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 20, 2008

 

 

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

 

 

 

Announcement of LM Ericsson Telephone Company, dated October 20, 2008 regarding “Ericsson reports strong third quarter results.”

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THIRD QUARTER REPORT

October 20, 2008

 

		Ericsson reports strong third quarter results
		•         Sales SEK 49.2 (43.5) b., 13% growth, SEK 141.9 (133.3) b. first nine months   •         Operating income SEK 5.7 (5.6) b., excl. restructuring charges of SEK 2.0 b1)., SEK 14.72) (23.0) b. first nine months, excl. restructuring charges of SEK 4.6 b.1)   •         Operating margin 11.5% (12.9%), excl. restructuring charges, 10.3%2) (17.3%) first nine months, excl. restructuring charges   •         Cash flow SEK 3.8 (-1.6) b., SEK 17.0 (7.2) b. first nine months   •         Net income3) SEK 2.8 (4.0) b., SEK 7.42) (16.2) b. first nine months   •         Earnings per share3) SEK 0.89 (1.25) 4), SEK 2.322) (5.10) 4) first nine months

 

		1)      The restructuring charges include SEK 0.2 b in Sony Ericsson 2)      Includes a capital gain of SEK 0.2 b. from divested enterprise PBX operations in Q208 3)      Attributable to stockholders of the Parent Company, excluding minority interests 4)      A reverse split 1:5 was made in June 2008. Comparable figures restated accordingly
		CEO COMMENTS
SALES BY QUARTER 2007 AND 2008 (SEK B)		“During the quarter, sales grew by 13% with strong development in all regions except Western Europe,” said Carl-Henric Svanberg, President and CEO of Ericsson (NASDAQ:ERIC). “Gross margin increased year-over-year and was stable sequentially. We are seeing initial positive effects from our ongoing cost adjustments. Our financial position is strong with healthy net cash and high payment readiness.   Our business in the quarter has not been impacted by the financial turmoil. Our customers are generally financially strong. In addition, networks are loaded and traffic shows strong increase. In the present financial turmoil, it is however hard to predict how operators will act and to what extent consumer telecom spending will be affected.   In this environment, we continue to adjust our cost base. Our cost adjustment program is running according to plan. The charges we announced earlier have now been exceeded. However, given the present market conditions, we will continue with cost adjustment activities in the fourth quarter, although at a slightly lower pace.   We have a positive longer-term view for our industry, however, as we look into 2009, we continue to plan for a flattish market, and we have measures in place also for tougher conditions,” said Carl-Henric Svanberg.

 

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FINANCIAL HIGHLIGHTS

Income statement and cash flow

 

		Third quarter									Second quarter						Nine months
SEK b.		20081)			2007			Change			20081)			Change			20081)			2007			Change
Net sales		49.2			43.5			13	%		48.5			1	%		141.9			133.3			6	%
Gross margin		37.0	%		35.6	%		—			37.0	%		—			37.5	%		40.6	%		—
EBITDA margin		15.3	%		17.4	%		—			14.9	%		—			15.0	%		21.8	%		—
Operating income		5.7			5.6			1	%		4.7			20	%		14.7			23.0			-36	%
Operating margin		11.5	%		12.9	%		—			9.7	%		—			10.3	%		17.3	%		—
Operating margin excl Sony Ericsson		11.5	%		9.0	%		—			9.7	%		—			9.7	%		13.7	%		—
Income after financial items		6.2			5.6			10	%		4.7			31	%		15.3			23.1			-34	%
Net income 3)		2.8	2)		4.0			-28	%		1.9	2)		50	%		7.4	2)		16.2			-54	%
EPS, SEK 3) 4)		0.89	2)		1.25			-29	%		0.60	2)		48	%		2.32	2)		5.10			-55	%
Cash flow from operating activities		3.8			-1.6			—			8.5			—			17.0			7.2			—
Cash flow excl. Sony Ericsson		2.4			-3.0			—			8.5			—			13.4			3.2			—

 

1)	Excluding restructuring charges of SEK 2.0 b.in the third quarter 2008, SEK 1.8 b. in the second quarter and SEK 0.8 b. in the first quarter

2)	Including restructuring charges

3)	Attributable to stockholders of the Parent Company, excluding minority interests

4)	A reverse split 1:5 was made in June 2008. Comparable figures are restated accordingly

 

		Sales were up 13% year-over-year, mainly driven by healthy growth in Networks across all regions except Western Europe. In constant currencies, growth amounted to some 17%. Acquisitions and divestitures had a limited net effect.
		Gross margin, excluding restructuring charges, amounted to 37.0% (35.6%) and was stable sequentially. The year-over-year improvement reflects a better business mix outside Western Europe and improved margins in Professional Services.
		Operating expenses, excluding restructuring charges, amounted to SEK 12.9 (12.0) b. in the quarter. Operating expenses decreased sequentially affected by seasonality and some initial effects of the cost adjustments.
		Operating income, excluding restructuring charges, amounted to SEK 5.7 (5.6) b. in the quarter. Sony Ericsson showed a small profit, excluding restructuring charges. Excluding Sony Ericsson, Group operating margin improved year-over-year to 11.5% (9.0%).
		Financial net amounted to SEK 0.5 (-0.1) b. with positive effects from foreign exchange as well as interest rates.
		Cash flow from operating activities reached SEK 3.8 (-1.6) b. in the quarter, including a dividend of SEK 1.4 b. from Sony Ericsson. The increase in working capital reflects the strong sales and customary build-up of inventories ahead of the fourth quarter. The cash conversion rate year-to-date amounted to 102% (30%).
		Cash flow from investing activities was SEK -5.5 (-3.6) b. in the quarter of which SEK -4.6 b are related to increased short-term investments.

 

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		Balance sheet and other performance indicators

 

		1)      Excluding restructuring costs
		The net cash position increased sequentially to SEK 30.2 (27.9) b. Cash, cash equivalents and short-term investments amounted to SEK 65.6 (57.1) b. This includes effects from a seven-year loan of SEK 4.0 b. with the European Investment Bank to support the development of LTE in Sweden. Of a total debt position of SEK 27.6 b., SEK 5.0 b. matures in the next twelve months.
		During the quarter, approximately SEK 1.6 b. of provisions were utilized related to warranty and project commitments and other items, of which SEK 0.3 b. were related to restructuring. Additions of SEK 3.4 b. were made, of which SEK 1.5 b. related to restructuring. Reversals of SEK 0.1 b. were made. The net impact on operating income, excluding restructuring charges, was negative by SEK 1.9 b.
		Days sales outstanding increased in the quarter to 115 days due to high business activity, especially in high-growth markets where payment terms are longer. Inventory increased due to customary fourth quarter build-up.
		Cost reductions
		In February 2008, a cost reduction plan of SEK 4 b. in annual savings was announced, including estimated charges of the same size. In the quarter, charges of SEK 1.8 b. have been recognized of which SEK 1.5 have been added to provisions. Year-to-date, charges of SEK 4.4 b. have been recognized of which SEK 3.1 b. have been added to provisions. The cost reductions should have full effect from 2009.
		Further charges will be taken in the fourth quarter with expected annual savings increasing accordingly. Ericsson’s share in Sony Ericsson’s restructuring charges were SEK 0.2 b. in the quarter.

