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

October 24, 2014

Commission File Number

000-12033

 

 

LM ERICSSON TELEPHONE COMPANY

(Translation of registrant’s name into English)

 

 

Torshamnsgatan 21, Kista

SE-164 83, Stockholm, Sweden

(Address of principal executive offices)

 

 

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

Form 20-F  x            Form 40-F  ¨

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

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

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

 

 

 


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: October 24, 2014


Table of Contents

 

LOGO

Third quarter report 2014

Stockholm, October 24, 2014

 

THIRD QUARTER HIGHLIGHTS    Read more (page)  

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

     3   

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

     2, 9   

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

     3   

•   Profitability showed stable improvement across all segments

     4   

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

     4   

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

     10   

 

SEK b.

   Q3
2014
    Q3
2013
    YoY
change
    Q2
2014
    QoQ
change
    9 months
2014
    9 months
2013
 

Net sales

     57.6        53.0        9     54.8        5     160.0        160.3   

Sales growth adj. for comparable units and currency

     —          —          3     —          2     -2     5

Gross margin

     35.2     32.0     —          36.4     —          36.0     32.1

Operating income

     3.9        4.2        -8     4.0        -3     10.5        8.8   

Operating margin

     6.7     8.0     —          7.3     —          6.6     5.5

Net income

     2.6        3.0        -13     2.7        -1     7.0        5.7   

EPS diluted, SEK

     0.81        0.90        -10     0.79        3     2.25        1.72   

EPS (Non-IFRS), SEK 1)

     1.11        1.31        -15     1.07        4     3.08        3.19   

Cash flow from operating activities

     -1.4        1.5        -193     2.1        -166     10.1        2.8   

Net cash, end of period

     29.4        24.7        19     32.5        -9     29.4        24.7   

 

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

 

Ericsson Third Quarter Report 2014

  1


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CEO Comments

 

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

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

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

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

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

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

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

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

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

 

    MetraTech accelerates our cloud and enterprise billing capabilities within BSS

 

    Fabrix Systems extends our overall leadership position in TV & Media

 

    Majority stake in Apcera that strengthens our position in enterprise cloud

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

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

Hans Vestberg

President and CEO

 

 

Ericsson Third Quarter Report 2014

  2


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Financial highlights

 

SEK b.

   Q3
2014
    Q3
2013
    YoY
change
    Q2
2014
    QoQ
change
    9 months
2014
    9 months
2013
 

Net sales

     57.6        53.0        9     54.8        5     160.0        160.3   

Of which Networks

     30.0        26.7        13     29.0        4     83.4        82.9   

Of which Global Services

     24.5        24.0        2     23.1        6     67.9        70.3   

Of which Support Solutions

     3.1        2.4        30     2.8        8     8.6        7.1   

Of which Modems

     0.1        0.0        —          0.0        —          0.1        0.0   

Gross income

     20.3        17.0        20     19.9        2     57.5        51.5   

Gross margin (%)

     35.2     32.0     —          36.4     —          36.0     32.1

Research and development expenses

     -9.3        -7.7        20     -9.1        2     -26.6        -23.3   

Selling and administrative expenses

     -6.0        -5.8        4     -6.5        -8     -19.0        -19.1   

Other operating income and expenses

     -1.1        0.8        -241     -0.2        450     -1.3        -0.2   

Operating income

     3.9        4.2        -8     4.0        -3     10.5        8.8   

Operating margin

     6.7     8.0     —          7.3     —          6.6     5.5

for Networks

     11     10     —          12     —          11     7

for Global Services

     7     8     —          6     —          6     6

for Support Solutions

     -4     -5     —          -13     —          -5     -6

for Modems

     —          —          —          —          —          —          —     

Financial net

     -0.1        0.1        -254     -0.2        -35     -0.5        -0.6   

Taxes

     -1.1        -1.3        -13     -1.1        -1     -3.0        -2.5   

Net income

     2.6        3.0        -13     2.7        -1     7.0        5.7   

Restructuring charges

     -0.3        -0.7        -61     -0.2        15     -0.7        -3.5   

 

Net sales

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

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

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

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

Gross margin

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

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

Restructuring charges

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

Operating expenses

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

 

 

Ericsson Third Quarter Report 2014

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

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

Operating income

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

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

Financial net

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

Net income and EPS

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

 

 

Ericsson Third Quarter Report 2014

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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.

