%		53.4	%		52.6	%
Return on equity (%)		6.9	%		6.8	%		6.0	%		8.7	%

Net cash decreased in the quarter as a result of higher working capital and post-employment benefits. Post-employment benefits increased by SEK 1.1 b., mainly due to lower discount rates.

Current borrowings decreased by SEK 1.5 b. mainly due to repayment of a short-term borrowing.

The average maturity of long-term borrowings as of September 30, 2014, was 6.0 years, compared to 4.9 years 12 months ago.

Ericsson has one unutilized Revolving Credit Facility of USD 2.0 b.

On August 28, Standard and Poor’s revised their outlook on Ericsson from negative to stable. Their present rating is BBB+/Stable/A-2.

LOGO

Debt maturity profile, Parent Company, SEK b.


Ericsson Third Quarter Report 2014		11

Parent company

Income after financial items was SEK 15.8 (4.2) b.

Major changes in the Parent Company’s financial position for the year; decreased cash, cash equivalents and short-term investments of SEK 7.8 b., increased current and non-current receivables to subsidiaries of SEK 10.2 b. and increased current and non-current liabilities to subsidiaries of SEK 1.5 b. At the end of the quarter, cash, cash equivalents and short-term investments amounted to SEK 50.7 (58.5) b.

The Parent Company has during the quarter recognized dividends from subsidiaries of SEK 12.1 b. (of which anticipated SEK 0.3 b.).

In accordance with the conditions of the long-term variable compensation program (LTV) for Ericsson employees, 2,574,690 shares from treasury stock were sold or distributed to employees during the third quarter. The holding of treasury stock at September 30, 2014, was 66,442,647 Class B shares.


Ericsson Third Quarter Report 2014		12

Other information

Ericsson acquires a majority stake in Apcera

On September 22, 2014, Ericsson announced it has agreed to acquire a majority stake in Apcera, a US based enterprise services company and creator of the next-generation platform as-a-service called Continuum which works across cloud, in premise and hybrid environments. In addition, Ericsson commits to fund development of next-generation technology as well as sales channel and ecosystem creation.

The acquisition is expected to close during Q4 2014, subject to customary closing conditions. Apcera will operate as a standalone company after the closing and will be consolidated financially under segment Networks.

Ericsson acquires Fabrix Systems

On September 12, 2014, Ericsson announced it has entered into an agreement to acquire Fabrix Systems, a leading provider of cloud storage, computing and network delivery for video applications that today power some of the most advanced cable and telecom cloud Digital Video Recorder (DVR) deployments.

The acquisition enables new services and migration to cloud DVR deployments in all TV platforms including Ericsson MediaFirst and Ericsson Mediaroom. It also adds to Ericsson’s video-centric network and services capabilities to ensure that video can be managed, stored and delivered from the cloud to all TV Anywhere devices efficiently and with assured quality of experience.

The acquisition is expected to close in the fourth quarter, 2014, subject to customary closing conditions. Fabrix Systems will be incorporated into Business Unit Support Solutions.

Ericsson acquires MetraTech

On July 29 Ericsson entered into an agreement to acquire US-based MetraTech Corp. MetraTech accelerates cloud and enterprise billing capabilities within BSS.

The acquisition includes 140 employees and contractors comprising a team of highly-skilled software experts. The acquisition was closed at end of the third quarter 2014.

Antitrust investigations against Ericsson

In March 2013, Ericsson filed a patent infringement lawsuit in the Indian Delhi High Court against Micromax Informatics Limited. As part of its defense, Micromax filed a complaint with the Competition Commission of India (CCI) and in November 2013 the CCI decided to refer the case to the Director General’s Office for an in-depth investigation. In January 2014 the CCI announced they had opened another investigation against Ericsson based on claims made by Intex Technologies (India) Limited. Ericsson has made numerous attempts to sign a license agreement with Micromax and Intex on Fair, Reasonable and Non-discriminatory (FRAND) terms.


Ericsson Third Quarter Report 2014		13

Risk factors

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 2013. Compared to the risks described in the Annual Report 2013, no material, new or changed risk factors or uncertainties have been identified in the year.

Risk factors and uncertainties in focus short-term for the Parent Company and the Ericsson Group include:

•

Potential negative effects on operators’ willingness to invest in network development due to uncertainty in the financial markets and a weak economic business environment, or reduced consumer telecom spending, or increased pressure on us to provide financing;

•

Uncertainty regarding the financial stability of suppliers, for example due to lack of 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 build outs 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;

•

Changes in foreign exchange rates, in particular USD, JPY 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 stringently monitors the compliance with all relevant trade regulations and trade embargos applicable to dealings with customers operating in countries where there are trade restrictions or trade restrictions are discussed. Moreover, Ericsson operates globally in accordance with Group policies and directives for business ethics and conduct.

Stockholm, October 24, 2014

Telefonaktiebolaget LM Ericsson

Hans Vestberg, President and CEO

Org. Nr. 556016-0680

Date for next report: January 27, 2015


Ericsson Third Quarter Report 2014		14

Auditors’ Review report

Introduction

We have reviewed the condensed interim financial information (interim report) of Telefonaktiebolaget LM Ericsson (publ.) as of September 30, 2014, and the nine months period then ended. The board of directors and the CEO are responsible for the preparation and presentation of this interim report in accordance with IAS 34 and the Swedish Annual Accounts Act. Our responsibility is to express a conclusion on this interim report based on our review.

Scope of review

We conducted our review in accordance with the International Standard on Review Engagements ISRE 2410, Review of Interim Report Performed by the Independent Auditor of the Entity. A review consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (ISA) and other generally accepted auditing standards in Sweden. The procedures performed in a review do not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the interim report is not prepared, in all material respects, in accordance with IAS 34 and the Swedish Annual Accounts Act, regarding the Group, and with the Swedish Annual Accounts Act, regarding the Parent Company.

Stockholm, October 24, 2014

PricewaterhouseCoopers AB

Peter Nyllinge

Authorized Public Accountant

Auditor in Charge

Bo Hjalmarsson

Authorized Public Accountant


Ericsson Third Quarter Report 2014		15

Editor’s note

Ericsson invites media, investors and analysts to a press briefing at the Ericsson Studio, Grönlandsgången 4, Stockholm, at 09.00 (CET), October 24, 2014. An analysts, investors and media conference call will begin at 14.00 (CET).

Live webcast of the press conference and conference call as well as supporting slides will be available at www.ericsson.com/press and

www.ericsson.com/investors

Video material will be published during the day on

www.ericsson.com/press

For further information, please contact:

Helena Norrman, Senior Vice President,

Communications Phone: +46 10 719 34 72

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

media.relations@ericsson.com

Telefonaktiebolaget LM Ericsson (publ.)