 

 

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SEGMENT RESULTS

 

		Third quarter									Second quarter						Nine months
SEK b.		20081)			2007			Change			20081)			Change			20081) 2)			2007			Change
Networks sales		33.0			28.5			16	%		33.3			-1	%		96.3			91.5			5	%
Of which network rollout		4.7			4.0			17	%		4.8			-2	%		14.0			12.1			16	%
Operating margin		11	%		8	%		—			10	%		—			10	%		15	%		—
EBITDA margin		15	%		13	%		—			15	%		—			15	%		20	%		—
Professional Services sales		11.8			11.0			7	%		11.0			7	%		32.8			30.8			7	%
Of which managed services		3.5			3.4			3	%		3.4			1	%		10.0			8.9			13	%
Operating margin		16	%		15	%		—			14	%		—			15	%		15	%		—
EBITDA margin		19	%		17	%		—			16	%		—			17	%		16	%		—
Multimedia sales		4.4			4.0			10	%		4.2			5	%		12.8			11.0			16	%
Operating margin		3	%		1	%		—			-1	%		—			-3	%		3	%		—
EBITDA margin		12	%		6	%		—			13	%3)		—			7	%3)		7	%		—
Total sales		49.2			43.5			13	%		48.5			1	%		141.9			133.3			6	%

 

1)	Excluding restructuring costs

2)	First quarter 2008 is restated for the transfer of the IPX operations from Professional Services to Multimedia

3)	Affected by SEK 0.2 b. due to changed allocation of capitalized development expenses

 

		Networks
SEGMENT SALES BY QUARTER 2007 AND 2008 (SEK B)		Sales in Networks were up 16% year-over-year and 5% year-to-date. Network rollout services grew in line with equipment sales. Build-out of new networks as well as network expansions across all markets except Western Europe continues with particularly strong growth in India, Indonesia, Russia and Brazil,. Margins improved sequentially as well as year-over-year due to improved business mix and lower operating expenses.
		Redback shows strong sales growth as a result of increased international sales while sales in the US were down.
		Professional Services
		Sales in Professional Services grew by 7% both year-over-year as well as year-to-date. Adjusted for the transfer of IPX and local currencies, sales growth amounted to 11% year-to-date. Operating margin improved sequentially, as a result of efficiency gains and a lower proportion of new managed services contracts in early phase.
		Compared to a strong third quarter 2007, managed services sales increased year-over-year by 3% and by 13% year-to-date. During the quarter, six new contracts were signed. The total number of subscribers in managed operations now amount to 225 million, of which 60% are in high-growth markets.
		Multimedia
		Sales growth was 10% year-over-year and 16% year-to-date. Organic growth, excluding acquisitions and divestitures, amounted to 23% year-over-year. Revenue management, including LHS, and Tandberg Television showed particularly strong development.
		Operating margin showed an encouraging improvement and reached 3% in the quarter. Multimedia is still in its build-up phase and sales and results will fluctuate between quarters.
		Sony Ericsson Mobile Communications

 

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		For information on transactions with Sony Ericsson Mobile Communications, please see Financial statements and Additional information.

 

		Third quarter									Second quarter						Nine months
EUR m.		2008			2007			Change			2008			Change			2008			2007			Change
Number of units shipped (m.)		25.7			25.9			-1	%		24.4			6	%		72.5			72.6			0	%
Average selling price (EUR)		109			120			-9	%		116			-6	%		115			126			-9	%
Net sales		2,808			3,108			-10	%		2,820			0	%		8,330			9,145			-9	%
Gross margin		22	%		31	%		—			23	%		—			25	%		30	%		—
Operating margin		-1	%		13	%		—			0	%		—			2	%		12	%		—
Income before taxes		-23			384			—			8			—			179			1,073			—
Income before taxes, excl restructuring charges		12			384			—			19			—			225			1,073			—
Net income		-25			267			—			6			—			114			741			—

 

		Units shipped in the quarter were 25.7 million, a sequential increase, but a year-on-year decrease. Sales for the quarter were EUR 2,808 million, a decrease of 10% compared to the third quarter 2007. Gross margin decreased year-on-year as well as sequentially due to continued price pressure at a time of adverse cost trends in the supplier base. New products launched, such as the C902 Cyber-shot™ camera phone, have been well received. Income before taxes for the quarter was EUR 12 (384) million, excluding restructuring charges of EUR 35 million.
		The target to reduce operating expenses by EUR 300 million annually by the end of the second quarter 2009 remains, with the full effects expected to appear in the second half of 2009. The plans are progressing in line with expectations.
		Ericsson’s share in Sony Ericsson’s income before tax, excluding restructuring charges, was SEK 0.1 (1.7) b. in the quarter.

 

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REGIONAL OVERVIEW

 

		Third quarter							Second quarter					Nine months
Sales, SEK b.		2008		2007		Change			2008		Change			2008		2007		Change
Western Europe		11.6		12.3		-6	%		12.1		-4	%		35.4		37.3		-5	%
Central and Eastern Europe, Middle East and Africa		13.1		12.0		9	%		11.2		16	%		35.4		34.4		3	%
Asia Pacific		14.1		12.0		17	%		15.8		-11	%		42.8		40.9		5	%
Latin America		6.1		4.2		43	%		5.0		23	%		15.2		11.6		31	%
North America		4.3		3.0		44	%		4.4		-2	%		13.0		9.1		43	%

 

		Sales in Western Europe declined by 6% year-over-year and is down 5% year-to-date. Spain, Italy and UK were particularly slow while Germany and the Nordic region showed good development. 3G accelerates while spending on GSM is decreasing.
REGIONAL SALES BY QUARTER 2007 AND 2008 (SEK B)		Sales in Central and Eastern Europe, Middle East and Africa increased 9% year-over-year and by 3% year-to-date. The business activity is increasing throughout the region. Russia and Africa showed particularly good development. Roll out of 2G network coverage in rural areas and deployments of 3G in urban areas characterize the region.
		Asia Pacific sales were up 17% year-over-year and 5% year-to-date. The business activity is generally high in the region although there are uncertainties in some countries. India and Indonesia showed particularly strong growth with major new network rollouts. Japan was up strongly after a temporary slow down. China was down sequentially, reflecting the temporary effects of the Beijing Olympics.   Latin American sales were up 43% year-over-year and 31% year-to-date. The development was particularly strong in Brazil, presently leading the rollout of mobile broadband in the region. Mexico and Central America also contributed to the positive development. Professional Services show positive development throughout the region.   North American sales were up 44% year-over-year and 43% year-to-date with sales stabilizing on a higher level. The positive development is a result of the continued build-out and expansion of mobile broadband. Smart phones and other new devices as well as broadband-connected laptops are generating demand for fast and efficient networks.

 

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MARKET DEVELOPMENT

Growth rates are based on Ericsson and market estimates.

We believe that the fundamentals for longer-term positive development for our industry are solid. The need for communication continues to grow and plays a vital role for the development for a prosperous society. Ericsson is well positioned to lead this development.

The demand for broadband is strong. We expect traffic in mobile and fixed networks to increase tenfold in the next five years mainly driven by internet applications and the introduction of interactive HD-TV. Data traffic in WCDMA networks measured by Ericsson is now four times the volume of voice versus close to three times in the previous quarter. With major 3G rollouts in Brazil, Russia, China, India and Africa, consumers across the world will soon benefit from broadband services and connection to Internet.

Mobile subscriptions grew by some 178 million in the quarter to a total of 3.8 billion. 260 million are WCDMA subscriptions, up by 24 million in the third quarter. There are 239 WCDMA networks in 101 countries, of which 221 networks are upgraded to HSPA. In the twelve-month period ending June 30, 2008, fixed broadband connections grew by 21% to more than 370 million.

PLANNING ASSUMPTIONS

For 2008 we have found it prudent to plan for a flattish global mobile infrastructure market and for good growth of the professional services market.

The major macro economic trends are negative but the present financial turmoil has so far no impact on Ericsson’s business. Operators are generally financially sound, networks are loaded and traffic shows strong growth. In the present financial environment, it is however hard to predict how operators will act and to what extent consumer telecom spending will be affected.