   Q3
2014
    Q3
2013
    YoY
change
    Q2
2014
    QoQ
change
    9 months
2014
    9 months
2013
 

Net sales

     30.0        26.7        13     29.0        4     83.4        82.9   

Sales growth adj. for comparable units and currency

     —          —          7     —          -2     0     6

Operating income

     3.2        2.6        24     3.6        -11     9.2        5.5   

Operating margin

     11     10     —          12     —          11     7

EBITA margin

     13     12     —          14     —          13     9

Restructuring charges

     -0.1        -0.3        -73     -0.1        -38     -0.3        -1.9   

 

Net sales

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

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

Operating income and margin

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

Business update

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

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

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

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

 

 

Ericsson Third Quarter Report 2014

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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.

   Q3
2014
    Q3
2013
    YoY
change
    Q2
2014
    QoQ
change
    9 months
2014
    9 months
2013
 

Net sales

     24.5        24.0        2     23.1        6     67.9        70.3   

Of which Professional Services

     17.8        16.2        10     16.6        7     49.4        47.6   

Of which Managed Services

     7.2        6.3        15     6.5        11     19.4        18.9   

Of which Network Rollout

     6.7        7.7        -14     6.5        3     18.5        22.6   

Sales growth adj. for comparable units and currency

     —          —          -2     —          5     -4     7

Operating income

     1.6        1.8        -11     1.5        8     4.1        4.1   

Of which Professional Services

     2.1        2.3        -10     2.1        -2     6.0        6.4   

Of which Network Rollout

     -0.5        -0.5        -4     -0.6        -26     -1.9        -2.3   

Operating margin

     7     8     —          6     —          6     6

for Professional Services

     12     14     —          13     —          12     13

for Network Rollout

     -7     -6     —          -9     —          -10     -10

EBITA margin

     8     9     —          8     —          7     7

Restructuring charges

     -0.1        -0.4        -70     -0.1        51     -0.2        -1.4   

 

Net sales

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

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

Operating income and margin

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

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

Business update

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

 

 

Other information

   Q3
2014
     Q2
2014
     Q1
2014
     Full year
2013
 

Number of signed Managed Services contracts

     17         21         16         84   

Number of signed significant consulting & systems integration contracts 1)

     13         12         9         31   

Number of Ericsson services professionals, end of period

     65,000         64,000         61,000         64,000   

 

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

 

Ericsson Third Quarter Report 2014

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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.

   Q3
2014
    Q3
2013
    YoY
change
    Q2
2014
    QoQ
change
    9 months
2014
    9 months
2013
 

Net sales

     3.1        2.4        30     2.8        8     8.6        7.1   

Sales growth adj. for comparable units and currency

     —          —          10     —          6     5     -13

Operating income

     -0.1        -0.1        -4     -0.4        -71     -0.5        -0.4   

Operating margin

     -4     -5     —          -13     —          -5     -6

EBITA margin

     3     2     —          -7     —          1     0

Restructuring charges

     -0.1        0.0        —          0.0        —          -0.1        -0.2   

 

Net sales

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

Sales increased QoQ with good development in OSS and BSS.

Operating income and margin

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

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

Business update

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

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

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

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

 

 

Ericsson Third Quarter Report 2014

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MODEMS

 

SEK b.