Org. number: 556016-0680

Torshamnsgatan 21

SE-164 83 Stockholm

Phone: +46 10 719 00 00 www.ericsson.com

Investors

Peter Nyquist, Vice President,

Investor Relations

Phone: +46 10 714 64 49, +46 70 575 29 06

E-mail: peter.nyquist@ericsson.com

Stefan Jelvin, Director,

Investor Relations

Phone: +46 10 714 20 39, +46 70 986 02 27

E-mail: stefan.jelvin@ericsson.com

Åsa Konnbjer, Director,

Investor Relations

Phone: +46 10 713 39 28, +46 73 082 59 28

E-mail: asa.konnbjer@ericsson.com

Rikard Tunedal, Director,

Investor Relations

Phone: +46 10 714 54 00, +46 761 005 400

E-mail: rikard.tunedal@ericsson.com

Media

Ola Rembe, Vice President,

Head of External Communications

Phone: +46 10 719 97 27, +46 73 024 48 73

E-mail: media.relations@ericsson.com

Corporate Communications

Phone: +46 10 719 69 92

E-mail: media.relations@ericsson.com


Ericsson Third Quarter Report 2014		16

Safe harbor statement

All statements made or incorporated by reference in this release, other than statements or characterizations of historical facts, are forward-looking statements. These forward-looking statements are based on our current expectations, estimates and 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 Third Quarter Report 2014		17

Financial statements and additional information

Financial statements

19 Consolidated income statement

19 Statement of comprehensive income

20 Consolidated balance sheet

21 Consolidated statement of cash flows

22 Consolidated statement of changes in equity

23 Consolidated income statement - isolated quarters

24 Consolidated statement of cash flows - isolated quarters

25 Parent Company income statement

25 Parent Company balance sheet

Additional information

26 Accounting policies

27 Net sales by segment by quarter

27 Sales growth for comparable units, adjusted for currency effects and hedging

28 Operating income by segment by quarter

28 Operating margin by segment by quarter

29 EBITA by segment by quarter

29 EBITA margin by segment by quarter

30 Net sales by region by quarter

31 Net sales by region by quarter (cont.)

31 Top 5 countries in sales

32 Net sales by region by segment

33 Provisions

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

33 Reconciliation table, non-IFRS measurements

34 Other information

34 Number of employees

35 Restructuring charges by function

35 Restructuring charges by segment


Ericsson Third Quarter Report 2014		18

CONSOLIDATED INCOME STATEMENT


	Jul - Sep									Jan - Sep
SEK million	2013			2014			Change			2013			2014			Change
Net sales		52,981			57,643			9	%		160,344			159,997			0	%
Cost of sales		-36,028			-37,362			4	%		-108,834			-102,456			-6	%

Gross income		16,953			20,281			20	%		51,510			57,541			12	%
Gross margin (%)		32.0	%		35.2	%					32.1	%		36.0	%
Research and development expenses		-7,710			-9,281			20	%		-23,334			-26,640			14	%
Selling and administrative expenses		-5,778			-6,000			4	%		-19,050			-18,993			0	%

Operating expenses		-13,488			-15,281			13	%		-42,384			-45,633			8	%
Other operating income and expenses		805			-1,134						-215			-1,319
Shares in earnings of JV and associated companies		-51			10						-121			-84			-31	%

Operating income		4,219			3,876			-8	%		8,790			10,505			20	%
Financial income		678			429						1,162			1,098
Financial expenses		-595			-557						-1,766			-1,634

Income after financial items		4,302			3,748			-13	%		8,186			9,969			22	%
Taxes		-1,292			-1,124						-2,456			-2,991

Net income		3,010			2,624			-13	%		5,730			6,978			22	%

Net income attributable to:
- Stockholders of the Parent Company		2,921			2,646						5,595			7,345
- Non-controlling interests		89			-22						135			-367
Other information
Average number of shares, basic (million)		3,227			3,238						3,225			3,235
Earnings per share, basic (SEK) ¹⁾		0.91			0.82						1.74			2.27
Earnings per share, diluted (SEK) ¹⁾		0.90			0.81						1.72			2.25

STATEMENT OF COMPREHENSIVE INCOME

	Jul - Sep									Jan - Sep
SEK million	2013			2014						2013			2014
Net income		3,010			2,624						5,730			6,978
Other comprehensive income
Items that will not be reclassified to profit or loss
Remeasurements of defined benefits pension plans incl. asset ceiling		458			-441						2,231			-2,637
Tax on items that will not be reclassified to profit or loss		-152			96						-858			539
Items that may be reclassified to profit or loss
Cash flow hedges
Gains/losses arising during the period		127			0						265			0
Reclassification adjustments for gains/losses included in profit or loss		-185			0						-948			0
Adjustments for amounts transferred to initial carrying amount of hedged items
Revaulation of other investments in shares and participations
Fair value remeasurement		1			39						70			39
Changes in cumulative translation adjustments		-3,150			2,656						-2,464			5,676
Share of other comprehensive income on JV and associated companies		-150			234						-46			362
Tax on items that may be reclassified to profit or loss		11			0						138			0
Total other comprehensive income, net of tax		-3,040			2,584						-1,612			3,979

Total comprehensive income		-30			5,208						4,118			10,957

Total comprehensive income attributable to:
Stockholders of the Parent Company		-79			5,180						4,008			11,212
Non-controlling interest		49			28						110			-255

¹⁾	Based on Net income attributable to stockholders of the Parent Company


Ericsson Third Quarter Report 2014		19

CONSOLIDATED BALANCE SHEET


	Dec 31		Jun 30		Sep 30
SEK million	2013		2014		2014
ASSETS
Non-current assets
Intangible assets
Capitalized development expenses		3,348		3,082		2,925
Goodwill		31,544		34,243		35,179
Intellectual property rights, brands and other intangible assets		12,815		11,765		12,149
Property, plant and equipment		11,433		11,924		12,674
Financial assets
Equity in JV and associated companies		2,568		2,324		2,566
Other investments in shares and participations		505		510		567
Customer finance, non-current		1,294		1,240		1,940
Other financial assets, non-current		5,684		6,303		7,085
Deferred tax assets		9,103		10,880		11,325

		78,294		82,271		86,410
Current assets
Inventories		22,759		26,915		28,529
Trade receivables		71,013		66,763		70,624
Customer finance, current		2,094		1,994		2,452
Other current receivables		17,941		19,208		19,953
Short-term investments		34,994		35,310		34,011
Cash and cash equivalents		42,095		33,088		32,042

		190,896		183,278		187,611
Total assets		269,190		265,549		274,021

EQUITY AND LIABILITIES
Equity
Stockholders’ equity		140,204		136,948		142,339
Non-controlling interest in equity of subsidiaries		1,419		1,010		1,035

		141,623		137,958		143,374
Non-current liabilities
Post-employment benefits		9,825		12,884		13,972
Provisions, non-current		222		202		187
Deferred tax liabilities		2,650		2,624		2,846
Borrowings, non-current		22,067		19,504		20,647
Other non-current liabilities		1,459		1,699		1,809

		36,223		36,913		39,461
Current liabilities
Provisions, current		5,140		4,377		4,380
Borrowings, current		7,388		3,525		1,997
Trade payables		20,502		22,795		22,067
Other current liabilities		58,314		59,981		62,742

		91,344		90,678		91,186
Total equity and liabilities		269,190		265,549		274,021

Of which interest-bearing liabilities and post-employment benefits		39,280		35,913		36,616
Of which net cash		37,809		32,485		29,437
Assets pledged as collateral		2,556		2,522		2,499
Contingent liabilities		657		664		666


Ericsson Third Quarter Report 2014		20

CONSOLIDATED STATEMENT OF CASH FLOWS


	Jul-Sep				Jan-Sep				Jan - Dec
SEK million	2013		2014		2013		2014		2013
Operating activities
Net income		3,010		2,624		5,730		6,978		12,174
Adjustments to reconcile net income to cash
Taxes		-881		-388		-3,419		-1,710		-1,323
Earnings/dividends in JV and associated companies		50		-10		120		330		258
Depreciation, amortization and impairment losses		2,546		2,481		7,393		7,255		10,137
Other		-327		267		-345		1,220		756

