6-K
Table of Contents

 

 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 6-K

 

 

REPORT OF FOREIGN ISSUER

Pursuant to Rule 13a-16 or 15d-16 of

the Securities Exchange Act of 1934

July 18, 2014

 

 

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 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 July18, 2014 regarding “Second Quarter Report 2014”

 

 

 


Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

TELEFONAKTIEBOLAGET LM ERICSSON (publ)
By:  

/S/ NINA MACPHERSON

  Nina Macpherson
  Senior Vice President and
  General Counsel

 

By:  

/S/ HELENA NORRMAN

  Helena Norrman
  Senior Vice President
  Corporate Communications

Date: July 18, 2014


Table of Contents

LOGO

Second quarter report 2014

Stockholm, July 18, 2014

 

SECOND QUARTER HIGHLIGHTS    Read more (page)  

•    Sales in the quarter were SEK 54.8 (55.3) b. Sales for comparable units, adjusted for currency, decreased -1% YoY and increased 13% QoQ

     3   

•    Sales recovered compared to the previous quarter driven by growth in the Middle East, China and India, as well as continued capacity business in North America

     2   

•    Gross margin increased YoY to 36.4% (32.4%), driven by strong development in capacity business, increased IPR revenues and lower restructuring charges

     3   

•    With current visibility, key contracts awarded will gradually impact sales and business mix, in the second half of the year

     2   

•    Operating margin improved YoY to 7.3% (4.5%), mainly driven by stronger performance in segment Networks

     3   

•    Operating income amounted to SEK 4.0 (2.5) b.

     5-8   

•    Cash flow from operating activities was SEK 2.1 (4.3) b.

     11   

 

SEK b.

   Q2
2014
    Q2
2013
    YoY
change
    Q1
2014
    QoQ
change
    Six months
2014
    Six months
2013
 

Net sales

     54.8        55.3        -1     47.5        15     102.4        107.4   

Sales growth adj. for comparable units and currency

     —          —          -1     —          13     -4     7

Gross margin

     36.4     32.4     —          36.5     —          36.4     32.2

Operating income

     4.0        2.5        62     2.6        52     6.6        4.6   

Operating margin

     7.3     4.5     —          5.5     —          6.5     4.3

Net income

     2.7        1.5        76     1.7        57     4.4        2.7   

EPS diluted, SEK

     0.79        0.45        76     0.65        22     1.44        0.82   

EPS (Non-IFRS), SEK 1)

     1.07        0.88        22     0.90        19     1.98        1.88   

Cash flow from operating activities

     2.1        4.3        -52     9.4        -78     11.5        1.3   

Net cash, end of period

     32.5        27.4        18     43.6        -26     32.5        27.4   

 

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

 

Ericsson Second Quarter Report 2014

  1


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CEO Comments

 

Sales for comparable units, adjusted for currency, recovered compared to the previous quarter and were down by -1% year-over-year. Operating margin improved year-over-year, mainly driven by stronger performance in segment Networks.

Sales in the quarter year-over-year were driven by growth in the Middle East, China and India, as well as continued capacity business in North America. This was offset by, as previously communicated, lower revenues from two large mobile broadband coverage projects in North America that peaked in the first half of 2013, and reduced activity in Japan.

The operating margin improved year-over-year, especially in segment Networks. This was due to a higher gross margin primarily from improved business mix with an increased share of mobile broadband capacity projects in advanced LTE markets, as well as higher recurring IPR revenues and efficiency improvements.

After a slow start of the year, we are executing on previously awarded 4G/LTE contracts in Mainland China and Taiwan. Furthermore, the investment climate in India is improving following the concluded spectrum auctions and government elections held in May.

Political unrest prevails in parts of the Middle East and Africa and is still impacting sales. There is also a continued political uncertainty in Russia and the Ukraine, but this had no negative impact on sales in the quarter.

As previously stated and with current visibility, key contracts awarded will gradually impact sales and business mix in the second half of the year.

In line with our strategic agenda, we have continued investing into new and targeted areas. The addition of the modems and Mediaroom businesses, as well as increased investments in IP, have resulted in increased R&D spending. At the same time, we continue to execute on profit improvement activities.

Our modems business will start generating sales by the end of this year, as our modem M7450 will be featured in smartphones and data devices. During the first half of 2014, we have invested SEK 1.2 b. primarily in R&D and we have a strong technology platform. However, the performance of the business is linked to our customers’ success. As previously communicated, success will be measured in an 18-24 months timeframe after integration of the modems business, which was completed in August 2013.

Support Solutions showed negative result in the quarter due to lower sales related to legacy portfolio. However, the transition from traditional telecom software license business models to recurrent license revenue deals continues.

Operating cash flow was positive in the quarter driven mainly by improved income and maintained working capital days. The execution of the company-wide order-to-cash initiative continues and shows good progress.

In a transforming ICT market, we continue to evolve through investments in both our core business as well as in new and targeted areas. 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 Second Quarter Report 2014

  2


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Financial highlights

 

SEK b.

   Q2
2014
    Q2
2013
    YoY
change
    Q1
2014
    QoQ
change
    6 months
2014
    6 months
2013
 

Net sales

     54.8        55.3        -1     47.5        15     102.4        107.4   

Of which Networks

     29.0        28.1        3     24.4        19     53.3        56.3   

Of which Global Services

     23.1        24.9        -7     20.4        13     43.4        46.3   

Of which Support Solutions

     2.8        2.3        21     2.8        2     5.6        4.8   

Of which Modems

     0.0        —          —          0.0        —          0.0        —     

Gross income

     19.9        17.9        11     17.3        15     37.3        34.6   

Gross margin (%)

     36.4     32.4     —          36.5     —          36.4     32.2

Research and development expenses

     -9.1        -7.7        17     -8.3        10     -17.4        -15.6   

Selling and administrative expenses

     -6.5        -6.6        -1     -6.5        1     -13.0        -13.3   

Other operating income and expenses

     -0.2        -1.0        -80     0.0        —          -0.2        -1.0   

Operating income

     4.0        2.5        62     2.6        52     6.6        4.6   

Operating margin

     7.3     4.5     —          5.5     —          6.5     4.3

for Networks

     12     5     —          10     —          11     5

for Global Services

     6     6     —          5     —          6     5

for Support Solutions

     -13     -12     —          0     —          -7     -7

for Modems

     —          —          —          —          —          —          —     

Financial net

     -0.2        -0.3        -35     -0.2        -7     -0.4        -0.7   

Taxes

     -1.1        -0.6        76     -0.7        57     -1.9        -1.2   

Net income

     2.7        1.5        76     1.7        57     4.4        2.7   

Restructuring charges

     -0.2        -0.9        -74     -0.1        87     -0.4        -2.8   

 

Net sales

Sales in the quarter, compared to last year, were driven by growth in the Middle East, China and India, as well as continued capacity business in North America. This was offset by, as previously communicated, lower revenues from two large mobile broadband coverage projects in North America that peaked in the first half of 2013, and the impact from reduced activity in Japan.

Segment Networks sales grew YoY while sales in Network Rollout, within segment Global Services, continued to decline. IPR revenues grew YoY following the Samsung license agreement reached in January 2014.

Sales increased sequentially after a weak Q1 2014, driven by strong sales in North America, China and Brazil.

Gross margin

Gross margin increased YoY. Continued strong development in capacity business contributed to higher hardware margins. Increased IPR revenues, lower restructuring charges and efficiency improvements combined with lower Network Rollout sales, also contributed positively to the gross margin.

Restructuring charges

Restructuring charges increased somewhat QoQ but remained at a low level and decreased YoY. 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, mainly due to increased R&D expenses primarily related to the added modems and Mediaroom businesses.

SG&A expenses decreased slightly YoY.

 

 

Ericsson Second Quarter Report 2014

  3


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LOGO    LOGO    LOGO

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 effect from hedges was SEK -0.5 b. compared to SEK -0.1 b. in Q1 2014 and -0.2 b. in Q2 2013. In Q2 2013, there were one-time items of SEK -0.9 b. related to divestments and for exiting the power and telecom cable operations.

Operating income

Operating income increased YoY driven by favorable business mix, IPR revenues and lower restructuring charges, partly offset by increased operating expenses.

Q2 2013 was also impacted by the one-time items of SEK -0.9 b. as mentioned above.

Financial net

Financial net improved slightly YoY mainly due to interest rate revaluation effects.

Net income and EPS

Net income and EPS diluted increased following the improved operating income.

 

 

Ericsson Second Quarter Report 2014

  4


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Segment results

NETWORKS

 

LOGO    LOGO    LOGO
Segment sales, SEK b.   

Quarterly sales, SEK b.

and sales growth year over year

  

Operating income, SEK b.

and operating margin, percent

 

SEK b.