   Q3
2014
     Q2
2014
     QoQ
change
    Q1
2014
 

Net sales

     0.1         0.0         —          0.0   

Sales growth for comparable units and currency

     —           —           —          —     

Operating income

     -0.7         -0.5         62     -0.7   

Operating margin

     —           —           —          —     

EBITA margin

     —           —           —          —     

Restructuring charges

     0.0         0.0         —          0.0   

 

Background

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

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

Operating income

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

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

 

 

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Regional Sales

 

                  

Third quarter 2014

    Change  

SEK b.

   Networks      Global
Services
     Support
Solutions
     Modems      Total      YoY     QoQ  

North America

     6.8         6.5         0.8         —           14.0         -3     -8

Latin America

     2.7         2.9         0.3         —           5.9         11     9

Northern Europe and Central Asia

     2.1         0.9         0.1         —           3.2         7     16

Western and Central Europe

     1.8         2.7         0.2         —           4.6         6     1

Mediterranean

     2.1         2.9         0.2         —           5.2         -8     -5

Middle East

     3.7         2.0         0.3         —           6.0         38     34

Sub-Saharan Africa

     1.2         1.1         0.1         —           2.4         -9     30

India

     1.1         0.7         0.2         —           2.0         56     22

North East Asia

     4.5         2.3         0.3         —           7.0         16     10

South East Asia and Oceania

     2.0         1.7         0.1         —           3.8         5     4

Other 1)

     1.9         0.7         0.7         0.1         3.4         55     1

Total

     30.0         24.5         3.1         0.1         57.6         9     5

 

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

 

North America

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

Latin America

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

Northern Europe and Central Asia

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

Western and Central Europe

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

Mediterranean

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

Middle East

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

Sub-Saharan Africa

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

India

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

North East Asia

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

South East Asia and Oceania

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

Other

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

 

 

Ericsson Third Quarter Report 2014

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CASH flow

 

SEK b.

   Q3
2014
    Q3
2013
    Q2
2014
 

Net income reconciled to cash

     5.0        4.4        5.9   

Changes in operating net assets

     -6.3        -2.9        -3.8   

Cash flow from operating activities

     -1.4        1.5        2.1   

Cash flow from investing activities

     -0.7        -3.1        3.7   

Cash flow from financing activities

     -1.3        0.0        -12.2   

Net change in cash and cash equivalents

     -1.0        -3.3        -5.0   

Cash conversion (%)

     -27     33     35

 

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

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

Short-term investments decreased by SEK 2.3 b.

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

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

 

 

Working capital KPIs, number of days

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

Sales outstanding

     111         113         112         97         109         103   

Inventory

     69         70         72         62         72         73   

Payable

     57         61         62         53         53         55   

 

Days of sales outstanding and inventory days decreased slightly.

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

 

 

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FINANCIAL POSITION

 

SEK b.

   Sep 30
2014
    Jun 30
2014
    Mar 31
2014
    Dec 31
2013
 

+ Short-term investments

     34.0        35.3        41.8        35.0   

+ Cash and cash equivalents

     32.0        33.1        38.1        42.1   

Gross cash

     66.1        68.4        79.9        77.1   

- Interest bearing liabilities and post-employment benefits

     36.6        35.9        36.3        39.3   

Net cash

     29.4        32.5        43.6        37.8   

Equity

     143.4        138.0        142.6        141.6   

Total assets

     274.0        265.5        267.2        269.2   

Capital turnover (times)

     1.2        1.2        1.1        1.3   

Return on capital employed (%)

     8.6     8.2     6.7     10.7

Equity ratio (%)

     52.3     52.0     53.4     52.6

Return on equity (%)

     6.9     6.8     6.0     8.7

 

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

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

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

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

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

 

LOGO

Debt maturity profile, Parent Company, SEK b.
 