		4,398		4,974		9,479		14,073		22,002
Changes in operating net assets
Inventories		357		-840		-469		-4,127		4,868
Customer finance, current and non-current		800		-1,101		1,972		-884		1,809
Trade receivables		-4,744		-1,222		-3,594		5,843		-8,504
Trade payables		-588		-1,519		-3,018		15		-2,158
Provisions and post-employment benefits		-970		-18		-1,567		-707		-3,298
Other operating assets and liabilities, net		2,206		-1,624		-23		-4,107		2,670

		-2,939		-6,324		-6,699		-3,967		-4,613
Cash flow from operating activities		1,459		-1,350		2,780		10,106		17,389
Investing activities
Investments in property, plant and equipment		-778		-1,415		-3,252		-3,769		-4,503
Sales of property, plant and equipment		97		139		199		466		378
Acquisitions/divestments of subsidiaries and other operations, net		-1,794		-286		-1,969		-2,647		-2,682
Product development		-237		-155		-733		-537		-915
Other investing activities		-230		-1,302		-135		-1,859		-1,330
Short-term investments		-144		2,308		6,205		2,530		-2,057

Cash flow from investing activities		-3,086		-711		315		-5,816		-11,109
Cash flow before financing activities		-1,627		-2,061		3,095		4,290		6,280
Financing activities
Dividends paid		-21		-3		-8,945		-9,831		-9,153
Other financing activities		43		-1,288		-4,101		-8,750		-355

Cash flow from financing activities		22		-1,291		-13,046		-18,581		-9,508
Effect of exchange rate changes on cash		-1,711		2,306		432		4,238		641
Net change in cash and cash equivalents		-3,316		-1,046		-9,519		-10,053		-2,587
Cash and cash equivalents, beginning of period		38,479		33,088		44,682		42,095		44,682
Cash and cash equivalents, end of period		35,163		32,042		35,163		32,042		42,095


Ericsson Third Quarter Report 2014		21

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY


	Jan - Sep		Jan - Sep		Jan - Dec
SEK million	2013		2014		2013
Opening balance		138,483		141,623		138,483
Total comprehensive income		4,118		10,957		11,881
Sale/repurchase of own shares		63		78		90
Stock purchase plan		297		547		388
Dividends paid		-8,945		-9,831		-9,153
Transactions with non-controlling interests		-66		0		-66

Closing balance		133,950		143,374		141,623


Ericsson Third Quarter Report 2014		22

CONSOLIDATED INCOME STATEMENT – ISOLATED QUARTERS


	2013												2014
Isolated quarters, SEK million	Q1			Q2			Q3			Q4			Q1			Q2			Q3
Net sales		52,032			55,331			52,981			67,032			47,505			54,849			57,643
Cost of sales		-35,394			-37,412			-36,028			-42,171			-30,184			-34,910			-37,362

Gross income		16,638			17,919			16,953			24,861			17,321			19,939			20,281
Gross margin (%)		32.0	%		32.4	%		32.0	%		37.1	%		36.5	%		36.4	%		35.2	%
Research and development expenses		-7,877			-7,747			-7,710			-8,902			-8,275			-9,084			-9,281
Selling and administrative expenses		-6,643			-6,629			-5,778			-7,223			-6,452			-6,541			-6,000

Operating expenses		-14,520			-14,376			-13,488			-16,125			-14,727			-15,625			-15,281
Other operating income and expenses		20			-1,040			805			328			21			-206			-1,134
Shares in earnings of JV and associated companies		-32			-38			-51			-9			15			-109			10

Operating income		2,106			2,465			4,219			9,055			2,630			3,999			3,876
Financial income		180			304			678			184			401			268			429
Financial expenses		-565			-606			-595			-327			-612			-465			-557

Income after financial items		1,721			2,163			4,302			8,912			2,419			3,802			3,748
Taxes		-517			-647			-1,292			-2,468			-727			-1,140			-1,124

Net income		1,204			1,516			3,010			6,444			1,692			2,662			2,624

Net income attributable to:
- Stockholders of the Parent Company		1,205			1,469			2,921			6,410			2,120			2,579			2,646
- Non-controlling interests		-1			47			89			34			-428			83			-22
Other information
Average number of shares, basic (million)		3,222			3,224			3,227			3,230			3,233			3,235			3,238
Earnings per share, basic (SEK) ¹⁾		0.37			0.46			0.91			1.98			0.66			0.80			0.82
Earnings per share, diluted (SEK)¹⁾		0.37			0.45			0.90			1.97			0.65			0.79			0.81

¹⁾	Based on Net income attributable to stockholders of the Parent Company


Ericsson Third Quarter Report 2014		23

CONSOLIDATED STATEMENT OF CASH FLOWS - ISOLATED QUARTERS


	2013								2014
Isolated quarters, SEK million	Q1		Q2		Q3		Q4		Q1		Q2		Q3
Operating activities
Net income		1,204		1,516		3,010		6,444		1,692		2,662		2,624
Adjustments to reconcile net income to cash
Taxes		-1,849		-689		-881		2,096		-1,348		26		-388
Earnings/dividends in JV and associated companies		33		37		50		138		-16		356		-10
Depreciation, amortization and impairment losses		2,411		2,436		2,546		2,744		2,360		2,414		2,481
Other		-201		183		-327		1,101		549		404		267

		1,598		3,483		4,398		12,523		3,237		5,862		4,974
Changes in operating net assets
Inventories		-1,426		600		357		5,337		-2,099		-1,188		-840
Customer finance, current and non-current		260		912		800		-163		558		-341		-1,101
Trade receivables		-1,934		3,084		-4,744		-4,910		7,957		-892		-1,222
Trade payables		-2,948		518		-588		860		-110		1,644		-1,519
Provisions and post-employment benefits		1,155		-1,752		-970		-1,731		-464		-225		-18
Other operating assets and liabilities, net		325		-2,554		2,206		2,693		323		-2,806		-1,624

		-4,568		808		-2,939		2,086		6,165		-3,808		-6,324
Cash flow from operating activities		-2,970		4,291		1,459		14,609		9,402		2,054		-1,350
Investing activities
Investments in property, plant and equipment		-1,196		-1,278		-778		-1,251		-1,034		-1,320		-1,415
Sales of property, plant and equipment		91		11		97		179		274		53		139
Acquisitions/divestments of subsidiaries and other operations, net		-136		-39		-1,794		-713		-849		-1,512		-286
Product development		-282		-214		-237		-182		-197		-185		-155
Other investing activities		298		-203		-230		-1,195		-169		-388		-1,302
Short-term investments		-2,860		9,209		-144		-8,262		-6,790		7,012		2,308

Cash flow from investing activities		-4,085		7,486		-3,086		-11,424		-8,765		3,660		-711
Cash flow before financing activities		-7,055		11,777		-1,627		3,185		637		5,714		-2,061
Financing activities
Dividends paid		-61		-8,863		-21		-208		—		-9,828		-3
Other financing activities		92		-4,236		43		3,746		-5,069		-2,393		-1,288

Cash flow from financing activities		31		-13,099		22		3,538		-5,069		-12,221		-1,291
Effect of exchange rate changes on cash		-214		2,357		-1,711		209		433		1,499		2,306
Net change in cash and cash equivalents		-7,238		1,035		-3,316		6,932		-3,999		-5,008		-1,046
Cash and cash equivalents, beginning of period		44,682		37,444		38,479		35,163		42,095		38,096		33,088
Cash and cash equivalents, end of period		37,444		38,479		35,163		42,095		38,096		33,088		32,042


Ericsson Third Quarter Report 2014		24

PARENT COMPANY INCOME STATEMENT


	Jul - Sep				Jan - Sep
SEK million	2013		2014		2013		2014
Net sales		—		—		—		—
Cost of sales		—		—		—		—