   Q2
2014
    Q2
2013
    YoY
change
    Q1
2014
    QoQ
change
    6 months
2014
    6 months
2013
 

Net sales

     29.0        28.1        3     24.4        19     53.3        56.3   

Sales growth adj. for comparable units and currency

     —          —          5     —          16     -3     7

Operating income

     3.6        1.3        168     2.5        44     6.1        2.9   

Operating margin

     12     5     —          10     —          11     5

EBITA margin

     14     7     —          13     —          14     8

Restructuring charges

     -0.1        -0.3        -59     -0.1        38     -0.2        -1.6   

 

Net sales

Sales, adjusted for comparable units and currency, recovered in the quarter driven by growth in the Middle East, China, US and India. The majority of sales growth was in Radio Access. In addition, IP Edge and IMS solutions showed good growth. Capacity business developed favorably also this quarter, particularly in advanced LTE markets, driven by operators’ focus on network performance as a key differentiator. The decline in mobile broadband coverage projects in North America and Japan continued as expected.

Sales increased QoQ following a weak first quarter 2014. CDMA sales have stabilized with sales at SEK 0.4 b. in the quarter with a YoY sales decline.

Operating income and margin

For the fourth consecutive quarter, operating margin was 10% or above and operating income has more than doubled over the last six months. The YoY increase was supported by improved business mix, higher IPR revenues and continued focus on commercial excellence and operational effectiveness. The operating margin increased QoQ as a result of higher sales volumes.

Business update

Mobile broadband demand, VoLTE and growing interest in LTE broadcast drives performance initiatives including carrier aggregation and network densification. Small cells and the use of new frequency bands will also be key to address demand.

The momentum for the multi-application router, SSR 8000, continued with 120 contracts signed since the launch in December 2011. During the quarter, 11 new contracts were signed of which 3 were for fixed networks.

 

 

Ericsson Second Quarter Report 2014

  5


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GLOBAL SERVICES

 

LOGO    LOGO    LOGO
Segment sales, SEK b.   

Quarterly sales, SEK b.

and sales growth year over year

  

Operating income, SEK b.

and operating margin, percent

 

SEK b.

   Q2
2014
    Q2
2013
    YoY
change
    Q1
2014
    QoQ
change
    6 months
2014
    6 months
2013
 

Net sales

     23.1        24.9        -7     20.4        13     43.4        46.3   

Of which Professional Services

     16.6        16.8        -1     15.1        10     31.7        31.4   

Of which Managed Services

     6.5        6.8        -4     5.8        13     12.2        12.6   

Of which Network Rollout

     6.5        8.1        -19     5.3        23     11.8        14.9   

Sales growth adj. for comparable units and currency

     —          —          -8     —          11     -5     9

Operating income

     1.5        1.6        -5     1.0        44     2.5        2.3   

Of which Professional Services

     2.1        2.3        -8     1.9        11     4.0        4.1   

Of which Network Rollout

     -0.6        -0.7        -16     -0.9        -29     -1.5        -1.8   

Operating margin

     6     6     —          5     —          6     5

for Professional Services

     13     14     —          13     —          13     13

for Network Rollout

     -9     -9     —          -16     —          -12     -12

EBITA margin

     8     7     —          6     —          7     6

Restructuring charges

     -0.1        -0.6        -86     0.0        153     -0.1        -1.0   

 

Net sales

Sales, adjusted for comparable units and currency, declined due to reduced mobile broadband network rollout activities in North America and Japan. Professional Services sales remained stable.

Managed Services continues to show high business activity and sales grew QoQ. During the quarter, several new contracts were announced, including a 5-year managed services deal in Romania involving more than 700 employees moving to Ericsson.

Global Services sales increased QoQ driven by increased activities in North America, impacting both Professional Services and Network Rollout.

 

Operating income and margin

Operating margin remained stable YoY. Network Rollout profitability improved sequentially, due to a reduced negative impact from the European modernization projects and lower temporary project costs in North America.

Professional Services margin declined slightly YoY due to lower sales.

Business update

The acquisition of Red Bee Media was finalized and consolidated as of May. The acquisition has strengthened Ericsson’s position in the transforming television and media industry and several new contracts have been signed in the quarter.

 

 

Other information

   Q2
2014
     Q1
2014
     Full year
2013
 

Number of signed Managed Services contracts

     21         16         84   

Number of signed significant consulting & systems integration contracts 1)

     12         9         31   

Number of Ericsson services professionals, end of period

     64,000         61,000         64,000   

 

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

 

Ericsson Second Quarter Report 2014

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SUPPORT SOLUTIONS

 

LOGO    LOGO    LOGO
Segment sales, SEK b.   

Quarterly sales, SEK b.

and sales growth year over year

  

Operating income, SEK b.

and operating margin, percent

 

SEK b.

   Q2
2014
    Q2
2013
    YoY
change
    Q1
2014
    QoQ
change
    6 months
2014
    6 months
2013
 

Net sales

     2.8        2.3        21     2.8        2     5.6        4.8   

Sales growth adj. for comparable units and currency

     —          —          5     —          1     4     -12

Operating income

     -0.4        -0.3        34     0.0        —          -0.4        -0.3   

Operating margin

     -13     -12     —          0     —          -7     -7

EBITA margin

     -7     -6     —          7     —          0     0

Restructuring charges

     0.0        0.0        0     0.0        —          0.0        -0.1   

 

Net sales

Reported sales, and sales adjusted for comparable units and currency, increased YoY. Growth from the acquired Mediaroom business and in OSS was partly offset by lower BSS sales in Latin America, Sub-Sahara Africa and India.

Sales increased slightly QoQ with strong growth in North America offset by weak sales in emerging markets.

Operating income and margin

Operating income and margin declined YoY and QoQ due to lower sales from legacy portfolio. In addition, investments in next-generation TV solutions are accelerating and this impacted operating income negatively.

Business update

An important multi-year BSS contract with T-Mobile in the US was announced in the quarter. The contract includes software, professional services and third party hardware.

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

 

 

Ericsson Second Quarter Report 2014

  7


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MODEMS

 

SEK b.

   Q2
2014
     Q1
2014
     QoQ
change
 

Net sales

     0.0         0.0         —     

Sales growth for comparable units and currency

     —           —           —     

Operating income

     -0.5         -0.7         -39

Operating margin

     —           —           —     

EBITA margin

     —           —           —     

Restructuring charges

     0.0         0.0         —     

 

Background

Since August 2013, Ericsson has a LTE thin-modems business with industry leading technology and intellectual property. The operation was integrated into Ericsson after the split-up of the joint venture ST-Ericsson last year. Modems are part of Ericsson’s vision of 50 billion connected devices and the ambition is to be a leading supplier in the thin-modems market. The first product, Ericsson M7450, was released for commercial use in Q4 2013.

Operating income

Operating income was SEK -0.5 b. Total operating expenses for the modems business in 2014 are still estimated at approximately SEK -2.6 b.

Net sales are expected in the second half of 2014.

Business update

Global operator certification for M7450 is progressing as planned, and work is ongoing with tier one smartphone manufacturers to integrate it in their devices. Smartphones and data devices featuring M7450 will be on the market by the end of this year.

 

 

Ericsson Second Quarter Report 2014

  8


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Regional Sales

 

     Second quarter 2014      Change  

SEK b.

   Networks      Global
Services
     Support
Solutions
     Total      YoY     QoQ  

North America

     7.7         6.4         1.1         15.2         -1     24

Latin America

     2.6         2.6         0.2         5.4         -3     15

Northern Europe and Central Asia

     1.8         0.9         0.0         2.7         0     12

Western and Central Europe

     1.8         2.6         0.2         4.6         1     5

Mediterranean

     2.5         2.9         0.2         5.5         -11     15

Middle East

     2.5         1.8         0.2         4.5         13     17

Sub-Saharan Africa

     0.9         1.0         0.1         1.9         -29     4

India

     0.9         0.7         0.0         1.6         29     -3

North East Asia

     4.3         2.0         0.1         6.4         -4     31

South East Asia and Oceania

     1.8         1.7         0.1         3.7         -3     6

Other 1)

     2.2         0.5         0.6         3.4         23     3

Total

     29.0         23.1         2.8         54.8         -1     15

 

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

 

North America

Sales in the quarter were driven by network quality and capacity expansion business, primarily as a result of increasing video traffic. This was offset by lower revenues from two large mobile broadband coverage projects that peaked in the first half of 2013. Recent network ICT transformation contracts, including the modernization of OSS and BSS, drove the Professional Services business.

Latin America

Sales decreased slightly YoY. Operators continue to invest to increase 3G network quality as well as deploy LTE.

Northern Europe and Central Asia

Sales were stable driven by mobile broadband infrastructure investments in Russia and operator focus on network quality. The non-operator business in the Nordics continued to show stable progress.