In this environment, as we look into 2009, we find it prudent to plan for a flattish development in the global mobile infrastructure market and good growth in the professional services market.

PARENT COMPANY INFORMATION

Net sales for the nine-month period amounted to SEK 4.1 (2.5) b. and income after financial items was SEK 17.6 (13.2) b. During the quarter, dividends to the Parent Company have impacted financial net with SEK 8.9 (1.8) b.

Major changes in the Parent Company’s financial position for the nine-month period include decreased current and non-current receivables from subsidiaries of SEK 9.0 b. and increased cash and bank and short-term investments of SEK 11.1 b. Current and non-current liabilities to subsidiaries decreased by SEK 9.5 b. and other current liabilities increased by SEK 3.7 b. As per September 30, 2008, cash and bank and short-term investments amounted to SEK 56.7 (45.6) b.

Major transactions and balances with related parties include the following with Sony Ericsson Mobile Communications: revenues of SEK 1.4 (1.8) b.; receivables of SEK 0.5 (0.9) b.; dividend of SEK 3.6 (3.9) b.

In the third quarter, as decided by the Annual General Meeting 2008, a stock issue and a subsequent stock repurchase of 19,900,000 shares was carried out related to Ericsson´s Long-Term Variable Compensation Program (LTV) 2008. In accordance with the conditions of the Stock Purchase Plans and Option Plans for Ericsson employees, 1,061,485 shares

 

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from treasury stock were sold or distributed to employees during the third quarter. The holding of treasury stock at September 30, 2008, was 62,237,216 shares of Class B.

OTHER INFORMATION

Joint venture Ericsson Mobile Platforms and ST-NXP Wireless

On August 20, Ericsson and STMicroelectronics announced an agreement to merge Ericsson Mobile Platforms and ST-NXP Wireless into a joint venture. The 50/50 joint venture will have the industry’s strongest product offering in semiconductors and platforms for mobile applications. Regulatory approvals are still pending.

Change in number of total shares and votes

On August 29, Ericsson changed the total number of shares and votes due to the issue of shares to expand the treasury stock as part of the financing of Ericsson’s long-term variable compensation program.

Assessment of risk environment

Ericsson’s operational and financial risk factors and exposures are described under “Risk factors” in our Annual Report 2007. However, the increased activities related to the new Multimedia segment may result in a more volatile quarterly sales pattern. Specific additional risks for the near term are associated with the acquisitions made during 2007, as a timely and effective integration of these is essential to make them accretive as planned.

Risk factors and exposures in focus for the Parent Company and the Ericsson Group for the forthcoming six-month period include: potential negative effects due to the present serious turmoil in the financial markets on operators’ willingness to invest in network development, for example due to lack of borrowing facilities, or increased pressure on us to provide financing; unfavorable product mix in the Networks segment with reduced sales of software, upgrades and extensions and an increased proportion of new network build-outs and break-in contracts, which may result in lower gross margins and/or working capital build-up, which in turn puts pressure on our cash conversion rate; variability in the seasonality could make it more difficult to forecast future sales; effects of the ongoing industry consolidation among the Company’s customers as well as between our largest competitors, e.g. intensified price competition; changes in foreign exchange rates, in particular USD and EUR; fluctuations in interest rates and the potential effect on operators’ willingness to invest in network development; and continued political unrest or instability in certain markets.

Ericsson conducts business in certain countries which are subject to trade restrictions or which are focused on by certain investors. We stringently follow all relevant regulations and trade embargos applicable to us in our dealings with customers operating in such countries. Moreover, Ericsson operates globally in accordance with Group level policies and directives for business ethics and conduct. In no way should our business activities in these countries be construed as supporting a particular political agenda or regime. We have activities in such countries mainly due to that certain customers with multi-country operations put demands on us to support them in all of their markets.

Please refer further to Ericsson’s Annual Report 2007, where we describe our risks and uncertainties along with our strategies and tactics to mitigate the risk exposures or limit unfavorable outcomes.

Stockholm, October 20, 2008

Carl-Henric Svanberg

President and CEO

Telefonaktiebolaget LM Ericsson (publ)

Date for next report: January 29, 2009

 

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AUDITORS’ REVIEW REPORT

We have reviewed this report for the period January 1 to September 30, 2008, for Telefonaktiebolaget LM Ericsson (publ). The board of directors and the CEO are responsible for the preparation and presentation of this interim financial information in accordance with IAS 34 and the Annual Accounts Act. Our responsibility is to express a conclusion on this interim financial information based on our review.

We conducted our review in accordance with the Standard on Review Engagements SÖG 2410, Review of Interim Financial Information Performed by the Independent Auditor of the Entity, issued by FAR SRS. A review consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Standards on Auditing in Sweden, RS, and other generally accepted auditing practices. The procedures performed in a review do not enable us to obtain a level of assurance that would make us aware of all significant matters that might be identified in an audit. Therefore, the conclusion expressed based on a review does not give the same level of assurance as a conclusion expressed based on an audit.

Based on our review, nothing has come to our attention that causes us to believe that the accompanying interim financial information is not, in all material respects, in accordance with IAS 34 and the Annual Accounts Act.

Stockholm, October 20, 2008

PricewaterhouseCoopers AB

 

Bo Hjalmarsson		Peter Clemedtson
Authorized Public Accountant		Authorized Public Accountant
Lead partner

EDITOR’S NOTE

To read the complete report with tables, please go to: www.ericsson.com/investors/financial_reports/2008/9month08-en.pdf

Ericsson invites media, investors and analysts to a press conference at the Ericsson headquarters, Torshamnsgatan 23, Stockholm, at 09.00 (CET), October 20.

An analysts, investors and media conference call will begin at 14.00 (CET).

Live webcasts 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 made available during the day on www.ericsson.com/broadcast_room

 

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FOR FURTHER INFORMATION, PLEASE CONTACT

Henry Sténson, Senior Vice President, Communications

Phone: +46 8 719 4044

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

 

Investors		Media
Gary Pinkham, Vice President,		Åse Lindskog, Vice President,
Investor Relations		Head of Media Relations
Phone: +46 8 719 0000		Phone: +46 8 719 9725, +46 730 244 872
E-mail: investor.relations@ericsson.com		E-mail: press.relations@ericsson.com
Susanne Andersson,		Ola Rembe, Vice President,
Investor Relations		Phone: +46 8 719 9727, +46 730 244 873
Phone: +46 8 719 4631		E-mail: press.relations@ericsson.com
E-mail: investor.relations@ericsson.com
Andreas Hedemyr,
Investor Relations
Phone: +46 8 404 37 48
E-mail: investor.relations@ericsson.com
Telefonaktiebolaget LM Ericsson (publ)
Org. number: 556016-0680
Torshamnsgatan 23
SE-164 83 Stockholm
Phone: +46 8 719 00 00 www.ericsson.com

 

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Disclosure Pursuant to the Swedish Securities Markets Act

Ericsson discloses the information provided herein pursuant to the Securities Markets Act. The information was submitted for publication at 06.45 CET, on October 20, 2008.

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.