Gross income		—		—		—		—
Operating expenses		-300		-232		-886		-783
Other operating income and expenses		621		752		1,972		2,075

Operating income		321		520		1,086		1,292
Financial net		1,152		12,344		3,121		14,484

Income after financial items		1,473		12,864		4,207		15,776
Transfers to (-) / from untaxed reserves				—				—
Taxes		18		-237		-211		-498

Net income		1,491		12,627		3,996		15,278


STATEMENT OF COMPREHENSIVE INCOME

	Jul - Sep				Jan - Sep
SEK million	2013		2014		2013		2014
Net income		1,491		12,627		3,996		15,278
Cash flow hedges		—		—		—		—
Fair value remeasurement		—		39		—		39
Total other comprehensive income, net of tax		—		—		—		—

Total comprehensive income		1,491		12,666		3,996		15,317

PARENT COMPANY BALANCE SHEET


	Dec 31		Sep 30
SEK million	2013		2014
ASSETS
Fixed assets
Intangible assets		646		481
Tangible assets		571		615
Financial assets		94,741		96,835

		95,958		97,931
Current assets
Inventories		7		11
Receivables		17,247		25,664
Short-term investments		34,520		33,536
Cash and cash equivalents		23,954		17,184

		75,728		76,395
Total assets		171,686		174,326

STOCKHOLDERS’ EQUITY, PROVISIONS AND LIABILITIES
Equity
Restricted equity		48,018		48,018
Non-restricted equity		23,798		29,507

		71,816		77,525
Provisions		2,097		1,567
Non-current liabilities		44,491		44,312
Current liabilities		53,282		50,922
Total stockholders’ equity, provisions and liabilities		171,686		174,326

Assets pledged as collateral		553		499
Contingent liabilities		15,999		19,990


Ericsson Third Quarter Report 2014		25

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, 2013, and should be read in conjunction with that annual report.

As from January 1, 2014, the Company has applied the following new or amended IFRSs and IFRICs:

Amendment to IAS 32, “Financial instruments: Presentation,” Offsetting Financial Assets and Financial Liabilities. This amendment is related to the application guidance in IAS 32, ‘Financial instruments: Presentation,’ and clarifies some of the requirements for offsetting financial assets and financial liabilities on the balance sheet.

IFRIC 21, “Levies.” This interpretation of IAS 37 “Provisions, contingent liabilities and contingent assets” sets out the accounting for an obligation to pay a levy that is not income tax. The interpretation addresses what the obligating event is that gives rise to the need to pay a levy and when a liability should be recognized.

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 significant difference between IFRS effective as per September 30, 2014 and IFRS as endorsed by the EU.

In the interim reports of 2013 disclosure was given in relation to IFRS 7 about fair valuation of financial instruments. Due to that the amounts are not considered material this disclosure will not be given in the interim reports as from the first quarter of 2014. Should amounts become material quarterly disclosure will be given as from then.


Ericsson Third Quarter Report 2014		26

NET SALES BY SEGMENT BY QUARTER

Segment Modems was consolidated as of October 1, 2013.


	2013												2014
Isolated quarters, SEK million	Q1			Q2			Q3			Q4			Q1			Q2			Q3
Networks		28,133			28,142			26,655			34,769			24,383			28,964			30,030
Global Services		21,452			24,851			23,974			27,166			20,356			23,059			24,467
Of which Professional Services		14,626			16,773			16,229			18,767			15,078			16,554			17,794
Of which Managed Services		5,888			6,754			6,264			6,574			5,754			6,485			7,175
Of which Network Rollout		6,826			8,078			7,745			8,399			5,278			6,505			6,673
Support Solutions		2,447			2,338			2,352			5,097			2,765			2,824			3,057
Modems		—			—			—			—			1			2			89

Total		52,032			55,331			52,981			67,032			47,505			54,849			57,643


	2013												2014
Sequential change, percent	Q1			Q2			Q3			Q4			Q1			Q2			Q3
Networks		-20	%		0	%		-5	%		30	%		-30	%		19	%		4	%
Global Services		-24	%		16	%		-4	%		13	%		-25	%		13	%		6	%
Of which Professional Services		-23	%		15	%		-3	%		16	%		-20	%		10	%		7	%
Of which Managed Services		-13	%		15	%		-7	%		5	%		-12	%		13	%		11	%
Of which Network Rollout		-26	%		18	%		-4	%		8	%		-37	%		23	%		3	%
Support Solutions		-33	%		-4	%		1	%		117	%		-46	%		2	%		8	%
Modems		—			—			—			—			—			—			—

Total		-22	%		6	%		-4	%		27	%		-29	%		15	%		5	%


	2013												2014
Year over year change, percent	Q1			Q2			Q3			Q4			Q1			Q2			Q3
Networks		3	%		1	%		-1	%		-1	%		-13	%		3	%		13	%
Global Services		4	%		3	%		-1	%		-3	%		-5	%		-7	%		2	%
Of which Professional Services		-2	%		-1	%		-1	%		-1	%		3	%		-1	%		10	%
Of which Managed Services		3	%		4	%		-1	%		-3	%		-2	%		-4	%		15	%
Of which Network Rollout		19	%		13	%		-2	%		-8	%		-23	%		-19	%		-14	%
Support Solutions		-19	%		-33	%		-29	%		40	%		13	%		21	%		30	%
Modems		—			—			—			—			—			—			—

Total		2	%		0	%		-3	%		0	%		-9	%		-1	%		9	%


	2013												2014
Year to date, SEK million	Jan - Mar			Jan - Jun			Jan - Sep			Jan - Dec			Jan - Mar			Jan - Jun			Jan - Sep
Networks		28,133			56,275			82,930			117,699			24,383			53,347			83,377
Global Services		21,452			46,303			70,277			97,443			20,356			43,415			67,882
Of which Professional Services		14,626			31,399			47,628			66,395			15,078			31,632			49,426
Of which Managed Services		5,888			12,642			18,906			25,480			5,754			12,239			19,414
Of which Network Rollout		6,826			14,904			22,649			31,048			5,278			11,783			18,456
Support Solutions		2,447			4,785			7,137			12,234			2,765			5,589			8,646
Modems		—			—			—			—			1			3			92

Total		52,032			107,363			160,344			227,376			47,505			102,354			159,997


Year to date,	2013												2014
year over year change, percent	Jan - Mar			Jan - Jun			Jan - Sep			Jan - Dec			Jan - Mar			Jan - Jun			Jan - Sep
Networks		3	%		2	%		1	%		0	%		-13	%		-5	%		1	%
Global Services		4	%		4	%		2	%		0	%		-5	%		-6	%		-3	%
Of which Professional Services		-2	%		-1	%		-1	%		-1	%		3	%		1	%		4	%
Of which Managed Services		3	%		4	%		2	%		1	%		-2	%		-3	%		3	%
Of which Network Rollout		19	%		16	%		9	%		4	%		-23	%		-21	%		-19	%
Support Solutions		-19	%		-26	%		-27	%		-9	%		13	%		17	%		21	%
Modems		—			—			—			—			—			—			—

Total		2	%		1	%		0	%		0	%		-9	%		-5	%		0	%


SALES GROWTH ADJUSTED FOR COMPARABLE UNITS AND CURRENCY (%)

	2013												2014
Sequential change, percent	Q1			Q2			Q3			Q4			Q1			Q2			Q3
Networks		-17	%		0	%		-3	%		31	%		-30	%		16	%		-2	%
Global Services		-20	%		17	%		-2	%		13	%		-25	%		11	%		5	%
Support Solutions		-30	%		-5	%		3	%		102	%		-45	%		1	%		6	%
Modems		—			—			—			—			—			—			—