Western and Central Europe

Sales increased YoY predominantly driven by Managed Services. Investments in network quality and capacity continue to be the main driver. However, this does not fully offset the decline in network modernization projects. Support Solutions increased YoY through the inclusion of Mediaroom.

Mediterranean

Sales in the region declined YoY due to major modernization projects that peaked in the beginning of 2013. Demand for Professional Services continued, driven by Managed Services.

Middle East

Sales continued to show solid growth YoY mainly driven by 3G deployments. 4G is also being deployed in parts of the region. Overall demand for network infrastructure is driven by the rapid increase in data traffic, as well as coverage requirements fueled by new mobile licenses.

Sub-Saharan Africa

During the quarter, sales declined due to overall cautious operator investment levels. This was partly offset by growth in Managed Services as operators seek operational efficiencies.

India

Sales grew YoY as operators increased mobile broadband infrastructure spending in response to rising data volumes. Increased sales related to OSS and BSS also contributed to growth.

North East Asia

Sales decreased YoY as a result of expected lower network investment levels in Japan and the continued structural decline of GSM in China. The decline was partly offset by execution on previously awarded 4G/LTE contracts in Mainland China and Taiwan.

South East Asia and Oceania

Networks sales declined further as major 3G projects in Indonesia peaked in 2013. Global Services sales increased QoQ and YoY driven by a significant rollout project in Australia. There is an increased focus on network quality to improve customer experience in several markets.

Other

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

 

 

Ericsson Second Quarter Report 2014

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Cash flow

 

SEK b.

   Q2
2014
    Q2
2013
    Q1
2014
 

Net income reconciled to cash

     5.9        3.5        3.2   

Changes in operating net assets

     -3.8        0.8        6.2   

Cash flow from operating activities

     2.1        4.3        9.4   

Cash flow from investing activities

     3.7        7.5        -8.8   

Cash flow from financing activities

     -12.2        -13.1        -5.1   

Net change in cash and cash equivalents

     -5.0        1.0        -4.0   

Cash conversion (%)

     35     123     290

 

The positive cash flow from operating activities was driven by strong income with maintained working capital days. Working capital increased mainly as a result of increased sales and preparation for new projects.

Investing activities were impacted by acquisitions of SEK -1.5 b., primarily related to Red Bee Media, and normal capex investments of SEK -1.3 b.

Short-term investments with maturity of more than 3 months have decreased by SEK 7.0 b., primarily as a result of transferred liquidity to Cash and cash equivalents in order to cater for dividend payout.

Cash flow from financing activities in the quarter was mainly related to dividend payouts of SEK -9.8 b. and repayment of debt of SEK -2.0 b.

Payments for ongoing restructuring charges amounted to approximately SEK 0.2 b. in the quarter.

 

 

Working capital KPIs, number of days

   Jan-Jun
2014
     Jan-Mar
2014
     Jan-Dec
2013
     Jan-Sep
2013
     Jan-Jun
2013
 

Sales outstanding

     113         112         97         109         103   

Inventory

     70         72         62         72         73   

Payable

     61         62         53         53         55   

 

Days of sales outstanding increased, mainly due to increased sales in the quarter.

Inventory days decreased due to higher volumes and improved process lead times. However, inventory levels increased as an effect of preparation for coming mobile broadband deployments.

Efforts to reduce working capital through a better order-to-cash process continue.

 

 

Ericsson Second Quarter Report 2014

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Financial position

 

SEK b.

   Jun 30
2014
    Mar 31
2014
    Dec 31
2013
 

+ Short-term investments

     35.3        41.8        35.0   

+ Cash and cash equivalents

     33.1        38.1        42.1   

Gross cash

     68.4        79.9        77.1   

- Interest bearing liabilities and post-employment benefits

     35.9        36.3        39.3   

Net cash

     32.5        43.6        37.8   

Equity

     138.0        142.6        141.6   

Total assets

     265.5        267.2        269.2   

Capital turnover (times)

     1.2        1.1        1.3   

Return on capital employed (%)

     8.2     6.7     10.7

Equity ratio (%)

     52.0     53.4     52.6

Return on equity (%)

     6.8     6.0     8.7

 

Net cash decreased in the quarter as a result of dividend payout. Borrowings decreased after a loan repayment of EUR 220 million (SEK 2.0 b.) that matured in the quarter.

Post-employment benefits increased by SEK 1.3 b.,mainly due to lower discount rates.

The average maturity of long-term borrowings as of June 30, 2014, was 6.2 years, compared to 5.4 years 12 months ago.

Ericsson has one unutilized Revolving Credit Facility of USD 2.0 b. During the quarter the facility was extended by one year and will mature 2020.

 

LOGO
Debt maturity profile, Parent Company, SEK b.
 

 

Ericsson Second Quarter Report 2014

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Parent company

 

Income after financial items was SEK 2.9 (2.7) b.

Major changes in the Parent Company’s financial position for the year; decreased cash, cash equivalents and short-term investments of SEK 6.1 b., increased current and non-current receivables to subsidiaries of SEK 5.2 b. and increased current and non-current liabilities to subsidiaries of SEK 12.6 b. At the end of the quarter, cash, cash equivalents and short-term investments amounted to SEK 52.4 (58.5) b.

In June the Parent Company repaid bonds of EUR 220 million at maturity date.

A dividend payment of SEK 9.7 b. was made in the quarter as decided by the Annual General Meeting.

In accordance with the conditions of the long-term variable compensation program (LTV) for Ericsson employees, 2,172,945 shares from treasury stock were sold or distributed to employees during the second quarter. The holding of treasury stock at June 30, 2014, was 69,017,337 Class B shares.

 

 

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Other information

 

Ericsson’s Nomination Committee appointed

On May 21, 2014, Ericsson announced that the Nomination Committee for the Annual General Meeting (AGM) 2015 has been appointed in accordance with the Instruction for the Nomination Committee resolved by the AGM 2012.

Ericsson completes acquisition of Red Bee Media

On May 12, 2014, Ericsson announced completion of its acquisition of Red Bee Media, a leading media services company headquartered in the UK, from Creative Broadcast Services Holdings - an entity controlled by Macquarie Advanced Investment Partners, L.P. Ericsson announced its intention to acquire Red Bee Media on July 1, 2013, and the UK’s Competition Commission formally cleared the acquisition on March 27, 2014.

Ericsson appoints Rima Qureshi as Chief Strategy Officer

On April 30, 2014, Ericsson announced the appointment of Rima Qureshi as Chief Strategy Officer for the Ericsson Group. She will also drive the company’s mergers and acquisitions (M&A) strategy and activities. In addition, she will serve as Chairman of Business Unit Modems.

New structure to support segment Networks growth

On April 24, 2014, Ericsson announced the establishment of two new business units within segment Networks in a move to accelerate transformation and support growth. The company has created two new units, Business Unit Radio and Business Unit Cloud & IP, replacing the old Business Unit Networks. The change in organization will enable more focus on the needs of each business while maintaining an end-to-end view on segment Networks. Johan Wibergh, Executive Vice President, will continue to lead segment Networks and remains a member of Ericsson’s Executive Leadership Team.

Composition of the Board of Directors

In conjunction with theAGM on April 11, 2014, Ericsson announced that, in accordance with the proposal of the Nomination Committee, Leif Johansson was re-elected Chairman of the Board of Directors. Roxanne S. Austin, Sir Peter L. Bonfield, Nora Denzel, Börje Ekholm, Alexander Izosimov, Ulf J. Johansson, Sverker Martin-Löf, Kristin Skogen Lund, Hans Vestberg, Jacob Wallenberg and Pär Östberg were re-elected to the Board. Board members appointed by the unions are Pehr Claesson, Kristina Davidsson and Karin Åberg. Deputy board members appointed by the unions are Rickard Fredriksson, Karin Lennartsson and Roger Svensson.

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 Second Quarter Report 2014

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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, July 18, 2014

Telefonaktiebolaget LM Ericsson

Hans Vestberg, President and CEO

Org. Nr. 556016-0680

This report has not been reviewed by

Telefonaktiebolaget LM Ericsson’s auditors.