 

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FINANCIAL STATEMENTS AND ADDITIONAL INFORMATION

 

		Page
Financial statements
Consolidated income statement		13
Consolidated balance sheet		14
Consolidated statement of cash flows		15
Consolidated statement of recognized income and expense		16
Consolidated income statement - isolated quarters		17
Consolidated statement of cash flows - isolated quarters		18
Parent Company income statement		19
Parent Company balance sheet		19
		Page
Additional information
Accounting policies		20
Net sales by segment by quarter		21
Operating income and margin by segment by quarter		22
Number of employees		22
EBITDA income and margin by segment by quarter		23
Restructuring costs by quarter		23
Net sales by market area by quarter		24
External net sales by market area by segment		25
Top 15 markets in sales		25
Transactions with Sony Ericsson Mobile Communications		26
Provisions		26
Other information		27
Ericsson planning assumptions for year 2008		27

 

12

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THIRD QUARTER REPORT

October 20, 2008

 

Consolidated Income Statement

 

		Jul - Sep									Jan - Sep
SEK million		2008			2007			Change			2008			2007			Change
Net sales		49,198			43,545			13	%		141,905			133,320			6	%
Cost of sales		-31,577			-28,050			13	%		-90,139			-79,250			14	%
Gross income		17,621			15,495			14	%		51,766			54,070			-4	%
Gross margin %		35.8	%		35.6	%					36.5	%		40.6	%
Research and development expenses		-7,859			-7,229			9	%		-25,357			-20,890			21	%
Selling and administrative expenses		-6,304			-4,783			32	%		-18,681			-15,961			17	%
Operating expenses		-14,163			-12,012						-44,038			-36,851
Other operating income and expenses		332			402			-17	%		1,475			953			55	%
Share in earnings of JV and associated companies		-131			1,751			-107	%		842			4,870			-83	%
Operating income		3,659			5,636			-35	%		10,045			23,042			-56	%
Operating margin %		7.4	%		12.9	%					7.1	%		17.3	%
Financial income		1,099			389						2,267			1,268
Financial expenses		-618			-442						-1,602			-1,178
Income after financial items		4,140			5,583			-26	%		10,710			23,132			-54	%
Taxes		-1,202			-1,629						-3,107			-6,820
Net income		2,938			3,954			-26	%		7,603			16,312			-53	%
Net income attributable to:
Stockholders of the Parent Company		2,842			3,970						7,388			16,194
Minority interests		96			-16						215			118
Other information
Average number of shares, basic (million) 1)		3,184			3,179						3,182			3,178
Earnings per share, basic (SEK) 1) 2)		0.89			1.25						2.32			5.10
Earnings per share, diluted (SEK) 1) 2)		0.89			1.24						2.31			5.07

 

1)	Reverse split 1:5 was made in June 2008. Comparable figures are restated accordingly.

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

 

13

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THIRD QUARTER REPORT

October 20, 2008

 

Consolidated Balance Sheet

 

SEK million		Sep 30 2008		Jun 30 2008		Dec 31 2007
ASSETS
Non-current assets
Intangible assets
Capitalized development expenses		2,675		2,693		3,661
Goodwill		23,026		21,140		22,826
Intellectual property rights, brands and other intangible assets		21,411		21,519		23,958
Property, plant and equipment		9,571		9,288		9,304
Financial assets
Equity in JV and associated companies		8,251		9,160		10,903
Other investments in shares and participations		1,582		1,625		738
Customer financing, non-current		533		508		1,012
Other financial assets, non-current		2,640		2,412		2,918
Deferred tax assets		14,045		12,799		11,690
		83,734		81,144		87,010
Current assets
Inventories		29,687		26,580		22,475
Trade receivables		62,624		56,696		60,492
Customer financing, current		1,670		1,842		2,362
Other current receivables		20,057		14,998		15,062
Short-term investments		31,906		26,411		29,406
Cash and cash equivalents		33,702		30,695		28,310
		179,646		157,222		158,107
Total assets		263,380		238,366		245,117
EQUITY AND LIABILITIES
Equity
Stockholders’ equity		135,014		129,228		134,112
Minority interests in equity of subsidiaries		989		977		940
		136,003		130,205		135,052
Non-current liabilities
Post-employment benefits		7,807		7,155		6,188
Provisions, non-current		287		311		368
Deferred tax liabilities		2,620		2,420		2,799
Borrowings, non-current		22,568		17,806		21,320
Other non-current liabilities		1,680		1,866		1,714
		34,962		29,558		32,389
Current liabilities
Provisions, current		12,708		10,795		9,358
Borrowings, current		5,028		4,217		5,896
Trade payables		20,273		18,297		17,427
Other current liabilities		54,406		45,294		44,995
		92,415		78,603		77,676
Total equity and liabilities		263,380		238,366		245,117
Of which interest-bearing liabilities and post-employment benefits		35,403		29,178		33,404
Net cash		30,205		27,928		24,312
Assets pledged as collateral		434		303		1,999
Contingent liabilities		874		1,104		1,182

 

14

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THIRD QUARTER REPORT

October 20, 2008

 

Consolidated Statement of Cash Flows

 

		Jul - Sep				Jan - Sep				Jan - Dec 2007
SEK million		2008		2007		2008		2007
Operating activities
Net income		2,938		3,954		7,603		16,312		22,135
Adjustments to reconcile net income to cash
Taxes		-343		-65		-933		1,070		1,119
Earnings/dividends in JV and associated companies		909		209		2,604		620		-1,413
Depreciation, amortization and impairment losses		1,872		1,953		6,615		5,956		8,363
Other		1,257		63		837		-68		-897
		6,633		6,114		16,726		23,890		29,307
Changes in operating net assets
Inventories		-1,878		-1,563		-6,695		-3,846		-445
Customer financing, current and non-current		137		-76		1,168		-102		365
Trade receivables		-3,776		-2,443		-1,850		-4,519		-7,467
Provisions and post-employment benefits		1,620		-824		3,158		-3,390		-4,401
Other operating assets and liabilities, net		1,027		-2,813		4,530		-4,842		1,851
		-2,870		-7,719		311		-16,699		-10,097
Cash flow from operating activities		3,763		-1,605		17,037		7,191		19,210
Investing activities
Investments in property, plant and equipment		-997		-871		-2,836		-2,663		-4,319
Sales of property, plant and equipment		428		13		745		90		152
Acquisitions/divestments of subsidiaries and other operations, net		114		-2,444		723		-26,404		-26,208
Product development		-261		-237		-1,016		-694		-1,053
Other investing activities		-156		-92		60		-208		396
Short-term investments		-4,606		67		-1,939		9,244		3,499
Cash flow from investing activities		-5,478		-3,564		-4,263		-20,635		-27,533
Cash flow before financing activities		-1,715		-5,169		12,774		-13,444		-8,323
Financing activities
Dividends paid		-188		-177		-8,202		-8,125		-8,132
Other financing activities		4,783		241		176		12,136		14,390
Cash flow from financing activities		4,595		64		-8,026		4,011		6,258
Effect of exchange rate changes on cash		127		171		644		91		406
Net change in cash		3,007		-4,934		5,392		-9,342		-1,659
Cash and cash equivalents, beginning of period		30,695		25,561		28,310		29,969		29,969
Cash and cash equivalents, end of period		33,702		20,627		33,702		20,627		28,310

 

15

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THIRD QUARTER REPORT

October 20, 2008

 

Consolidated Statement of Recognized Income and Expense

 

SEK million		Jan - Sep 2008		Jan - Sep 2007		Jan - Dec 2007
Income and expense recognized directly in equity
Actuarial gains and losses related to pensions		-1,731		1,257		1,208
Revaluation of other investments in shares and participations
Fair value measurement reported in equity		930		—		2
Cash flow hedges
Fair value remeasurement of derivatives reported in equity		-1,130		428		584
Transferred to income statement for the period		-1,076		-648		-1,390
Changes in cumulative translation adjustments		2,922		-7		-797
Tax on items reported directly in/or transferred from equity		1,180		-292		-73
Total transactions reported directly in equity		1,095		738		-466
Net income		7,603		16,312		22,135
Total income and expense recognized for the period		8,698		17,050		21,669
Attributable to:
Stockholders of the Parent Company		8,381		16,949		21,371
Minority interest		317		101		298
Other changes in equity:
Stock issue, net		100		—		—
Sale of own shares		-20		46		62
Stock Purchase- and Stock Option Plans		395		346		509
Dividends paid
Stockholders of the Parent Company		-7,954		-7,943		-7,943
Minority interest		-248		-182		-189
Business combinations
Minority interest		-20		-38		49