Total		-19	%		6	%		-2	%		27	%		-28	%		13	%		2	%


Isolated quarter,	2013												2014
year over year change, percent	Q1			Q2			Q3			Q4			Q1			Q2			Q3
Networks		7	%		8	%		4	%		3	%		-10	%		5	%		7	%
Global Services		9	%		9	%		3	%		1	%		-3	%		-8	%		-2	%
Support Solutions		-3	%		-19	%		-15	%		35	%		4	%		5	%		10	%
Modems		—			—			—			—			—			—			—

Total		7	%		7	%		3	%		4	%		-7	%		-1	%		3	%


Year to date,	2013												2014
year over year change, percent	Jan - Mar			Jan - Jun			Jan - Sep			Jan - Dec			Jan - Mar			Jan - Jun			Jan - Sep
Networks		7	%		7	%		6	%		5	%		-10	%		-3	%		0	%
Global Services		9	%		9	%		7	%		5	%		-3	%		-5	%		-4	%
Support Solutions		-3	%		-12	%		-13	%		0	%		4	%		4	%		7	%
Modems		—			—			—			—			—			—			—

Total		7	%		7	%		5	%		5	%		-7	%		-4	%		-2	%


Ericsson Third Quarter Report 2014		27

OPERATING INCOME BY SEGMENT BY QUARTER


	2013												2014
Isolated quarters, SEK million	Q1			Q2			Q3			Q4			Q1			Q2			Q3
Networks		1,565			1,335			2,557			5,861			2,476			3,574			3,175
Global Services		726			1,564			1,808			2,087			1,036			1,487			1,607
Of which Professional Services		1,837			2,285			2,279			2,628			1,893			2,095			2,059
Of which Network Rollout		-1,111			-721			-471			-541			-857			-608			-452
Support Solutions		-29			-283			-113			1,880			12			-378			-108
Modems		—			—			—			-543			-745			-456			-739
Unallocated¹⁾		-156			-151			-33			-230			-149			-228			-59

Total		2,106			2,465			4,219			9,055			2,630			3,999			3,876


	2013												2014
Year to date, SEK million	Jan - Mar			Jan - Jun			Jan - Sep			Jan - Dec			Jan - Mar			Jan-Jun			Jan - Sep
Networks		1,565			2,900			5,457			11,318			2,476			6,050			9,225
Global Services		726			2,290			4,098			6,185			1,036			2,523			4,130
Of which Professional Services		1,837			4,122			6,401			9,029			1,893			3,988			6,047
Of which Network Rollout		-1,111			-1,832			-2,303			-2,844			-857			-1,465			-1,917
Support Solutions		-29			-312			-425			1,455			12			-366			-474
Modems		—			—			—			-543			-745			-1,201			-1,940
Unallocated¹⁾		-156			-307			-340			-570			-149			-377			-436

Total		2,106			4,571			8,790			17,845			2,630			6,629			10,505


OPERATING MARGIN BY SEGMENT BY QUARTER

As percentage of net sales, isolated quarters	2013												2014
As percentage of net sales, isolated quarters	Q1			Q2			Q3			Q4			Q1			Q2			Q3
Networks		6	%		5	%		10	%		17	%		10	%		12	%		11	%
Global Services		3	%		6	%		8	%		8	%		5	%		6	%		7	%
Of which Professional Services		13	%		14	%		14	%		14	%		13	%		13	%		12	%
Of which Network Rollout		-16	%		-9	%		-6	%		-6	%		-16	%		-9	%		-7	%
Support Solutions		-1	%		-12	%		-5	%		37	%		0	%		-13	%		-4	%
Modems		—			—			—			—			—			—			—

Total		4	%		4	%		8	%		14	%		6	%		7	%		7	%


As percentage of net sales, Year to date	2013												2014
As percentage of net sales, Year to date	Jan - Mar			Jan - Jun			Jan - Sep			Jan - Dec			Jan - Mar			Jan - Jun			Jan - Sep
Networks		6	%		5	%		7	%		10	%		10	%		11	%		11	%
Global Services		3	%		5	%		6	%		6	%		5	%		6	%		6	%
Of which Professional Services		13	%		13	%		13	%		14	%		13	%		13	%		12	%
Of which Network Rollout		-16	%		-12	%		-10	%		-9	%		-16	%		-12	%		-10	%
Support Solutions		-1	%		-7	%		-6	%		12	%		0	%		-7	%		-5	%
Modems		—			—			—			—			—			—			—

Total		4	%		4	%		5	%		8	%		6	%		6	%		7	%

¹⁾	“Unallocated” consists mainly of costs for corporate staff, non-operational capital gains and losses


Ericsson Third Quarter Report 2014		28

EBITA BY SEGMENT BY QUARTER


	2013												2014
Isolated quarters, SEK million	Q1			Q2			Q3			Q4			Q1			Q2			Q3
Networks		2,302			2,074			3,320			6,525			3,052			4,156			3,773
Global Services		942			1,783			2,043			2,342			1,257			1,731			1,857
Of which Professional Services		2,009			2,443			2,466			2,820			2,073			2,289			2,254
Of which Network Rollout		-1,067			-660			-423			-478			-816			-558			-397
Support Solutions		118			-132			38			2,076			192			-196			95
Modems		—			—			—			-499			-699			-416			-698
Unallocated¹⁾		-155			-150			-32			-229			-149			-226			-59

Total		3,207			3,575			5,369			10,215			3,653			5,049			4,968


	2013												2014
Year to date, SEK million	Jan - Mar			Jan - Jun			Jan - Sep			Jan - Dec			Jan - Mar			Jan - Jun			Jan - Sep
Networks		2,302			4,376			7,696			14,221			3,052			7,208			10,981
Global Services		942			2,725			4,768			7,110			1,257			2,988			4,845
Of which Professional Services		2,009			4,452			6,918			9,738			2,073			4,362			6,616
Of which Network Rollout		-1,067			-1,727			-2,150			-2,628			-816			-1,374			-1,771
Support Solutions		118			-14			24			2,100			192			-4			91
Modems		—			—			—			-499			-699			-1,115			-1,813
Unallocated¹⁾		-155			-305			-337			-566			-149			-375			-434

Total		3,207			6,782			12,151			22,366			3,653			8,702			13,670


EBITA MARGIN BY SEGMENT BY QUARTER

As percentage of net sales, isolated quarters	2013												2014
As percentage of net sales, isolated quarters	Q1			Q2			Q3			Q4			Q1			Q2			Q3
Networks		8	%		7	%		12	%		19	%		13	%		14	%		13	%
Global Services		4	%		7	%		9	%		9	%		6	%		8	%		8	%
Of which Professional Services		14	%		15	%		15	%		15	%		14	%		14	%		13	%
Of which Network Rollout		-16	%		-8	%		-5	%		-6	%		-15	%		-9	%		-6	%
Support Solutions		5	%		-6	%		2	%		41	%		7	%		-7	%		3	%
Modems		—			—			—			—			—			—			—

Total		6	%		6	%		10	%		15	%		8	%		9	%		9	%


As percentage of net sales, year to date	2013												2014
As percentage of net sales, year to date	Jan - Mar			Jan - Jun			Jan - Sep			Jan - Dec			Jan - Mar			Jan - Jun			Jan - Sep
Networks		8	%		8	%		9	%		12	%		13	%		14	%		13	%
Global Services		4	%		6	%		7	%		7	%		6	%		7	%		7	%
Of which Professional Services		14	%		14	%		15	%		15	%		14	%		14	%		13	%
Of which Network Rollout		-16	%		-12	%		-9	%		-8	%		-15	%		-12	%		-10	%
Support Solutions		5	%		0	%		0	%		17	%		7	%		0	%		1	%
Modems		—			—			—			—			—			—			—