Date for next report: October 24, 2014

 

 

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Board Assurance

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

Stockholm, July 18, 2014

Telefonaktiebolaget LM Ericsson (publ)

Org. Nr. 556016-0680

 

 

Sverker Martin-Löf

Deputy chairman

  

Leif Johansson

Chairman

  

Jacob Wallenberg

Deputy chairman

  
 

Roxanne S. Austin

Member of the board

  

Sir Peter L. Bonfield

Member of the board

  

Nora Denzel

Member of the board

  
 

Börje Ekholm

Member of the board

  

Ulf J. Johansson

Member of the board

  

Kristin Skogen Lund

Member of the board

  
 

Alexander Izosimov

Member of the board

     

Pär Östberg

Member of the board

  
 

Pehr Claesson

Member of the board

  

Kristina Davidsson

Member of the board

  

Karin Åberg

Member of the board

  
    

Hans Vestberg

Member of the board and

President and CEO

     

 

Ericsson Second Quarter Report 2014

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Editor’s note

 

Ericsson invites media, investors and analysts to a press briefing at the Ericsson Studio, Grönlandsgången 4, Stockholm, at 09.00 (CET), July 18, 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

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 Second Quarter Report 2014

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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 Second Quarter Report 2014

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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 Second Quarter Report 2014

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CONSOLIDATED INCOME STATEMENT

 

     Apr - Jun           Jan - Jun  

SEK million

   2013     2014     Change     2013     2014     Change  

Net sales

     55,331        54,849        -1     107,363        102,354        -5

Cost of sales

     -37,412        -34,910        -7     -72,806        -65,094        -11
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross income

     17,919        19,939        11     34,557        37,260        8

Gross margin (%)

     32.4     36.4       32.2     36.4  

Research and development expenses

     -7,747        -9,084        17     -15,624        -17,359        11

Selling and administrative expenses

     -6,629        -6,541        -1     -13,272        -12,993        -2
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses

     -14,376        -15,625        9     -28,896        -30,352        5

Other operating income and expenses

     -1,040        -206          -1,020        -185     

Shares in earnings of JV and associated companies

     -38        -109          -70        -94        34
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     2,465        3,999        62     4,571        6,629        45

Financial income

     304        268          484        669     

Financial expenses

     -606        -465          -1,171        -1,077     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income after financial items

     2,163        3,802        76     3,884        6,221        60

Taxes

     -647        -1,140          -1,164        -1,867     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     1,516        2,662        76     2,720        4,354        60
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to:

            

- Stockholders of the Parent Company

     1,469        2,579          2,674        4,699     

- Non-controlling interests

     47        83          46        -345     

Other information

            

Average number of shares, basic (million)

     3,224        3,235          3,223        3,234     

Earnings per share, basic (SEK) 1)

     0.46        0.80          0.83        1.45     

Earnings per share, diluted (SEK) 1)

     0.45        0.79          0.82        1.44     

STATEMENT OF COMPREHENSIVE INCOME

            
     Apr - Jun           Jan - Jun        

SEK million

   2013     2014           2013     2014        

Net income

     1,516        2,662          2,720        4,354     

Other comprehensive income

            

Items that will not be reclassified to profit or loss

            

Remeasurements of defined benefits pension plans incl. asset ceiling

     954        -574          1,773        -2,196     

Tax on items that will not be reclassified to profit or loss

     -318        114          -706        443     

Items that may be reclassified to profit or loss

            

Cash flow hedges

            

Gains/losses arising during the period

     -36        —            138        —       

Reclassification adjustments for gains/losses included in profit or loss

     -297        —            -763        —       

Adjustments for amounts transferred to initial carrying amount of hedged items

            

Revaulation of other investments in shares and participations

            

Fair value remeasurement

     69        —            69        —       

Changes in cumulative translation adjustments

     1,404        2,619          686        3,020     

Share of other comprehensive income on JV and associated companies

     120        117          104        128     

Tax on items that may be reclassified to profit or loss

     65        —            127        —       

Total other comprehensive income, net of tax

     1,961        2,276          1,428        1,395     
  

 

 

   

 

 

     

 

 

   

 

 

   

Total comprehensive income

     3,477        4,938          4,148        5,749     
  

 

 

   

 

 

     

 

 

   

 

 

   

Total comprehensive income attributable to:

            

Stockholders of the Parent Company

     3,394        4,792          4,087        6,032     

Non-controlling interest

     83        146          61        -283     

 

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

 

 

Ericsson Second Quarter Report 2014

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CONSOLIDATED BALANCE SHEET

 

     Dec 31      Mar 31      Jun 30  

SEK million

   2013      2014      2014  

ASSETS

        

Non-current assets

        

Intangible assets

        

Capitalized development expenses

     3,348         3,212         3,082   

Goodwill

     31,544         32,114         34,243   

Intellectual property rights, brands and other intangible assets

     12,815         11,889         11,765   

Property, plant and equipment

     11,433         11,209         11,924   

Financial assets

        

Equity in JV and associated companies

     2,568         2,595         2,324   

Other investments in shares and participations

     505         509         510   

Customer finance, non-current

     1,294         1,146         1,240   

Other financial assets, non-current

     5,684         5,779         6,303   

Deferred tax assets

     9,103         10,030         10,880   
  

 

 

    

 

 

    

 

 

 
     78,294         78,483         82,271   

Current assets

        

Inventories

     22,759         24,962         26,915   

Trade receivables

     71,013         63,643         66,763   

Customer finance, current

     2,094         1,698         1,994   

Other current receivables

     17,941         18,528         19,208   

Short-term investments

     34,994         41,779         35,310   

Cash and cash equivalents

     42,095         38,096         33,088   
  

 

 

    

 

 

    

 

 

 
     190,896         188,706         183,278   

Total assets

     269,190         267,189         265,549   
  

 

 

    

 

 

    

 

 

 

EQUITY AND LIABILITIES

        

Equity

        

Stockholders’ equity

     140,204         141,643         136,948   

Non-controlling interest in equity of subsidiaries

     1,419         990         1,010   
  

 

 

    

 

 

    

 

 

 
     141,623         142,633         137,958   

Non-current liabilities

        

Post-employment benefits

     9,825         11,633         12,884   

Provisions, non-current

     222         198         202   

Deferred tax liabilities

     2,650         2,466         2,624   

Borrowings, non-current

     22,067         18,900         19,504   

Other non-current liabilities

     1,459         1,532         1,699   
  

 

 

    

 

 

    

 

 

 
     36,223         34,729         36,913   

Current liabilities

        

Provisions, current

     5,140         4,730         4,377   

Borrowings, current

     7,388         5,737         3,525   

Trade payables

     20,502         20,482         22,795   

Other current liabilities

     58,314         58,878         59,981   
  

 

 

    

 

 

    

 

 

 
     91,344         89,827         90,678   

Total equity and liabilities

     269,190         267,189         265,549   
  

 

 

    

 

 

    

 

 

 

Of which interest-bearing liabilities and post-employment benefits

     39,280         36,270         35,913   

Of which net cash

     37,809         43,605         32,485   

Assets pledged as collateral

     2,556         2,528         2,522   

Contingent liabilities

     657         658         664   

 

Ericsson Second Quarter Report 2014

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CONSOLIDATED STATEMENT OF CASH FLOWS

 

     Apr-Jun      Jan - Jun      Jan - Dec  

SEK million

   2013      2014      2013      2014      2013  

Operating activities

              

Net income

     1,516         2,662         2,720         4,354         12,174   

Adjustments to reconcile net income to cash

              

Taxes

     -689         26         -2,538         -1,322         -1,323   

Earnings/dividends in JV and associated companies

     37         356         70         340         258   

Depreciation, amortization and impairment losses

     2,436         2,414         4,847         4,774         10,137   

Other

     183         404         -18         953         756   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     3,483         5,862         5,081         9,099         22,002   

Changes in operating net assets

              

Inventories

     600         -1,188         -826         -3,287         4,868   

Customer finance, current and non-current

     912         -341         1,172         217         1,809   

Trade receivables

     3,084         -892         1,150         7,065         -8,504   

Trade payables

     518         1,644         -2,430         1,534         -2,158   

Provisions and post-employment benefits

     -1,752         -225         -597         -689         -3,298   

Other operating assets and liabilities, net

     -2,554         -2,806         -2,229         -2,483         2,670   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     808         -3,808         -3,760         2,357         -4,613   

Cash flow from operating activities

     4,291         2,054         1,321         11,456         17,389   

Investing activities

              

Investments in property, plant and equipment

     -1,278         -1,320         -2,474         -2,354         -4,503   

Sales of property, plant and equipment

     11         53         102         327         378   

Acquisitions/divestments of subsidiaries and other operations, net

     -39         -1,512         -175         -2,361         -2,682   

Product development

     -214         -185         -496         -382         -915   

Other investing activities

     -203         -388         95         -557         -1,330   

Short-term investments

     9,209         7,012         6,349         222         -2,057   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Cash flow from investing activities

     7,486         3,660         3,401         -5,105         -11,109   

Cash flow before financing activities

     11,777         5,714         4,722         6,351         6,280   

Financing activities

              

Dividends paid

     -8,863         -9,828         -8,924         -9,828         -9,153   

Other financing activities

     -4,236         -2,393         -4,144         -7,462         -355   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Cash flow from financing activities