 

16

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THIRD QUARTER REPORT

October 20, 2008

 

Consolidated Income Statement – Isolated Quarters

 

		2008									2007
SEK million		Q3			Q2			Q1			Q4			Q3			Q2			Q1
Net sales		49,198			48,532			44,175			54,460			43,545			47,619			42,156
Cost of sales		-31,577			-31,206			-27,356			-34,809			-28,050			-27,166			-24,034
Gross income		17,621			17,326			16,819			19,651			15,495			20,453			18,122
Gross margin %		35.8	%		35.7	%		38.1	%		36.1	%		35.6	%		43.0	%		43.0	%
Research and development expenses		-7,859			-8,932			-8,566			-7,952			-7,229			-7,208			-6,453
Selling and administrative expenses		-6,304			-6,271			-6,106			-7,238			-4,783			-5,856			-5,322
Operating expenses		-14,163			-15,203			-14,672			-15,190			-12,012			-13,064			-11,775
Other operating income and expenses		332			704			439			781			402			389			162
Share in earnings of JV and associated companies		-131			62			911			2,362			1,751			1,477			1,642
Operating income		3,659			2,889			3,497			7,604			5,636			9,255			8,151
Operating margin %		7.4	%		6.0	%		7.9	%		14.0	%		12.9	%		19.4	%		19.3	%
Financial income		1,099			503			665			510			389			322			556
Financial expenses		-618			-511			-473			-517			-442			-292			-443
Income after financial items		4,140			2,881			3,689			7,597			5,583			9,285			8,264
Taxes		-1,202			-835			-1,070			-1,774			-1,629			-2,776			-2,415
Net income		2,938			2,046			2,619			5,823			3,954			6,509			5,849
Net income attributable to:
Stockholders of the Parent Company		2,842			1,901			2,645			5,642			3,970			6,409			5,815
Minority interests		96			145			-26			181			-16			100			34
Other information
Average number of shares, basic (million) 1)		3,184			3,183			3,181			3,179			3,179			3,178			3,177
Earnings per share, basic (SEK) 1) 2)		0.89			0.60			0.83			1.77			1.25			2.02			1.83
Earnings per share, diluted (SEK) 1) 2)		0.89			0.59			0.83			1.77			1.24			2.01			1.79

 

1)	Reverse split 1:5 was made in June 2008. Comparable figures are restated accordingly.

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

 

17

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THIRD QUARTER REPORT

October 20, 2008

 

Consolidated Statement of Cash Flows – Isolated Quarters

 

		2008						2007
SEK million		Q3		Q2		Q1		Q4		Q3		Q2		Q1
Operating activities
Net income		2,938		2,046		2,619		5,823		3,954		6,509		5,849
Adjustments to reconcile net income to cash
Taxes		-343		-278		-311		49		-65		1,424		-289
Earnings/dividends in JV and associated companies		909		-41		1,736		-2,033		209		1,915		-1,504
Depreciation, amortization and impairment losses		1,872		2,529		2,214		2,407		1,953		2,140		1,863
Other		1,257		169		-589		-829		63		33		-164
		6,633		4,425		5,669		5,417		6,114		12,021		5,755
Changes in operating net assets
Inventories		-1,878		-1,906		-2,912		3,401		-1,563		-496		-1,787
Customer financing, current and non-current		137		371		660		467		-76		94		-120
Trade receivables		-3,776		-356		2,282		-2,948		-2,443		-2,276		200
Provisions and post-employment benefits		1,620		967		571		-1,011		-824		-507		-2,059
Other operating assets and liabilities, net		1,027		5,043		-1,540		6,693		-2,813		-4,616		2,587
		-2,870		4,119		-939		6,602		-7,719		-7,801		-1,179
Cash flow from operating activities		3,763		8,544		4,730		12,019		-1,605		4,220		4,576
Investing activities
Investments in property, plant and equipment		-997		-893		-946		-1,656		-871		-1,024		-768
Sales of property, plant and equipment		428		108		209		62		13		38		39
Acquisitions/divestments of subsidiaries and other operations, net		114		602		7		196		-2,444		-8,264		-15,696
Product development		-261		-422		-333		-359		-237		-251		-206
Other investing activities		-156		12		204		604		-92		-42		-74
Short-term investments		-4,606		-1,392		4,059		-5,745		67		1,654		7,523
Cash flow from investing activities		-5,478		-1,985		3,200		-6,898		-3,564		-7,889		-9,182
Cash flow before financing activities		-1,715		6,559		7,930		5,121		-5,169		-3,669		-4,606
Financing activities
Dividends paid		-188		-8,008		-6		-7		-177		-7,948		—
Other financing activities		4,783		-3,581		-1,026		2,254		241		11,323		572
Cash flow from financing activities		4,595		-11,589		-1,032		2,247		64		3,375		572
Effect of exchange rate changes on cash		127		308		209		315		171		-337		257
Net change in cash		3,007		-4,722		7,107		7,683		-4,934		-631		-3,777
Cash and cash equivalents, beginning of period		30,695		35,417		28,310		20,627		25,561		26,192		29,969
Cash and cash equivalents, end of period		33,702		30,695		35,417		28,310		20,627		25,561		26,192

 

18

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THIRD QUARTER REPORT

October 20, 2008

 

Parent Company Income Statement

 

		Jul - Sep				Jan - Sep
SEK million		2008		2007		2008		2007
Net sales		950		743		4,079		2,453
Cost of sales		-123		-56		-611		-65
Gross income		827		687		3,468		2,388
Operating expenses		-487		-364		-1,708		-1,086
Other operating income and expenses		613		657		1,968		1,800
Operating income		953		980		3,728		3,102
Financial net		9,593		3,918		13,823		10,101
Income after financial items		10,546		4,898		17,551		13,203
Transfers to (-) / from untaxed reserves
Taxes		-405		-355		-1,291		-1,076
Net income		10,141		4,543		16,260		12,127
Parent Company Balance Sheet
SEK million						Sep 30 2008		Dec 31 2007
ASSETS
Fixed assets
Intangible assets						2,700		2,989
Tangible assets						664		443
Financial assets						107,466		106,478
						110,830		109,910
Current assets
Inventories						68		84
Receivables						22,532		28,873
Cash, bank and short-term investments						56,731		45,608
						79,331		74,565
Total assets						190,161		184,475
STOCKHOLDERS’ EQUITY, PROVISIONS AND LIABILITIES
Equity
Restricted equity						47,724		47,624
Non-restricted equity						44,575		35,225
						92,299		82,849
Untaxed reserves						1,339		1,339
Provisions						1,069		1,057
Non-current liabilities						48,771		50,457
Current liabilities						46,683		48,773
Total stockholders’ equity, provisions and liabilities						190,161		184,475
Assets pledged as collateral						432		359
Contingent liabilities						12,017		9,650

 

19

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THIRD QUARTER REPORT

October 20, 2008

 

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 International Financial Reporting Interpretations Committee (IFRIC).

New interpretation (IFRIC), endorsed by the EU

IFRIC 11 IFRS 2 – Group and Treasury Share Transactions requires a share-based payment arrangement in which a company receives goods or services as consideration for its own equity instruments to be accounted for as an equity-settled share-based payment transaction, regardless of how the equity instruments are obtained. IFRIC 11 is mandatory for the Company’s 2008 financial statements, with retrospective application required. It has not had any impact on the consolidated financial statements since the Company is not buying equity instruments from other parties to satisfy its obligations to its employees.