Total		6	%		6	%		8	%		10	%		8	%		9	%		9	%

¹⁾	“Unallocated” consists mainly of costs for corporate staff, non-operational capital gains and losses


Ericsson Third Quarter Report 2014		29

NET SALES BY REGION BY QUARTER


	2013												2014
Isolated quarters, SEK million	Q1			Q2			Q3			Q4			Q1			Q2			Q3
North America		15,773			15,341			14,453			13,772			12,215			15,179			14,033
Latin America		4,374			5,565			5,294			6,749			4,710			5,414			5,882
Northern Europe & Central Asia ^{1) 2)}		2,283			2,708			2,949			3,678			2,436			2,717			3,151
Western & Central Europe ²⁾		4,349			4,522			4,399			5,215			4,381			4,582			4,646
Mediterranean ²⁾		5,271			6,159			5,659			7,067			4,785			5,487			5,218
Middle East		3,160			3,978			4,386			5,914			3,859			4,514			6,039
Sub Saharan Africa		2,131			2,653			2,693			2,572			1,813			1,886			2,447
India		1,606			1,279			1,280			1,973			1,695			1,645			2,000
North East Asia		6,054			6,642			6,053			8,649			4,908			6,406			7,033
South East Asia & Oceania		4,129			3,758			3,617			4,283			3,446			3,662			3,794
Other ^{1) 2)}		2,902			2,726			2,198			7,160			3,257			3,357			3,400

Total		52,032			55,331			52,981			67,032			47,505			54,849			57,643

¹⁾ Of which in Sweden		1,020			1,276			798			1,333			999			1,008			1,090
²⁾ Of which in EU		9,782			10,816			10,111			12,835			9,720			10,320			10,736

	2013												2014
Sequential change, percent	Q1			Q2			Q3			Q4			Q1			Q2			Q3
North America		-7	%		-3	%		-6	%		-5	%		-11	%		24	%		-8	%
Latin America		-33	%		27	%		-5	%		27	%		-30	%		15	%		9	%
Northern Europe & Central Asia ^{1) 2)}		-24	%		19	%		9	%		25	%		-34	%		12	%		16	%
Western & Central Europe ²⁾		-20	%		4	%		-3	%		19	%		-16	%		5	%		1	%
Mediterranean ²⁾		-25	%		17	%		-8	%		25	%		-32	%		15	%		-5	%
Middle East		-38	%		26	%		10	%		35	%		-35	%		17	%		34	%
Sub Saharan Africa		-40	%		24	%		2	%		-4	%		-30	%		4	%		30	%
India		0	%		-20	%		0	%		54	%		-14	%		-3	%		22	%
North East Asia		-41	%		10	%		-9	%		43	%		-43	%		31	%		10	%
South East Asia & Oceania		-9	%		-9	%		-4	%		18	%		-20	%		6	%		4	%
Other ^{1) 2)}		-3	%		-6	%		-19	%		226	%		-55	%		3	%		1	%

Total		-22	%		6	%		-4	%		27	%		-29	%		15	%		5	%

¹⁾ Of which in Sweden		-20	%		25	%		-37	%		67	%		-25	%		1	%		8	%
²⁾ Of which in EU		-24	%		11	%		-7	%		27	%		-24	%		6	%		4	%

	2013												2014
Year-over-year change, percent	Q1			Q2			Q3			Q4			Q1			Q2			Q3
North America		23	%		18	%		3	%		-19	%		-23	%		-1	%		-3	%
Latin America		-9	%		6	%		-2	%		4	%		8	%		-3	%		11	%
Northern Europe & Central Asia ^{1) 2)}		0	%		-19	%		9	%		23	%		7	%		0	%		7	%
Western & Central Europe ²⁾		1	%		10	%		21	%		-4	%		1	%		1	%		6	%
Mediterranean ²⁾		14	%		-1	%		5	%		0	%		-9	%		-11	%		-8	%
Middle East		0	%		7	%		21	%		17	%		22	%		13	%		38	%
Sub Saharan Africa		-3	%		-5	%		-4	%		-28	%		-15	%		-29	%		-9	%
India		13	%		-25	%		-26	%		23	%		6	%		29	%		56	%
North East Asia		-34	%		-21	%		-28	%		-16	%		-19	%		-4	%		16	%
South East Asia & Oceania		22	%		2	%		3	%		-5	%		-17	%		-3	%		5	%
Other ^{1) 2)}		2	%		-13	%		-34	%		141	%		12	%		23	%		55	%

Total		2	%		0	%		-3	%		0	%		-9	%		-1	%		9	%

¹⁾ Of which in Sweden		22	%		0	%		-52	%		5	%		-2	%		-21	%		37	%
²⁾ Of which in EU		3	%		-3	%		-5	%		-1	%		-1	%		-5	%		6	%


Ericsson Third Quarter Report 2014		30

NET SALES BY REGION BY QUARTER (continued)


	2013												2014
Year to date, SEK million	Jan - Mar			Jan - Jun			Jan - Sep			Jan - Dec			Jan - Mar			Jan - Jun			Jan - Sep
North America		15,773			31,114			45,567			59,339			12,215			27,394			41,427
Latin America		4,374			9,939			15,233			21,982			4,710			10,124			16,006
Northern Europe & Central Asia ^{1) 2)}		2,283			4,991			7,940			11,618			2,436			5,153			8,304
Western & Central Europe ²⁾		4,349			8,871			13,270			18,485			4,381			8,963			13,609
Mediterranean ²⁾		5,271			11,430			17,089			24,156			4,785			10,272			15,490
Middle East		3,160			7,138			11,524			17,438			3,859			8,373			14,412
Sub Saharan Africa		2,131			4,784			7,477			10,049			1,813			3,699			6,146
India		1,606			2,885			4,165			6,138			1,695			3,340			5,340
North East Asia		6,054			12,696			18,749			27,398			4,908			11,314			18,347
South East Asia & Oceania		4,129			7,887			11,504			15,787			3,446			7,108			10,902
Other ^{1) 2)}		2,902			5,628			7,826			14,986			3,257			6,614			10,014

Total		52,032			107,363			160,344			227,376			47,505			102,354			159,997

¹⁾ Of which in Sweden		1,020			2,296			3,094			4,427			999			2,007			3,097
²⁾ Of which in EU		9,782			20,598			30,709			43,544			9,720			20,040			30,776

Year to date,	2013												2014
year-over-year change, percent	Jan - Mar			Jan - Jun			Jan - Sep			Jan - Dec			Jan - Mar			Jan - Jun			Jan - Sep
North America		23	%		21	%		14	%		5	%		-23	%		-12	%		-9	%
Latin America		-9	%		-1	%		-2	%		0	%		8	%		2	%		5	%
Northern Europe & Central Asia ^{1) 2)}		0	%		-12	%		-5	%		2	%		7	%		3	%		5	%
Western & Central Europe ²⁾		1	%		6	%		10	%		6	%		1	%		1	%		3	%
Mediterranean ²⁾		14	%		6	%		5	%		4	%		-9	%		-10	%		-9	%
Middle East		0	%		4	%		10	%		12	%		22	%		17	%		25	%
Sub Saharan Africa		-3	%		-4	%		-4	%		-11	%		-15	%		-23	%		-18	%
India		13	%		-8	%		-14	%		-5	%		6	%		16	%		28	%
North East Asia		-34	%		-28	%		-28	%		-24	%		-19	%		-11	%		-2	%
South East Asia & Oceania		22	%		12	%		9	%		5	%		-17	%		-10	%		-5	%
Other^{1) 2)}		2	%		-6	%		-16	%		22	%		12	%		18	%		28	%