     -13,099         -12,221         -13,068         -17,290         -9,508   

Effect of exchange rate changes on cash

     2,357         1,499         2,143         1,932         641   

Net change in cash and cash equivalents

     1,035         -5,008         -6,203         -9,007         -2,587   

Cash and cash equivalents, beginning of period

     37,444         38,096         44,682         42,095         44,682   

Cash and cash equivalents, end of period

     38,479         33,088         38,479         33,088         42,095   

 

Ericsson Second Quarter Report 2014

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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

 

     Jan - Jun      Jan - Jun      Jan - Dec  

SEK million

   2013      2014      2013  

Opening balance

     138,483         141,623         138,483   

Total comprehensive income

     4,148         5,749         11,881   

Sale/repurchase of own shares

     40         54         90   

Stock purchase plan

     193         360         388   

Dividends paid

     -8,924         -9,828         -9,153   

Transactions with non-controlling interests

     -73         —           -66   
  

 

 

    

 

 

    

 

 

 

Closing balance

     133,867         137,958         141,623   
  

 

 

    

 

 

    

 

 

 

 

Ericsson Second Quarter Report 2014

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Table of Contents

CONSOLIDATED INCOME STATEMENT – ISOLATED QUARTERS

 

     2013     2014  

Isolated quarters, SEK million

   Q1     Q2     Q3     Q4     Q1     Q2  

Net sales

     52,032        55,331        52,981        67,032        47,505        54,849   

Cost of sales

     -35,394        -37,412        -36,028        -42,171        -30,184        -34,910   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross income

     16,638        17,919        16,953        24,861        17,321        19,939   

Gross margin (%)

     32.0     32.4     32.0     37.1     36.5     36.4

Research and development expenses

     -7,877        -7,747        -7,710        -8,902        -8,275        -9,084   

Selling and administrative expenses

     -6,643        -6,629        -5,778        -7,223        -6,452        -6,541   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses

     -14,520        -14,376        -13,488        -16,125        -14,727        -15,625   

Other operating income and expenses

     20        -1,040        805        328        21        -206   

Shares in earnings of JV and associated companies

     -32        -38        -51        -9        15        -109   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

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

Financial income

     180        304        678        184        401        268   

Financial expenses

     -565        -606        -595        -327        -612        -465   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income after financial items

     1,721        2,163        4,302        8,912        2,419        3,802   

Taxes

     -517        -647        -1,292        -2,468        -727        -1,140   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     1,204        1,516        3,010        6,444        1,692        2,662   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to:

            

- Stockholders of the Parent Company

     1,205        1,469        2,921        6,410        2,120        2,579   

- Non-controlling interests

     -1        47        89        34        -428        83   

Other information

            

Average number of shares, basic (million)

     3,222        3,224        3,227        3,230        3,233        3,235   

Earnings per share, basic (SEK) 1)

     0.37        0.46        0.91        1.98        0.66        0.80   

Earnings per share, diluted (SEK) 1)

     0.37        0.45        0.90        1.97        0.65        0.79   

 

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

 

Ericsson Second Quarter Report 2014

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Table of Contents

CONSOLIDATED STATEMENT OF CASH FLOWS - ISOLATED QUARTERS

 

     2013      2014  

Isolated quarters, SEK million

   Q1      Q2      Q3      Q4      Q1      Q2  

Operating activities

                 

Net income

     1,204         1,516         3,010         6,444         1,692         2,662   

Adjustments to reconcile net income to cash

                 

Taxes

     -1,849         -689         -881         2,096         -1,348         26   

Earnings/dividends in JV and associated companies

     33         37         50         138         -16         356   

Depreciation, amortization and impairment losses

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

Other

     -201         183         -327         1,101         549         404   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     1,598         3,483         4,398         12,523         3,237         5,862   

Changes in operating net assets

                 

Inventories

     -1,426         600         357         5,337         -2,099         -1,188   

Customer finance, current and non-current

     260         912         800         -163         558         -341   

Trade receivables

     -1,934         3,084         -4,744         -4,910         7,957         -892   

Trade payables

     -2,948         518         -588         860         -110         1,644   

Provisions and post-employment benefits

     1,155         -1,752         -970         -1,731         -464         -225   

Other operating assets and liabilities, net

     325         -2,554         2,206         2,693         323         -2,806   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     -4,568         808         -2,939         2,086         6,165         -3,808   

Cash flow from operating activities

     -2,970         4,291         1,459         14,609         9,402         2,054   

Investing activities

                 

Investments in property, plant and equipment

     -1,196         -1,278         -778         -1,251         -1,034         -1,320   

Sales of property, plant and equipment

     91         11         97         179         274         53   

Acquisitions/divestments of subsidiaries and other operations, net

     -136         -39         -1,794         -713         -849         -1,512   

Product development

     -282         -214         -237         -182         -197         -185   

Other investing activities

     298         -203         -230         -1,195         -169         -388   

Short-term investments

     -2,860         9,209         -144         -8,262         -6,790         7,012   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Cash flow from investing activities

     -4,085         7,486         -3,086         -11,424         -8,765         3,660   

Cash flow before financing activities

     -7,055         11,777         -1,627         3,185         637         5,714   

Financing activities

                 

Dividends paid

     -61         -8,863         -21         -208         —           -9,828   

Other financing activities

     92         -4,236         43         3,746         -5,069         -2,393   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Cash flow from financing activities

     31         -13,099         22         3,538         -5,069         -12,221   

Effect of exchange rate changes on cash

     -214         2,357         -1,711         209         433         1,499   

Net change in cash and cash equivalents

     -7,238         1,035         -3,316         6,932         -3,999         -5,008   

Cash and cash equivalents, beginning of period

     44,682         37,444         38,479         35,163         42,095         38,096   

Cash and cash equivalents, end of period

     37,444         38,479         35,163         42,095         38,096         33,088   

 

Ericsson Second Quarter Report 2014

  24


Table of Contents

PARENT COMPANY INCOME STATEMENT

 

     Apr - Jun      Jan -Jun  

SEK million

   2013      2014      2013      2014  

Net sales

     —           —           —           —     

Cost of sales

     —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Gross income

     —           —           —           —     

Operating expenses

     -330         -209         -586         -551   

Other operating income and expenses

     711         658         1,351         1,323   
  

 

 

    

 

 

    

 

 

    

 

 

 

Operating income

     381         449         765         772   

Financial net

     1,177         2,023         1,969         2,140   
  

 

 

    

 

 

    

 

 

    

 

 

 

Income after financial items

     1,558         2,472         2,734         2,912   

Transfers to (-) / from untaxed reserves

     —           —           —           —     

Taxes

     -110         -187         -229         -261   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net income

     1,448         2,285         2,505         2,651   
  

 

 

    

 

 

    

 

 

    

 

 

 
STATEMENT OF COMPREHENSIVE INCOME            
     Apr - Jun      Jan -Jun  

SEK million

   2013      2014      2013      2014  

Net income

     1,448         2,285         2,505         2,651   

Cash flow hedges

     —           —           —           —     

Fair value remeasurement

     —           —           —           —     

Total other comprehensive income, net of tax

     —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total comprehensive income

     1,448         2,285         2,505         2,651   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

PARENT COMPANY BALANCE SHEET      
     Dec 31      Jun 30  

SEK million

   2013      2014  

ASSETS

     

Fixed assets

     

Intangible assets

     646         536   

Tangible assets

     571         627   

Financial assets

     94,741         95,156   
  

 

 

    

 

 

 
     95,958         96,319   

Current assets

     

Inventories

     7         16   

Receivables

     17,247         21,392   

Short-term investments

     34,520         34,905   

Cash and cash equivalents

     23,954         17,456   
  

 

 

    

 

 

 
     75,728         73,769   

Total assets

     171,686         170,088   
  

 

 

    

 

 

 

STOCKHOLDERS’ EQUITY, PROVISIONS AND LIABILITIES

     

Equity

     

Restricted equity

     48,018         48,018   

Non-restricted equity

     23,798         16,812   
  

 

 

    

 

 

 
     71,816         64,830   

Provisions

     2,097         1,668   

Non-current liabilities

     44,491         43,235   

Current liabilities

     53,282         60,355   

Total stockholders’ equity, provisions and liabilities

     171,686         170,088   
  

 

 

    

 

 

 

Assets pledged as collateral

     553         522   

Contingent liabilities

     15,999         18,007   
  

 

 

    

 

 

 

 

Ericsson Second Quarter Report 2014

  25


Table of Contents

Accounting policies

The Group

This interim report is prepared in accordance with IAS 34. The term “IFRS” used in this document refers to the application of IAS and IFRS as well as interpretations of these standards as issued by IASB’s Standards Interpretation Committee (SIC) and IFRS Interpretations Committee (IFRIC). The accounting policies adopted are consistent with those of the annual report for the year ended December 31, 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 June 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 Second Quarter Report 2014