Renaming of recommendations issued by the Swedish Financial Accounting Standards Council (Rådet för finansiell rapportering)

The Swedish Financial Accounting Standards Council issues recommendations in relation to matters that are unique for Sweden. These recommendations have from January 1, 2008, been given new names. The content of the renamed recommendations has not been changed.

Reverse split

The Annual General Meeting on April 9, 2008 resolved on a reverse split 1:5 of the Company’s shares. The reverse split has the effect that five shares of series A and five shares of series B, respectively, are consolidated into one share of series A and one share of series B, respectively. Numbers of shares and Earnings per share for comparison periods have been restated accordingly.

Changes in financial reporting structure

Operations related to product area Internet Payment Exchange (IPX) have been transferred from Segment Professional Services to Segment Multimedia as from April 1, 2008. Financial statements for the first quarter 2008 have been restated accordingly. No restate is made for year 2007, as the amounts are not material.

The Parent Company

Recommendations issued by the Swedish Financial Accounting Standards Council (Rådet för finansiell rapportering), related to the Parent Company have been renamed. The content of the renamed recommendations has not been changed.

 

20

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THIRD QUARTER REPORT

October 20, 2008

 

Net Sales by Segment by Quarter

 

		2008									2007
Isolated quarters, SEK million		Q3			Q2			Q11)			Q4			Q3			Q2			Q1
Networks		33,017			33,274			29,992			37,463			28,538			33,666			29,350
Of which Network rollout		4,679			4,776			4,520			6,444			4,002			4,309			3,752
Professional Services		11,750			11,018			10,011			12,134			10,995			10,257			9,516
Of which Managed services		3,458			3,416			3,112			3,318			3,352			2,910			2,592
Multimedia		4,431			4,240			4,172			4,868			4,017			3,650			3,370
Less: Intersegment sales		—			—			—			-5			-5			46			-80
Total		49,198			48,532			44,175			54,460			43,545			47,619			42,156
		2008									2007
Sequential change, percent		Q3			Q2			Q11)			Q4			Q3			Q2			Q1
Networks		-1	%		11	%		-20	%		31	%		-15	%		15	%		-25	%
Of which Network rollout		-2	%		6	%		-30	%		61	%		-7	%		15	%		-32	%
Professional Services		7	%		10	%		-17	%		10	%		7	%		8	%		-10	%
Of which Managed services		1	%		10	%		-6	%		-1	%		15	%		12	%		3	%
Multimedia		5	%		2	%		-14	%		21	%		10	%		8	%		-26	%
Total		1	%		10	%		-19	%		25	%		-9	%		13	%		-22	%
		2008									2007
Year over year change, percent		Q3			Q2			Q11)			Q4			Q3			Q2			Q1
Networks		16	%		-1	%		2	%		-4	%		-2	%		7	%		5	%
Of which Network rollout		17	%		11	%		20	%		16	%		14	%		26	%		-4	%
Professional Services		7	%		7	%		5	%		15	%		26	%		11	%		15	%
Of which Managed services		3	%		17	%		20	%		32	%		50	%		21	%		11	%
Multimedia		10	%		16	%		24	%		7	%		31	%		6	%		19	%
Total		13	%		2	%		5	%		0	%		6	%		6	%		7	%
		2008									2007
Year to date, SEK million		0809			0806			08031)			0712			0709			0706			0703
Networks		96,283			63,266			29,992			129,017			91,554			63,016			29,350
Of which Network rollout		13,975			9,296			4,520			18,507			12,063			8,061			3,752
Professional Services		32,779			21,029			10,011			42,902			30,768			19,773			9,516
Of which Managed services		9,986			6,528			3,112			12,172			8,854			5,502			2,592
Multimedia		12,843			8,412			4,172			15,905			11,037			7,020			3,370
Less: Intersegment sales		—			—			—			-44			-39			-34			-80
Total		141,905			92,707			44,175			187,780			133,320			89,775			42,156
Year to date, year over year change, percent		2008									2007
		0809			0806			08031)			0712			0709			0706			0703
Networks		5	%		0	%		2	%		1	%		3	%		6	%		5	%
Of which Network rollout		16	%		15	%		20	%		13	%		11	%		10	%		-4	%
Professional Services		7	%		6	%		5	%		16	%		17	%		13	%		15	%
Of which Managed services		13	%		19	%		20	%		28	%		27	%		16	%		11	%
Multimedia		16	%		20	%		24	%		14	%		18	%		12	%		19	%
Total		6	%		3	%		5	%		4	%		6	%		6	%		7	%

 

1)	First quarter 2008 is restated for the transfer of the IPX operations from Professional Services to Multimedia.

 

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THIRD QUARTER REPORT

October 20, 2008

 

Operating Income by Segment by Quarter

 

		2008									2007
Isolated quarters, SEK million		Q3			Q2			Q12)			Q4			Q3			Q2			Q1
Networks		2,454			1,803			1,945			3,836			2,256			6,396			4,910
Professional Services		1,509			1,337			1,274			1,792			1,682			1,515			1,405
Multimedia		9			-172			-509			-439			42			-11			273
Phones		-142			24			895			2,286			1,737			1,464			1,621
Unallocated 1)		-171			-103			-108			129			-81			-109			-58
Total		3,659			2,889			3,497			7,604			5,636			9,255			8,151
		2008									2007
Year to date, SEK million		0809			0806			08032)			0712			0709			0706			0703
Networks		6,202			3,748			1,945			17,398			13,562			11,306			4,910
Professional Services		4,120			2,611			1,274			6,394			4,602			2,920			1,405
Multimedia		-672			-681			-509			-135			304			262			273
Phones		777			919			895			7,108			4,822			3,085			1,621
Unallocated 1)		-382			-211			-108			-119			-248			-167			-58
Total		10,045			6,386			3,497			30,646			23,042			17,406			8,151
1)       “Unallocated” consists mainly of costs for corporate staffs, non-operational capital gains and losses.
2)       First quarter 2008 is restated for the transfer of the IPX operations from Professional Services to Multimedia.
Operating Margin by Segment by Quarter
As percentage of net sales, isolated quarters		2008									2007
		Q3			Q2			Q12)			Q4			Q3			Q2			Q1
Networks		7	%		5	%		7	%		10	%		8	%		19	%		17	%
Professional Services		13	%		12	%		13	%		15	%		15	%		15	%		15	%
Multimedia		0	%		-4	%		-12	%		-9	%		1	%		0	%		8	%
Total		7	%		6	%		8	%		14	%		13	%		19	%		19	%
As percentage of net sales, Year to date		2008									2007
		0809			0806			08032)			0712			0709			0706			0703
Networks		6	%		6	%		7	%		13	%		15	%		18	%		17	%
Professional Services		13	%		12	%		13	%		15	%		15	%		15	%		15	%
Multimedia		-5	%		-8	%		-12	%		-1	%		3	%		4	%		8	%
Total		7	%		7	%		8	%		16	%		17	%		19	%		19	%
Calculation not applicable for segment Phones and Unallocated.
2)       First quarter 2008 is restated for the transfer of the IPX operations from Professional Services to Multimedia.
Number of Employees
		2008									2007
Year to Date		0809			0806			0803			0712			0709			0706			0703
Western Europe 1)		41,800			42,000			42,100			41,500			40,300			39,600			38,050
Central & Eastern Europe, Middle East & Africa		8,350			8,000			7,700			7,350			6,850			6,200			6,600
Asia Pacific		14,100			13,700			13,450			13,100			12,350			11,650			11,000
Latin America		7,450			6,600			6,250			6,550			6,000			5,050			4,600
North America		5,650			5,500			5,500			5,500			5,450			5,000			4,900
Total		77,350			75,800			75,000			74,000			70,950			67,500			65,150
1)       Of which Sweden		20,250			20,250			20,200			19,800			19,450			19,300			18,900