Total		2	%		1	%		0	%		0	%		-9	%		-5	%		0	%

¹⁾ Of which in Sweden		22	%		9	%		-18	%		-12	%		-2	%		-13	%		0	%
²⁾ Of which in EU		3	%		-1	%		-2	%		-2	%		-1	%		-3	%		0	%

TOP 5 COUNTRIES IN SALES
							Q3						Jan - Sep
Country							2013			2014			2013			2014
UNITED STATES								28	%		24	%		28	%		26	%
CHINA								5	%		6	%		4	%		6	%
JAPAN								5	%		5	%		6	%		4	%
INDIA								2	%		4	%		3	%		3	%
BRAZIL								3	%		3	%		3	%		3	%


Ericsson Third Quarter Report 2014		31

NET SALES BY REGION BY SEGMENT

Revenue from Telcordia is reported 50/50 between segments Global Services and Support Solutions.


	Q3 2014															Jan - Sep 2014
SEK milion	Net- works			Global Services			Support Solutions			Modems			Total			Net- works			Global Services			Support Solutions			Modems			Total
North America		6,829			6,452			752			—			14,033			21,082			17,855			2,490			0			41,427
Latin America		2,691			2,860			331			—			5,882			7,741			7,541			724			0			16,006
Northern Europe & Central Asia		2,143			937			71			—			3,151			5,270			2,855			179			0			8,304
Western & Central Europe		1,773			2,720			153			—			4,646			5,397			7,770			442			0			13,609
Mediterranean		2,088			2,943			187			—			5,218			6,526			8,409			555			0			15,490
Middle East		3,705			2,028			306			—			6,039			8,054			5,676			682			0			14,412
Sub Saharan Africa		1,237			1,126			84			—			2,447			2,820			2,911			415			0			6,146
India		1,106			743			151			—			2,000			2,881			2,152			307			0			5,340
North East Asia		4,463			2,293			277			—			7,033			11,545			6,324			478			0			18,347
South East Asia & Oceania		2,048			1,677			69			—			3,794			5,724			4,893			285			0			10,902
Other		1,947			688			676			89			3,400			6,337			1,496			2,089			92			10,014

Total		30,030			24,467			3,057			89			57,643			83,377			67,882			8,646			92			159,997
Share of Total		52	%		43	%		5	%		0	%		100	%		52	%		43	%		5	%		0	%		100	%


	Q3 2014
Sequential change, percent	Net- works			Global Services			Support Solutions			Modems			Total
North America		-11	%		1	%		-32	%		—			-8	%
Latin America		3	%		8	%		112	%		—			9	%
Northern Europe & Central Asia		22	%		3	%		45	%		—			16	%
Western & Central Europe		-3	%		5	%		-4	%		—			1	%
Mediterranean		-15	%		3	%		6	%		—			-5	%
Middle East		46	%		14	%		55	%		—			34	%
Sub Saharan Africa		44	%		18	%		15	%		—			30	%
India		25	%		5	%		215	%		—			22	%
North East Asia		4	%		14	%		215	%		—			10	%
South East Asia & Oceania		13	%		-3	%		-44	%		—			4	%
Other		-11	%		34	%		5	%		—			1	%

Total		4	%		6	%		8	%		—			5	%

	Q3 2014
Year over year change, percent	Net- works			Global Services			Support Solutions			Modems			Total
North America		4	%		-11	%		28	%		—			-3	%
Latin America		-3	%		24	%		54	%		—			11	%
Northern Europe & Central Asia		8	%		2	%		39	%		—			7	%
Western & Central Europe		2	%		7	%		21	%		—			6	%
Mediterranean		-19	%		-1	%		43	%		—			-8	%
Middle East		64	%		12	%		-6	%		—			38	%
Sub Saharan Africa		-9	%		1	%		-62	%		—			-9	%
India		95	%		10	%		297	%		—			56	%
North East Asia		26	%		-7	%		386	%		—			16	%
South East Asia & Oceania		7	%		7	%		-47	%		—			5	%
Other		43	%		91	%		43	%		—			55	%

Total		13	%		2	%		30	%		—			9	%

	Jan - Sep 2014
Year over year change, percent	Net- works			Global Services			Support Solutions			Modems			Total
North America		-9	%		-14	%		59	%		—			-9	%
Latin America		0	%		14	%		-15	%		—			5	%
Northern Europe & Central Asia		8	%		-1	%		3	%		—			5	%
Western & Central Europe		-3	%		6	%		16	%		—			3	%
Mediterranean		-18	%		-4	%		27	%		—			-9	%
Middle East		47	%		8	%		-11	%		—			25	%
Sub Saharan Africa		-24	%		-5	%		-41	%		—			-18	%
India		51	%		6	%		31	%		—			28	%
North East Asia		8	%		-19	%		137	%		—			-2	%
South East Asia & Oceania		-12	%		6	%		-18	%		—			-5	%
Other		20	%		39	%		41	%		—			28	%

Total		1	%		-3	%		21	%		—			0	%


Ericsson Third Quarter Report 2014		32

PROVISIONS


	2013												2014
Isolated quarters, SEK million	Q1			Q2			Q3			Q4			Q1			Q2			Q3
Opening balance		8,638			9,499			7,716			6,414			5,362			4,928			4,579
Additions		1,915			1,215			658			911			625			430			675
Utilization/Cash out		-758			-2,365			-1,534			-1,364			-977			-642			-648
Of which restructuring		-324			-1,001			-457			-307			-512			-246			-231
Reversal of excess amounts		-209			-586			-191			-575			-88			-298			-132
Reclassification, translation difference and other		-87			-47			-235			-24			6			161			93

Closing balance		9,499			7,716			6,414			5,362			4,928			4,579			4,567


	2013												2014
Year to date, SEK million	Jan - Mar			Jan - Jun			Jan - Sep			Jan - Dec			Jan - Mar			Jan - Jun			Jan - Sep
Opening balance		8,638			8,638			8,638			8,638			5,362			5,362			5,362
Additions		1,915			3,130			3,788			4,699			625			1,055			1,730
Utilization/Cash out		-758			-3,123			-4,657			-6,021			-977			-1,619			-2,267
Of which restructuring		-324			-1,325			-1,782			-2,089			-512			-758			-989
Reversal of excess amounts		-209			-795			-986			-1,561			-88			-386			-518
Reclassification, translation difference and other		-87			-134			-369			-393			6			167			260

Closing balance		9,499			7,716			6,414			5,362			4,928			4,579			4,567


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

	2013												2014
Isolated quarters, SEK million	Q1			Q2			Q3			Q4			Q1			Q2			Q3
Additions
Property, plant and equipment		1,196			1,278			778			1,251			1,034			1,320			1,415
Capitalized development expenses		282			214			237			182			197			185			155
IPR, brands and other intangible assets		196			22			1,418			562			77			621			935

Total		1,674			1,514			2,433			1,995			1,308			2,126			2,505

Depreciation, amortization and impairment losses
Property, plant and equipment		1,008			983			1,008			1,210			1,004			1,048			1,078
Capitalized development expenses		303			342			388			374			333			315			311
IPR, brands and other intangible assets, etc.		1,100			1,111			1,150			1,160			1,023			1,051			1,092