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Table of Contents

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  

Networks

     28,133        28,142        26,655        34,769        24,383        28,964   

Global Services

     21,452        24,851        23,974        27,166        20,356        23,059   

Of which Professional Services

     14,626        16,773        16,229        18,767        15,078        16,554   

Of which Managed Services

     5,888        6,754        6,264        6,574        5,754        6,485   

Of which Network Rollout

     6,826        8,078        7,745        8,399        5,278        6,505   

Support Solutions

     2,447        2,338        2,352        5,097        2,765        2,824   

Modems

     —          —          —          —          1        2   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     52,032        55,331        52,981        67,032        47,505        54,849   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     2013     2014  

Sequential change, percent

   Q1     Q2     Q3     Q4     Q1     Q2  

Networks

     -20     0     -5     30     -30     19

Global Services

     -24     16     -4     13     -25     13

Of which Professional Services

     -23     15     -3     16     -20     10

Of which Managed Services

     -13     15     -7     5     -12     13

Of which Network Rollout

     -26     18     -4     8     -37     23

Support Solutions

     -33     -4     1     117     -46     2

Modems

     —          —          —          —          —          100
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     -22     6     -4     27     -29     15
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     2013     2014  

Year over year change, percent

   Q1     Q2     Q3     Q4     Q1     Q2  

Networks

     3     1     -1     -1     -13     3

Global Services

     4     3     -1     -3     -5     -7

Of which Professional Services

     -2     -1     -1     -1     3     -1

Of which Managed Services

     3     4     -1     -3     -2     -4

Of which Network Rollout

     19     13     -2     -8     -23     -19

Support Solutions

     -19     -33     -29     40     13     21

Modems

     —          —          —          —          —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     2     0     -3     0     -9     -1
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     2013     2014  

Year to date, SEK million

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

Networks

     28,133        56,275        82,930        117,699        24,383        53,347   

Global Services

     21,452        46,303        70,277        97,443        20,356        43,415   

Of which Professional Services

     14,626        31,399        47,628        66,395        15,078        31,632   

Of which Managed Services

     5,888        12,642        18,906        25,480        5,754        12,239   

Of which Network Rollout

     6,826        14,904        22,649        31,048        5,278        11,783   

Support Solutions

     2,447        4,785        7,137        12,234        2,765        5,589   

Modems

     —          —          —          —          1        3   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

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

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
Year to date,    2013     2014  

year over year change, percent

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

Networks

     3     2     1     0     -13     -5

Global Services

     4     4     2     0     -5     -6

Of which Professional Services

     -2     -1     -1     -1     3     1

Of which Managed Services

     3     4     2     1     -2     -3

Of which Network Rollout

     19     16     9     4     -23     -21

Support Solutions

     -19     -26     -27     -9     13     17

Modems

     —          —          —          —          —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     2     1     0     0     -9     -5
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
SALES GROWTH ADJUSTED FOR COMPARABLE UNITS AND CURRENCY (%)   
     2013     2014  

Sequential change, percent

   Q1     Q2     Q3     Q4     Q1     Q2  

Networks

     -17     0     -3     31     -30     16

Global Services

     -20     17     -2     13     -25     11

Support Solutions

     -30     -5     3     102     -45     1

Modems

     —          —          —          —          —          164
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     -19     6     -2     27     -28     13
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
Isolated quarter,    2013     2014  

year over year change, percent

   Q1     Q2     Q3     Q4     Q1     Q2  

Networks

     7     8     4     3     -10     5

Global Services

     9     9     3     1     -3     -8

Support Solutions

     -3     -19     -15     35     4     5

Modems

     —          —          —          —          —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     7     7     3     4     -7     -1
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
Year to date,    2013     2014  

year over year change, percent

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

Networks

     7     7     6     5     -10     -3

Global Services

     9     9     7     5     -3     -5

Support Solutions

     -3     -12     -13     0     4     4

Modems

     —          —          —          —          —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     7     7     5     5     -7     -4
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

Ericsson Second Quarter Report 2014

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Table of Contents

OPERATING INCOME BY SEGMENT BY QUARTER

 

     2013     2014  

Isolated quarters, SEK million

   Q1     Q2     Q3     Q4     Q1     Q2  

Networks

     1,565        1,335        2,557        5,861        2,476        3,574   

Global Services

     726        1,564        1,808        2,087        1,036        1,487   

Of which Professional Services

     1,837        2,285        2,279        2,628        1,893        2,095   

Of which Network Rollout

     -1,111        -721        -471        -541        -857        -608   

Support Solutions

     -29        -283        -113        1,880        12        -378   

Modems

     —          —          —          -543        -745        -456   

Unallocated 1)

     -156        -151        -33        -230        -149        -228   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

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

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     2013     2014  

Year to date, SEK million

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

Networks

     1,565        2,900        5,457        11,318        2,476        6,050   

Global Services

     726        2,290        4,098        6,185        1,036        2,523   

Of which Professional Services

     1,837        4,122        6,401        9,029        1,893        3,988   

Of which Network Rollout

     -1,111        -1,832        -2,303        -2,844        -857        -1,465   

Support Solutions

     -29        -312        -425        1,455        12        -366   

Modems

     —          —          —          -543        -745        -1,201   

Unallocated 1)

     -156        -307        -340        -570        -149        -377   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

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

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
OPERATING MARGIN BY SEGMENT BY QUARTER   

As percentage of net sales,

isolated quarters

   2013     2014  
   Q1     Q2     Q3     Q4     Q1     Q2  

Networks

     6     5     10     17     10     12

Global Services

     3     6     8     8     5     6

Of which Professional Services

     13     14     14     14     13     13

Of which Network Rollout

     -16     -9     -6     -6     -16     -9

Support Solutions

     -1     -12     -5     37     0     -13

Modems

     —          —          —          —          —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     4     4     8     14     6     7
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

As percentage of net sales,

Year to date

   2013     2014  
   Jan - Mar     Jan - Jun     Jan - Sep     Jan - Dec     Jan -Mar     Jan - Jun  

Networks

     6     5     7     10     10     11

Global Services

     3     5     6     6     5     6

Of which Professional Services

     13     13     13     14     13     13

Of which Network Rollout

     -16     -12     -10     -9     -16     -12

Support Solutions

     -1     -7     -6     12     0     -7

Modems

     —          —          —          —          —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     4     4     5     8     6     6
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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

 

Ericsson Second Quarter Report 2014

  28


Table of Contents

EBITA BY SEGMENT BY QUARTER

 

     2013     2014  

Isolated quarters, SEK million

   Q1     Q2     Q3     Q4     Q1     Q2  

Networks

     2,302        2,074        3,320        6,525        3,052        4,156   

Global Services

     942        1,783        2,043        2,342        1,257        1,731   

Of which Professional Services

     2,009        2,443        2,466        2,820        2,073        2,289   

Of which Network Rollout

     -1,067        -660        -423        -478        -816        -558   

Support Solutions

     118        -132        38        2,076        192        -196   

Modems

     —          —          —          -499        -699        -416   

Unallocated 1)

     -155        -150        -32        -229        -149        -226   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     3,207        3,575        5,369        10,215        3,653        5,049   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     2013     2014  

Year to date, SEK million

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

Networks

     2,302        4,376        7,696        14,221        3,052        7,208   

Global Services

     942        2,725        4,768        7,110        1,257        2,988   

Of which Professional Services

     2,009        4,452        6,918        9,738        2,073        4,362   

Of which Network Rollout

     -1,067        -1,727        -2,150        -2,628        -816        -1,374   

Support Solutions

     118        -14        24        2,100        192        -4   

Modems

     —          —          —          -499        -699        -1,115   

Unallocated 1)

     -155        -305        -337        -566        -149        -375   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

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

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
EBITA MARGIN BY SEGMENT BY QUARTER   
     2013     2014  

As percentage of net sales, isolated quarters

   Q1     Q2     Q3     Q4     Q1     Q2  

Networks

     8     7     12     19     13     14

Global Services

     4     7     9     9     6     8

Of which Professional Services

     14     15     15     15     14     14

Of which Network Rollout

     -16     -8     -5     -6     -15     -9

Support Solutions

     5     -6     2     41     7     -7

Modems

     —          —          —          —          —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     6     6     10     15     8     9
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     2013     2014  

As percentage of net sales, year to date

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

Networks

     8     8     9     12     13     14

Global Services

     4     6     7     7     6     7

Of which Professional Services

     14     14     15     15     14     14

Of which Network Rollout

     -16     -12     -9     -8     -15     -12

Support Solutions

     5     0     0     17     7     0

Modems

     —          —          —          —          —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     6     6     8     10     8     9
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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