 

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Parent company

 

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

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

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

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

 

 

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Other information

 

Ericsson acquires a majority stake in Apcera

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

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

Ericsson acquires Fabrix Systems

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

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

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

Ericsson acquires MetraTech

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

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

Antitrust investigations against Ericsson

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

 

 

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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, October 24, 2014

Telefonaktiebolaget LM Ericsson

Hans Vestberg, President and CEO

Org. Nr. 556016-0680

Date for next report: January 27, 2015

 

 

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Auditors’ Review report

 

Introduction

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

Scope of review

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

Conclusion

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

Stockholm, October 24, 2014

PricewaterhouseCoopers AB

Peter Nyllinge

Authorized Public Accountant

Auditor in Charge

Bo Hjalmarsson

Authorized Public Accountant

 

 

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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), October 24, 2014. An analysts, investors and media conference call will begin at 14.00 (CET).

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

www.ericsson.com/investors

Video material will be published during the day on

www.ericsson.com/press

For further information, please contact:

Helena Norrman, Senior Vice President,

Communications Phone: +46 10 719 34 72

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

media.relations@ericsson.com

Telefonaktiebolaget LM Ericsson (publ.)

Org. number: 556016-0680

Torshamnsgatan 21

SE-164 83 Stockholm

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

Investors

Peter Nyquist, Vice President,

Investor Relations

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

E-mail: peter.nyquist@ericsson.com

Stefan Jelvin, Director,

Investor Relations

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

E-mail: stefan.jelvin@ericsson.com

Åsa Konnbjer, Director,

Investor Relations

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

E-mail: asa.konnbjer@ericsson.com

Rikard Tunedal, Director,

Investor Relations

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

E-mail: rikard.tunedal@ericsson.com

Media

Ola Rembe, Vice President,

Head of External Communications

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

E-mail: media.relations@ericsson.com

Corporate Communications

Phone: +46 10 719 69 92

E-mail: media.relations@ericsson.com

 

 

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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.

 

 

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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 Third Quarter Report 2014

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CONSOLIDATED INCOME STATEMENT

 

     Jul - Sep           Jan - Sep  

SEK million

   2013     2014     Change     2013     2014     Change  

Net sales

     52,981        57,643        9     160,344        159,997        0

Cost of sales

     -36,028        -37,362        4     -108,834        -102,456        -6
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross income

     16,953        20,281        20     51,510        57,541        12

Gross margin (%)

     32.0     35.2       32.1     36.0  

Research and development expenses

     -7,710        -9,281        20     -23,334        -26,640        14

Selling and administrative expenses

     -5,778        -6,000        4     -19,050        -18,993        0
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses

     -13,488        -15,281        13     -42,384        -45,633        8

Other operating income and expenses

     805        -1,134          -215        -1,319     

Shares in earnings of JV and associated companies

     -51        10          -121        -84        -31
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     4,219        3,876        -8     8,790        10,505        20

Financial income

     678        429          1,162        1,098     

Financial expenses

     -595        -557          -1,766        -1,634     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income after financial items

     4,302        3,748        -13     8,186        9,969        22

Taxes

     -1,292        -1,124          -2,456        -2,991     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

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

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to:

            

- Stockholders of the Parent Company

     2,921        2,646          5,595        7,345     

- Non-controlling interests

     89        -22          135        -367     

Other information

            

Average number of shares, basic (million)

     3,227        3,238          3,225        3,235     

Earnings per share, basic (SEK) 1)

     0.91        0.82          1.74        2.27     

Earnings per share, diluted (SEK) 1)

     0.90        0.81          1.72        2.25     

STATEMENT OF COMPREHENSIVE INCOME

            
     Jul - Sep           Jan - Sep        

SEK million

   2013     2014           2013     2014        

Net income

     3,010        2,624          5,730        6,978     

Other comprehensive income

            

Items that will not be reclassified to profit or loss

            

Remeasurements of defined benefits pension plans incl. asset ceiling

     458        -441          2,231        -2,637     

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

     -152        96          -858        539     

Items that may be reclassified to profit or loss

            

Cash flow hedges

            

Gains/losses arising during the period

     127        0          265        0     

Reclassification adjustments for gains/losses included in profit or loss

     -185        0          -948        0     

Adjustments for amounts transferred to initial carrying amount of hedged items

            