 

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THIRD QUARTER REPORT

October 20, 2008

 

EBITDA by Segment by Quarter

 

		2008									2007
Isolated quarters, SEK million		Q3			Q21)			Q12)			Q4			Q3			Q2			Q1
Networks		3,628			3,510			3,690			5,767			3,846			8,183			6,643
Professional Services		1,811			1,589			1,480			1,988			1,828			1,689			1,494
Multimedia		403			400			-246			-159			260			167			314
Phones		-142			24			895			2,286			1,737			1,464			1,621
Unallocated 3)		-171			-103			-108			129			-81			-109			-58
Total		5,529			5,420			5,711			10,011			7,590			11,394			10,014
		2008									2007
Year to date, SEK million		0809			0806			08032)			0712			0709			0706			0703
Networks		10,828			7,200			3,690			24,439			18,672			14,826			6,643
Professional Services		4,880			3,069			1,480			6,999			5,011			3,183			1,494
Multimedia		557			154			-246			582			741			481			314
Phones		777			919			895			7,108			4,822			3,085			1,621
Unallocated 3)		-382			-211			-108			-119			-248			-167			-58
Total		16,660			11,131			5,711			39,009			28,998			21,408			10,014
1)       Second quarter 2008 for Multimedia is effected by SEK 156 m. due to changed allocation of capitalized development expenses. 2)        First quarter 2008 is restated for the transfer of the IPX operations from Professional Services to Multimedia. 3)       “Unallocated” consists mainly of costs for corporate staffs, non-operational capital gains and losses.
EBITDA Margin by Segment by Quarter
As percentage of net sales, isolated quarters		2008									2007
		Q3			Q21)			Q12)			Q4			Q3			Q2			Q1
Networks		11	%		11	%		12	%		15	%		13	%		24	%		23	%
Professional Services		15	%		14	%		15	%		16	%		17	%		16	%		16	%
Multimedia		9	%		9	%		-6	%		-3	%		6	%		5	%		9	%
Total		11	%		11	%		13	%		18	%		17	%		24	%		24	%
As percentage of net sales, Year to date		2008									2007
		0809			08061)			08032)			0712			0709			0706			0703
Networks		11	%		11	%		12	%		19	%		20	%		24	%		23	%
Professional Services		15	%		15	%		15	%		16	%		16	%		16	%		16	%
Multimedia		4	%		2	%		-6	%		4	%		7	%		7	%		9	%
Total		12	%		12	%		13	%		21	%		22	%		24	%		24	%
Calculation not applicable for segment Phones and Unallocated.
1)       Second quarter 2008 for Multimedia is effected by SEK 156 m. due to changed allocation of capitalized development expenses. 2)        First quarter 2008 is restated for the transfer of the IPX operations from Professional Services to Multimedia.

Restructuring costs by Quarter

 

		2008
Isolated quarters, SEK million		Q3		Q2		Q1
Networks		-1,330		-1,519		-692
Professional Services		-374		-170		-88
Multimedia		-141		-138		-10
Phones		-165		—		—
Unallocated		-8		—		—
Total		-2,018		-1,827		-790
		2008
Year to Date, SEK million		0809		0806		0803
Networks		-3,541		-2,211		-692
Professional Services		-632		-258		-88
Multimedia		-289		-148		-10
Phones		-165		—		—
Unallocated		-8		—		—
Total		-4,635		-2,617		-790

No restructuring charges recognized during 2007.

 

23

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THIRD QUARTER REPORT

October 20, 2008

 

Net Sales by Market Area by Quarter

 

		2008									2007
Isolated quarters, SEK million		Q3			Q2			Q1			Q4			Q3			Q2			Q1
Western Europe 1)		11,629			12,125			11,681			15,396			12,341			12,440			12,508
Central & Eastern Europe, Middle East & Africa		13,069			11,253			11,123			14,256			11,957			11,468			10,980
Asia Pacific		14,114			15,785			12,908			13,734			12,027			16,616			12,252
Latin America		6,083			4,956			4,154			6,750			4,240			4,083			3,310
North America		4,303			4,413			4,309			4,324			2,980			3,012			3,106
Total 2)		49,198			48,532			44,175			54,460			43,545			47,619			42,156
1)       Of which Sweden		2,191			2,308			1,993			2,453			1,946			2,055			1,941
2)       Of which EU		13,059			13,427			12,744			17,575			13,643			13,977			13,783
		2008									2007
Sequential change, percent		Q3			Q2			Q1			Q4			Q3			Q2			Q1
Western Europe 1)		-4	%		4	%		-24	%		25	%		-1	%		-1	%		-27	%
Central & Eastern Europe, Middle East & Africa		16	%		1	%		-22	%		19	%		4	%		4	%		-23	%
Asia Pacific		-11	%		22	%		-6	%		14	%		-28	%		36	%		-12	%
Latin America		23	%		19	%		-38	%		59	%		4	%		23	%		-31	%
North America		-2	%		2	%		0	%		45	%		-1	%		-3	%		-22	%
Total 2)		1	%		10	%		-19	%		25	%		-9	%		13	%		-22	%
1)       Of which Sweden		-5	%		16	%		-19	%		26	%		-5	%		6	%		-15	%
2)       Of which EU		-3	%		5	%		-27	%		29	%		-2	%		1	%		-26	%
		2008									2007
Year-over-year change, percent		Q3			Q2			Q1			Q4			Q3			Q2			Q1
Western Europe 1)		-6	%		-3	%		-7	%		-10	%		6	%		-3	%		9	%
Central & Eastern Europe, Middle East & Africa		9	%		-2	%		1	%		-1	%		10	%		-3	%		16	%
Asia Pacific		17	%		-5	%		5	%		-2	%		3	%		32	%		26	%
Latin America		43	%		21	%		25	%		41	%		1	%		7	%		-9	%
North America		44	%		47	%		39	%		9	%		3	%		-19	%		-41	%
Total 2)		13	%		2	%		5	%		0	%		6	%		6	%		7	%
1)       Of which Sweden		13	%		12	%		3	%		7	%		3	%		2	%		19	%
2)       Of which EU		-4	%		-4	%		-8	%		-6	%		5	%		-6	%		11	%
		2008									2007
Year to date, SEK million		0809			0806			0803			0712			0709			0706			0703
Western Europe 1)		35,435			23,806			11,681			52,685			37,289			24,948			12,508
Central & Eastern Europe, Middle East & Africa		35,445			22,376			11,123			48,661			34,405			22,448			10,980
Asia Pacific		42,807			28,693			12,908			54,629			40,895			28,868			12,252
Latin America		15,193			9,110			4,154			18,383			11,633			7,393			3,310
North America		13,025			8,722			4,309			13,422			9,098			6,118			3,106
Total 2)		141,905			92,707			44,175			187,780			133,320			89,775			42,156
1)       Of which Sweden		6,492			4,301			1,993			8,395			5,942			3,996			1,941
2)       Of which EU		39,230			26,171			12,744			58,978			41,403			27,760			13,783
		2008									2007
Year to date, year-over-year change, percent		0809			0806			0803			0712			0709			0706			0703
Western Europe 1)		-5	%		-5	%		-7	%		-1	%		4	%		2	%		9	%
Central & Eastern Europe, Middle East & Africa		3	%		0	%		1	%		5	%		7	%		6	%		16	%
Asia Pacific		5	%		-1	%		5	%		14	%		21	%		29	%		26	%
Latin America		31	%		23	%		25	%		12	%		0	%		-1	%		-9	%
North America		43	%		43	%		39	%		-15	%		-24	%		-32	%		-41	%
Total 2)		6	%		3	%		5	%		4	%		6	%		6	%		7	%
1)       Of which Sweden		9	%		8	%		3	%		8	%		8	%		10	%		19	%
2)       Of which EU		-5	%		-6	%		-8	%		0	%		3	%		2	%		11	%