 

Ericsson Second Quarter Report 2014

  29


Table of Contents

NET SALES BY REGION BY QUARTER

 

     2013     2014  

Isolated quarters, SEK million

   Q1     Q2     Q3     Q4     Q1     Q2  

North America

     15,773        15,341        14,453        13,772        12,215        15,179   

Latin America

     4,374        5,565        5,294        6,749        4,710        5,414   

Northern Europe & Central Asia 1) 2)

     2,283        2,708        2,949        3,678        2,436        2,717   

Western & Central Europe 2)

     4,349        4,522        4,399        5,215        4,381        4,582   

Mediterranean 2)

     5,271        6,159        5,659        7,067        4,785        5,487   

Middle East

     3,160        3,978        4,386        5,914        3,859        4,514   

Sub Saharan Africa

     2,131        2,653        2,693        2,572        1,813        1,886   

India

     1,606        1,279        1,280        1,973        1,695        1,645   

North East Asia

     6,054        6,642        6,053        8,649        4,908        6,406   

South East Asia & Oceania

     4,129        3,758        3,617        4,283        3,446        3,662   

Other 1) 2)

     2,902        2,726        2,198        7,160        3,257        3,357   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     52,032        55,331        52,981        67,032        47,505        54,849   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

1)  Of which in Sweden

     1,020        1,276        798        1,333        999        1,008   

2)  Of which in EU

     9,782        10,816        10,111        12,835        9,720        10,320   
     2013     2014  

Sequential change, percent

   Q1     Q2     Q3     Q4     Q1     Q2  

North America

     -7     -3     -6     -5     -11     24

Latin America

     -33     27     -5     27     -30     15

Northern Europe & Central Asia 1) 2)

     -24     19     9     25     -34     12

Western & Central Europe 2)

     -20     4     -3     19     -16     5

Mediterranean 2)

     -25     17     -8     25     -32     15

Middle East

     -38     26     10     35     -35     17

Sub Saharan Africa

     -40     24     2     -4     -30     4

India

     0     -20     0     54     -14     -3

North East Asia

     -41     10     -9     43     -43     31

South East Asia & Oceania

     -9     -9     -4     18     -20     6

Other 1) 2)

     -3     -6     -19     226     -55     3
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     -22     6     -4     27     -29     15
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

1)  Of which in Sweden

     -20     25     -37     67     -25     1

2)  Of which in EU

     -24     11     -7     27     -24     6
     2013     2014  

Year-over-year change, percent

   Q1     Q2     Q3     Q4     Q1     Q2  

North America

     23     18     3     -19     -23     -1

Latin America

     -9     6     -2     4     8     -3

Northern Europe & Central Asia 1) 2)

     0     -19     9     23     7     0

Western & Central Europe 2)

     1     10     21     -4     1     1

Mediterranean 2)

     14     -1     5     0     -9     -11

Middle East

     0     7     21     17     22     13

Sub Saharan Africa

     -3     -5     -4     -28     -15     -29

India

     13     -25     -26     23     6     29

North East Asia

     -34     -21     -28     -16     -19     -4

South East Asia & Oceania

     22     2     3     -5     -17     -3

Other 1) 2)

     2     -13     -34     141     12     23
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     2     0     -3     0     -9     -1
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

1)  Of which in Sweden

     22     0     -52     5     -2     -21

2)  Of which in EU

     3     -3     -5     -1     -1     -5

 

Ericsson Second Quarter Report 2014

  30


Table of Contents

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  

North America

     15,773        31,114        45,567        59,339        12,215        27,394   

Latin America

     4,374        9,939        15,233        21,982        4,710        10,124   

Northern Europe & Central Asia 1) 2)

     2,283        4,991        7,940        11,618        2,436        5,153   

Western & Central Europe 2)

     4,349        8,871        13,270        18,485        4,381        8,963   

Mediterranean 2)

     5,271        11,430        17,089        24,156        4,785        10,272   

Middle East

     3,160        7,138        11,524        17,438        3,859        8,373   

Sub Saharan Africa

     2,131        4,784        7,477        10,049        1,813        3,699   

India

     1,606        2,885        4,165        6,138        1,695        3,340   

North East Asia

     6,054        12,696        18,749        27,398        4,908        11,314   

South East Asia & Oceania

     4,129        7,887        11,504        15,787        3,446        7,108   

Other 1) 2)

     2,902        5,628        7,826        14,986        3,257        6,614   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

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

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

1)  Of which in Sweden

     1,020        2,296        3,094        4,427        999        2,007   

2)  Of which in EU

     9,782        20,598        30,709        43,544        9,720        20,040   
Year to date,    2013     2014  

year-over-year change, percent

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

North America

     23     21     14     5     -23     -12

Latin America

     -9     -1     -2     0     8     2

Northern Europe & Central Asia 1) 2)

     0     -12     -5     2     7     3

Western & Central Europe 2)

     1     6     10     6     1     1

Mediterranean 2)

     14     6     5     4     -9     -10

Middle East

     0     4     10     12     22     17

Sub Saharan Africa

     -3     -4     -4     -11     -15     -23

India

     13     -8     -14     -5     6     16

North East Asia

     -34     -28     -28     -24     -19     -11

South East Asia & Oceania

     22     12     9     5     -17     -10

Other1) 2)

     2     -6     -16     22     12     18
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     2     1     0     0     -9     -5
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

1)  Of which in Sweden

     22     9     -18     -12     -2     -13

2)  Of which in EU

     3     -1     -2     -2     -1     -3
TOP 5 COUNTRIES IN SALES             
                 Q2     Jan - Jun  

Country

               2013     2014     2013     2014  

UNITED STATES

         27     28     28     27

CHINA

         4     6     4     5

JAPAN

         7     4     7     4

INDIA

         2     3     3     3

KOREA

         1     3     1     3

 

Ericsson Second Quarter Report 2014

  31


Table of Contents

NET SALES BY REGION BY SEGMENT

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

 

    Q2 2014     Jan - Jun 2014  

SEK milion

  Net-
works
    Global
Services
    Support
Solutions
    Modems     Total     Net-
works
    Global
Services
    Support
Solutions
    Modems     Total  

North America

    7,708        6,365        1,106        —          15,179        14,253        11,403        1,738        —          27,394   

Latin America

    2,615        2,643        156        —          5,414        5,050        4,681        393        —          10,124   

Northern Europe & Central Asia

    1,754        914        49        —          2,717        3,127        1,918        108        —          5,153   

Western & Central Europe

    1,830        2,592        160        —          4,582        3,624        5,050        289        —          8,963   

Mediterranean

    2,450        2,860        177        —          5,487        4,438        5,466        368        —          10,272   

Middle East

    2,541        1,776        197        —          4,514        4,349        3,648        376        —          8,373   

Sub Saharan Africa

    858        955        73        —          1,886        1,583        1,785        331        —          3,699   

India

    887        710        48        —          1,645        1,775        1,409        156        —          3,340   

North East Asia

    4,312        2,006        88        —          6,406        7,082        4,031        201        —          11,314   

South East Asia & Oceania

    1,814        1,724        124        —          3,662        3,676        3,216        216        —          7,108   

Other

    2,195        514        646        2        3,357        4,390        808        1,413        3        6,614   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

    28,964        23,059        2,824        2        54,849        53,347        43,415        5,589        3        102,354   

Share of Total

    53     42     5     0     100     51     43     6     0     100
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    Q2 2014                                

Sequential change, percent

  Net-
works
    Global
Services
    Support
Solutions
    Modems     Total        

North America

    18     26     75     —          24  

Latin America

    7     30     -34     —          15  

Northern Europe & Central Asia

    28     -9     -17     —          12  

Western & Central Europe

    2     5     24     —          5  

Mediterranean

    23     10     -7     —          15  

Middle East

    41     -5     10     —          17  

Sub Saharan Africa

    18     15     -72     —          4  

India

    0     2     -56     —          -3  

North East Asia

    56     -1     -22     —          31  

South East Asia & Oceania

    -3     16     35     —          6  

Other

    0     75     -16     100     3  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Total

    19     13     2     100     15  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   
   

 

Q2 2014

   

Year over year change, percent

  Net-
works
    Global
Services
    Support
Solutions
    Modems     Total    

North America

    4     -14     126     —          -1  

Latin America

    -12     15     -45     —          -3  

Northern Europe & Central Asia

    8     -11     -17     —          0  

Western & Central Europe

    -6     6     17     —          1  

Mediterranean

    -16     -7     8     —          -11  

Middle East

    40     -11     15     —          13  

Sub Saharan Africa

    -31     -16     -73     —          -29  

India

    83     -1     -37     —          29  

North East Asia

    14     -29     52     —          -4  

South East Asia & Oceania

    -10     6     13     —          -3  

Other

    16     69     24     —          23  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Total