Total		2,411			2,436			2,546			2,744			2,360			2,414			2,481


RECONCILIATION TABLE, NON-IFRS MEASUREMENTS

CASH CONVERSION

	2013												2014
Isolated quarters, SEK million	Q1			Q2			Q3			Q4			Q1			Q2			Q3
Net income		1,204			1,516			3,010			6,444			1,692			2,662			2,624
Net income reconciled to cash		1,598			3,483			4,398			12,523			3,237			5,862			4,974
Cash flow from operating activities		-2,970			4,291			1,459			14,609			9,402			2,054			-1,350
Cash conversion		-185.9	%		123.2	%		33.2	%		116.7	%		290.5	%		35.0	%		-27.1	%

NET CASH, END OF PERIOD
SEK million										Dec 31 2013			Mar 31 2014			Jun 30 2014			Sep 30 2014
Cash and cash equivalents											42,095			38,096			33,088			32,042
+ Short term investments											34,994			41,779			35,310			34,011
- Borrowings, non-current											22,067			18,900			19,504			20,647
- Borrowings, current											7,388			5,737			3,525			1,997
- Post employment benefits											9,825			11,633			12,884			13,972
Net cash, end of period											37,809			43,605			32,485			29,437


Ericsson Third Quarter Report 2014		33

OTHER INFORMATION


	Jul - Sep						Jan - Sep						Jan - Dec
	2013			2014			2013			2014			2013
Number of shares and earnings per share
Number of shares, end of period (million)		3,305			3,305			3,305			3,305			3,305
Of which class A-shares (million)		262			262			262			262			262
Of which class B-shares (million)		3,043			3,043			3,043			3,043			3,043
Number of treasury shares, end of period (million)		77			66			77			66			74
Number of shares outstanding, basic, end of period (million)		3,228			3,239			3,228			3,239			3,231
Numbers of shares outstanding, diluted, end of period (million)		3,259			3,271			3,259			3,271			3,262
Average number of treasury shares (million)		78			67			81			70			79
Average number of shares outstanding, basic (million)		3,227			3,238			3,225			3,235			3,226
Average number of shares outstanding, diluted (million) ¹⁾		3,258			3,270			3,256			3,268			3,257
Earnings per share, basic (SEK)		0.91			0.82			1.74			2.27			3.72
Earnings per share, diluted (SEK) ¹⁾		0.90			0.81			1.72			2.25			3.69
Earnings per share (Non-IFRS), diluted (SEK) ²⁾		1.16			1.05			2.46			2.94			4.69
Earnings per share (Non-IFRS, excluding restructuring), diluted (SEK) ²⁾		1.31			1.11			3.19			3.08			5.62
Ratios
Days sales outstanding		—			—			109			111			97
Inventory turnover days		73			68			72			69			62
Payable days		51			55			53			57			53
Equity ratio (%)		—			—			52.4	%		52.3	%		52.6	%
Return on equity (%)		8.8	%		7.6	%		5.5	%		6.9	%		8.7	%
Return on capital employed (%)		11.5	%		9.7	%		7.7	%		8.6	%		10.7	%
Capital turnover (times)		1.2			1.3			1.2			1.2			1.3
Cash conversion %, end of period		33.2	%		-27.1	%		29.3	%		71.8	%		79.0	%
Payment readiness, end of period		—			—			69,651			78,595			82,631
Payment readiness, as percentage of sales		—			—			32.6	%		36.8	%		36.3	%
Exchange rates used in the consolidation
SEK/EUR - average rate		—			—			8.60			9.04			8.67
- closing rate		—			—			8.66			9.15			8.90
SEK/USD - average rate		—			—			6.53			6.69			6.52
- closing rate		—			—			6.42			7.27			6.46
Other
Regional inventory, end of period,		18,416			17,094			18,416			17,094			14,652
Export sales from Sweden		24,019			26,871			73,728			79,106			108,944

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

²⁾	Excluding amortizations and write-downs of acquired intangibles



NUMBER OF EMPLOYEES
	2013								2014
End of period	Mar 31		Jun 30		Sep 30		Dec 31		Mar 31		Jun 30		Sep 30
North America		15,404		15,047		14,825		14,931		14,902		15,306		15,554
Latin America		11,153		11,412		11,402		11,445		9,731		11,179		10,901
Northern Europe & Central Asia ¹⁾		21,043		21,148		22,038		21,892		21,484		21,476		21,691
Western & Central Europe		11,118		11,235		11,612		11,530		11,455		12,624		12,606
Mediterranean		12,015		12,405		12,350		12,314		12,253		12,475		13,306
Middle East		3,951		3,951		3,766		3,752		3,749		3,736		3,831
Sub Saharan Africa		1,967		2,101		2,081		2,084		2,094		2,284		2,288
India		14,588		16,183		16,978		17,622		17,991		18,495		19,413
North East Asia		14,088		14,059		14,625		14,503		13,490		13,448		13,653
South East Asia & Oceania		4,321		4,264		4,312		4,267		4,234		4,359		4,265

Total		109,648		111,805		113,989		114,340		111,383		115,382		117,508

¹⁾Of which in Sweden		17,550		17,264		18,008		17,858		17,545		17,497		17,655


Ericsson Third Quarter Report 2014		34

RESTRUCTURING CHARGES BY FUNCTION


	2013								2014
Isolated quarters, SEK million	Q1		Q2		Q3		Q4		Q1		Q2		Q3
Cost of sales		-698		-707		-600		-652		-82		-116		-168
Research and development expenses		-552		-117		-64		-139		-19		-80		-92
Selling and administrative expenses		-589		-110		-55		-170		-29		-47		-19

Total		-1,839		-934		-719		-961		-130		-243		-279


	2013								2014
Year to date, SEK million	Jan - Mar		Jan - Jun		Jan - Sep		Jan - Dec		Jan - Mar		Jan - Jun		Jan - Sep
Cost of sales		-698		-1,405		-2,005		-2,657		-82		-198		-366
Research and development expenses		-552		-669		-733		-872		-19		-99		-191
Selling and administrative expenses		-589		-699		-754		-924		-29		-76		-95

Total		-1,839		-2,773		-3,492		-4,453		-130		-373		-652


RESTRUCTURING CHARGES BY SEGMENT
	2013								2014
Isolated quarters, SEK million	Q1		Q2		Q3		Q4		Q1		Q2		Q3
Networks		-1,251		-316		-299		-316		-93		-128		-80
Global Services		-385		-586		-410		-616		-32		-81		-122
Of which Professional Services		-270		-389		-290		-420		-25		-63		-85
Of which Network Rollout		-115		-197		-120		-196		-7		-18		-37
Support Solutions		-111		-34		-11		-30		-5		-34		-77
Modems		—		—		—		—		—		—		—
Unallocated		-92		2		1		1		0		—		—

Total		-1,839		-934		-719		-961		-130		-243		-279


	2013								2014
Year to date, SEK million	Jan - Mar		Jan - Jun		Jan - Sep		Jan - Dec		Jan - Mar		Jan - Jun		Jan - Sep
Networks		-1,251		-1,567		-1,866		-2,182		-93		-221		-301
Global Services		-385		-971		-1,381		-1,997		-32		-113		-235
Of which Professional Services		-270		-659		-949		-1,369		-25		-88		-173
Of which Network Rollout		-115		-312		-432		-628		-7		-25		-62
Support Solutions		-111		-145		-156		-186		-5		-39		-116
Modems		—		—		—		—		—		—		—
Unallocated		-92		-90		-89		-88		—		—		—

Total		-1,839		-2,773		-3,492		-4,453		-130		-373		-652


Ericsson Third Quarter Report 2014		35

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