 

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THIRD QUARTER REPORT

October 20, 2008

 

External Net Sales by Market Area by Segment

 

SEK, million Jul - Sep 2008		Networks			Professional Services			Multimedia			Total
Western Europe		5,664			4,285			1,680			11,629
Central & Eastern Europe, Middle East & Africa		9,313			2,411			1,345			13,069
Asia Pacific		10,822			2,518			774			14,114
Latin America		4,456			1,303			324			6,083
North America		2,762			1,233			308			4,303
Total		33,017			11,750			4,431			49,198
Share of Total		67	%		24	%		9	%		100	%
SEK, million Year to date 2008		Networks			Professional Services			Multimedia			Total
Western Europe		17,028			13,020			5,387			35,435
Central & Eastern Europe, Middle East & Africa		25,648			6,331			3,466			35,445
Asia Pacific		33,805			6,794			2,208			42,807
Latin America		10,711			3,540			942			15,193
North America		9,091			3,094			840			13,025
Total		96,283			32,779			12,843			141,905
Share of Total		68	%		23	%		9	%		100	%

First quarter 2008 is restated for the transfer of the IPX operations from Professional Services to Multimedia.

Top 15 Markets in Sales

 

Market		Year to date Share of total sales			Q3 Share of iso. total sales
India		7	%		8	%
United States		7	%		8	%
China		7	%		5	%
Italy		5	%		4	%
Sweden		5	%		4	%
Indonesia		4	%		5	%
Brazil		4	%		5	%
Spain		4	%		3	%
United Kingdom		3	%		3	%
Japan		2	%		2	%
Germany		2	%		2	%
Canada		2	%		1	%
Nigeria		2	%		2	%
Australia		2	%		2	%
Russian Federation		2	%		2	%

 

25

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THIRD QUARTER REPORT

October 20, 2008

 

Transactions with Sony Ericsson Mobile Communications

 

		2008						2007
SEK million		Q3		Q2		Q1		Q4		Q3		Q2		Q1
Revenues from Sony Ericsson		1,470		1,271		1,547		1,930		1,242		1,411		1,160
Purchases from Sony Ericsson		19		20		170		39		11		232		51
Receivables from Sony Ericsson		952		927		1,097		932		132		178		116
Liabilities to Sony Ericsson		237		186		330		204		1,357		2,464		3,720
Dividends from Sony Ericsson		1,407		—		2,220		—		1,388		2,561		—
Provisions
		2008						2007
Isolated quarters, SEK million		Q3		Q2		Q1		Q4		Q3		Q2		Q1
Opening balance		11,106		10,056		9,726		10,357		11,675		12,291		13,882
Additions		3,418		2,724		2,019		1,710		874		1,056		1,519
Utilization/Cash out		-1,595		-1,343		-781		-1,215		-1,341		-1,276		-2,476
Reversal of excess amounts		-117		-244		-622		-1,401		-668		-1,006		-675
Reclassification, translation difference and other		183		-87		-286		275		-183		610		41
Closing balance		12,995		11,106		10,056		9,726		10,357		11,675		12,291
		2008						2007
Year to date, SEK million		0809		0806		0803		0712		0709		0706		0703
Opening balance		9,726		9,726		9,726		13,882		13,882		13,882		13,882
Additions		8,161		4,743		2,019		5,159		3,449		2,575		1,519
Utilization/Cash out		-3,719		-2,124		-781		-6,308		-5,093		-3,752		-2,476
Reversal of excess amounts		-983		-866		-622		-3,750		-2,349		-1,681		-675
Reclassification, translation difference and other		-190		-373		-286		743		468		651		41
Closing balance		12,995		11,106		10,056		9,726		10,357		11,675		12,291

 

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THIRD QUARTER REPORT

October 20, 2008

 

Other Information

 

		Jul - Sep						Jan - Sep						Jan - Dec 2007
		2008			2007			2008			2007
Number of shares and earnings per share 1)
Number of shares, end of period (million)		3,246			3,226			3,246			3,226			3,226
of which A-shares (million)		262			262			262			262			262
of which B-shares (million)		2,984			2,964			2,984			2,964			2,964
Number of treasury shares, end of period (million)		62			48			62			48			46
Number of shares outstanding, basic, end of period (million)		3,184			3,179			3,184			3,179			3,180
Numbers of shares outstanding, diluted, end of period (million)		3,202			3,194			3,202			3,194			3,195
Average number of treasury shares (million)		56			48			48			49			48
Average number of shares outstanding, basic (million)		3,184			3,179			3,182			3,178			3,178
Average number of shares outstanding, diluted (million)2)		3,201			3,194			3,200			3,193			3,193
Earnings per share, basic (SEK)		0.89			1.25			2.32			5.10			6.87
Earnings per share, diluted (SEK)2)		0.89			1.24			2.31			5.07			6.84
Ratios
Equity ratio, percent		—			—			51.6	%		56.4	%		55.1	%
Capital turnover (times)		1.2			1.1			1.1			1.2			1.2
Trade receivable turnover (times)		3.3			3.1			3.1			3.3			3.4
Inventory turnover (times)		4.5			4.5			4.6			4.5			5.2
Return on equity, percent		8.6	%		12.4	%		7.3	%		17.3	%		17.2	%
Return on capital employed, percent		11.5	%		15.0	%		9.7	%		21.2	%		20.9	%
Days Sales Outstanding		—			—			115			115			102
Payable days		56			54			57			59			57
Payment readiness, end of period		—			—			74,255			51,580			64,678
Payment readiness, as percentage of sales		—			—			39.2	%		29.0	%		34.4	%
Exchange rates used in the consolidation
SEK / EUR - average rate		—			—			9.45			9.22			9.24
- closing rate		—			—			9.79			9.21			9.45
SEK / USD - average rate		—			—			6.23			6.84			6.74
- closing rate		—			—			6.84			6.49			6.43
Other
Additions to property, plant and equipment		997			871			2,836			2,663			4,319
of which in Sweden		316			247			1,112			884			1,250
Additions to capitalized development expenses		261			237			1,016			694			1,053
Capitalization of development expenses, net		-18			-372			-986			-1,042			-1,334
Depreciation, amortization and impairment losses
Development expenses		279			609			2,002			1,736			2,387
Property, plant and equipment and other intangible assets		1,593			1,344			4,613			4,220			5,976
Total		1,872			1,953			6,615			5,956			8,363
Export sales from Sweden		26,160			23,956			78,596			73,087			102,486

 

1)	Reverse split 1:5 was made in June 2008. Comparable figures are restated accordingly.

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

Ericsson Planning Assumptions for Year 2008

Research and development expenses

We estimate R&D expenses for the full year to be at about the same runrate level as in the second half of 2007. The estimate includes amortizations/write-downs of intangible assets related to major acquisitions previously made and excludes restructuring. However, currency effects may cause this to change.

Tax rate

We estimate the tax rate for the full year 2008 to be around 28%.

Capital expenditures

Excluding acquisitions, the capital expenditures in relation to sales are not expected to be significantly different in 2008, remaining at roughly two percent of sales.

Utilization of provisions

Expected utilization of provisions for year 2008 is stated in the Annual report, note C18.

 

27

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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.

 

Date: October 20, 2008