    3     -7     21     —          -1  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   
   

 

Jan - Jun 2014

   

Year over year change, percent

  Net-
works
    Global
Services
    Support
Solutions
    Modems     Total    

North America

    -14     -16     78     —          -12  

Latin America

    1     8     -38     —          2  

Northern Europe & Central Asia

    8     -3     -12     —          3  

Western & Central Europe

    -6     6     14     —          1  

Mediterranean

    -17     -5     21     —          -10  

Middle East

    35     5     -15     —          17  

Sub Saharan Africa

    -33     -9     -31     —          -23  

India

    32     5     -21     —          16  

North East Asia

    -1     -25     39     —          -11  

South East Asia & Oceania

    -20     5     -1     —          -10  

Other

    13     13     40     —          18  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Total

    -5     -6     17     —          -5  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

           

 

Ericsson Second Quarter Report 2014

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Table of Contents

PROVISIONS

 

     2013     2014  

Isolated quarters, SEK million

   Q1     Q2     Q3     Q4     Q1     Q2  

Opening balance

     8,638        9,499        7,716        6,414        5,362        4,928   

Additions

     1,915        1,215        658        911        625        429   

Utilization/Cash out

     -758        -2,365        -1,534        -1,364        -977        -642   

Of which restructuring

     -324        -1,001        -457        -307        -512        -246   

Reversal of excess amounts

     -209        -586        -191        -575        -88        -297   

Reclassification, translation difference and other

     -87        -47        -235        -24        6        161   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Closing balance

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

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     2013     2014  

Year to date, SEK million

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

Opening balance

     8,638        8,638        8,638        8,638        5,362        5,362   

Additions

     1,915        3,130        3,788        4,699        625        1,055   

Utilization/Cash out

     -758        -3,123        -4,657        -6,021        -977        -1,619   

Of which restructuring

     -324        -1,325        -1,782        -2,089        -512        -758   

Reversal of excess amounts

     -209        -795        -986        -1,561        -88        -386   

Reclassification, translation difference and other

     -87        -134        -369        -393        6        167   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Closing balance

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

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
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  

Additions

            

Property, plant and equipment

     1,196        1,278        778        1,251        1,034        1,320   

Capitalized development expenses

     282        214        237        182        197        185   

IPR, brands and other intangible assets

     196        22        1,418        562        77        621   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

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

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Depreciation, amortization and impairment losses

            

Property, plant and equipment

     1,008        983        1,008        1,210        1,004        1,048   

Capitalized development expenses

     303        342        388        374        333        315   

IPR, brands and other intangible assets, etc.

     1,100        1,111        1,150        1,160        1,023        1,051   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

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

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
RECONCILIATION TABLE, NON-IFRS MEASUREMENTS     
CASH CONVERSION   
     2013     2014  

Isolated quarters, SEK million

   Q1     Q2     Q3     Q4     Q1     Q2  

Net income

     1,204        1,516        3,010        6,444        1,692        2,662   

Net income reconciled to cash

     1,598        3,483        4,398        12,523        3,237        5,862   

Cash flow from operating activities

     -2,970        4,291        1,459        14,609        9,402        2,054   

Cash conversion

     -185.9     123.2     33.2     116.7     290.5     35
NET CASH, END OF PERIOD   

SEK million

                     Dec 31
2013
    Mar 31
2014
    Jun 30
2014
 

Cash and cash equivalents

           42,095        38,096        33,088   

+ Short term investments

           34,994        41,779        35,310   

- Borrowings, non-current

           22,067        18,900        19,504   

- Borrowings, current

           7,388        5,737        3,525   

- Post employment benefits

           9,825        11,633        12,884   

Net cash, end of period

           37,809        43,605        32,485   

 

Ericsson Second Quarter Report 2014

  33


Table of Contents

OTHER INFORMATION

 

            Apr - Jun     Jan - Jun     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)

        80        69        80        69        74   

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

        3,225        3,236        3,225        3,236        3,231   

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

        3,257        3,268        3,257        3,268        3,262   

Average number of treasury shares (million)

        81        70        82        71        79   

Average number of shares outstanding, basic (million)

        3,224        3,235        3,223        3,234        3,226   

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

        3,256        3,268        3,255        3,266        3,257   

Earnings per share, basic (SEK)

        0.46        0.80        0.83        1.45        3.72   

Earnings per share, diluted (SEK) 1)

        0.45        0.79        0.82        1.44        3.69   

Earnings per share (Non-IFRS), diluted (SEK) 2)

        0.69        1.02        1.30        1.90        4.69   

Earnings per share (Non-IFRS, excluding restructuring), diluted (SEK) 2)

        0.88        1.07        1.88        1.98        5.62   

Ratios

             

Days sales outstanding

        —          —          103        113        97   

Inventory turnover days

        73        68        73        70        62   

Payable days

        50        57        55        61        53   

Equity ratio (%)

        —          —          51.2     52.0     52.6

Return on equity (%)

        4.4     7.4     4.0     6.8     8.7

Return on capital employed (%)

        6.3     9.7     5.8     8.2     10.7

Capital turnover (times)

        1.3        1.2        1.2        1.2        1.3   

Cash conversion %, end of period

        123.2     35.0     26.0     125.9     79.0

Payment readiness, end of period

        —          —          74,246        78,316        82,631   

Payment readiness, as percentage of sales

        —          —          34.6     38.3     36.3

Exchange rates used in the consolidation

             

SEK/EUR - average rate

        —          —          8.56        8.98        8.67   

  - closing rate

        —          —          8.79        9.18        8.90   

SEK/USD - average rate

        —          —          6.53        6.55        6.52   

  - closing rate

        —          —          6.73        6.72        6.46   

Other

             

Regional inventory, end of period,

        20,284        17,339        20,284        17,339        14,652   

Export sales from Sweden

        23,555        28,157        49,709        52,235        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  

North America

     15,404         15,047        14,825        14,931        14,902        15,306   

Latin America

     11,153         11,412        11,402        11,445        9,731        11,179   

Northern Europe & Central Asia 1)

     21,043         21,148        22,038        21,892        21,484        21,476   

Western & Central Europe

     11,118         11,235        11,612        11,530        11,455        12,624   

Mediterranean

     12,015         12,405        12,350        12,314        12,253        12,475   

Middle East

     3,951         3,951        3,766        3,752        3,749        3,736   

Sub Saharan Africa

     1,967         2,101        2,081        2,084        2,094        2,284   

India

     14,588         16,183        16,978        17,622        17,991        18,495   

North East Asia

     14,088         14,059        14,625        14,503        13,490        13,448   

South East Asia & Oceania

     4,321         4,264        4,312        4,267        4,234        4,359   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

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

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

1)    Of which in Sweden

     17,550         17,264        18,008        17,858        17,545        17,497   

 

Ericsson Second Quarter Report 2014

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Table of Contents

RESTRUCTURING CHARGES BY FUNCTION

 

     2013      2014  

Isolated quarters, SEK million

   Q1      Q2      Q3      Q4      Q1      Q2  

Cost of sales

     -698         -707         -600         -652         -82         -116   

Research and development expenses

     -552         -117         -64         -139         -19         -80   

Selling and administrative expenses

     -589         -110         -55         -170         -29         -47   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

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

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     2013      2014  

Year to date, SEK million

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

Cost of sales

     -698         -1,405         -2,005         -2,657         -82         -198   

Research and development expenses

     -552         -669         -733         -872         -19         -99   

Selling and administrative expenses

     -589         -699         -754         -924         -29         -76   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

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

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
RESTRUCTURING CHARGES BY SEGMENT   
     2013      2014  

Isolated quarters, SEK million

   Q1      Q2      Q3      Q4      Q1      Q2  

Networks

     -1,251         -316         -299         -316         -93         -128   

Global Services

     -385         -586         -410         -616         -32         -81   

Of which Professional Services

     -270         -389         -290         -420         -25         -63   

Of which Network Rollout

     -115         -197         -120         -196         -7         -18   

Support Solutions

     -111         -34         -11         -30         -5         -34   

Modems

     —           —           —           —           —           —     

Unallocated

     -92         2         1         1         0         —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

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

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     2013      2014  

Year to date, SEK million

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

Networks

     -1,251         -1,567         -1,866         -2,182         -93         -221   

Global Services

     -385         -971         -1,381         -1,997         -32         -113   

Of which Professional Services

     -270         -659         -949         -1,369         -25         -88   

Of which Network Rollout

     -115         -312         -432         -628         -7         -25   

Support Solutions

     -111         -145         -156         -186         -5         -39   

Modems

     —           —           —           —           —           —     

Unallocated

     -92         -90         -89         -88         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

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

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

Ericsson Second Quarter Report 2014

  35