Revaulation of other investments in shares and participations

            

Fair value remeasurement

     1        39          70        39     

Changes in cumulative translation adjustments

     -3,150        2,656          -2,464        5,676     

Share of other comprehensive income on JV and associated companies

     -150        234          -46        362     

Tax on items that may be reclassified to profit or loss

     11        0          138        0     

Total other comprehensive income, net of tax

     -3,040        2,584          -1,612        3,979     
  

 

 

   

 

 

     

 

 

   

 

 

   

Total comprehensive income

     -30        5,208          4,118        10,957     
  

 

 

   

 

 

     

 

 

   

 

 

   

Total comprehensive income attributable to:

            

Stockholders of the Parent Company

     -79        5,180          4,008        11,212     

Non-controlling interest

     49        28          110        -255     

 

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

 

 

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CONSOLIDATED BALANCE SHEET

 

     Dec 31      Jun 30      Sep 30  

SEK million

   2013      2014      2014  

ASSETS

        

Non-current assets

        

Intangible assets

        

Capitalized development expenses

     3,348         3,082         2,925   

Goodwill

     31,544         34,243         35,179   

Intellectual property rights, brands and other intangible assets

     12,815         11,765         12,149   

Property, plant and equipment

     11,433         11,924         12,674   

Financial assets

        

Equity in JV and associated companies

     2,568         2,324         2,566   

Other investments in shares and participations

     505         510         567   

Customer finance, non-current

     1,294         1,240         1,940   

Other financial assets, non-current

     5,684         6,303         7,085   

Deferred tax assets

     9,103         10,880         11,325   
  

 

 

    

 

 

    

 

 

 
     78,294         82,271         86,410   

Current assets

        

Inventories

     22,759         26,915         28,529   

Trade receivables

     71,013         66,763         70,624   

Customer finance, current

     2,094         1,994         2,452   

Other current receivables

     17,941         19,208         19,953   

Short-term investments

     34,994         35,310         34,011   

Cash and cash equivalents

     42,095         33,088         32,042   
  

 

 

    

 

 

    

 

 

 
     190,896         183,278         187,611   

Total assets

     269,190         265,549         274,021   
  

 

 

    

 

 

    

 

 

 

EQUITY AND LIABILITIES

        

Equity

        

Stockholders’ equity

     140,204         136,948         142,339   

Non-controlling interest in equity of subsidiaries

     1,419         1,010         1,035   
  

 

 

    

 

 

    

 

 

 
     141,623         137,958         143,374   

Non-current liabilities

        

Post-employment benefits

     9,825         12,884         13,972   

Provisions, non-current

     222         202         187   

Deferred tax liabilities

     2,650         2,624         2,846   

Borrowings, non-current

     22,067         19,504         20,647   

Other non-current liabilities

     1,459         1,699         1,809   
  

 

 

    

 

 

    

 

 

 
     36,223         36,913         39,461   

Current liabilities

        

Provisions, current

     5,140         4,377         4,380   

Borrowings, current

     7,388         3,525         1,997   

Trade payables

     20,502         22,795         22,067   

Other current liabilities

     58,314         59,981         62,742   
  

 

 

    

 

 

    

 

 

 
     91,344         90,678         91,186   

Total equity and liabilities

     269,190         265,549         274,021   
  

 

 

    

 

 

    

 

 

 

Of which interest-bearing liabilities and post-employment benefits

     39,280         35,913         36,616   

Of which net cash

     37,809         32,485         29,437   

Assets pledged as collateral

     2,556         2,522         2,499   

Contingent liabilities

     657         664         666   

 

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CONSOLIDATED STATEMENT OF CASH FLOWS

 

     Jul-Sep      Jan-Sep      Jan - Dec  

SEK million

   2013      2014      2013      2014      2013  

Operating activities

              

Net income

     3,010         2,624         5,730         6,978         12,174   

Adjustments to reconcile net income to cash

              

Taxes

     -881         -388         -3,419         -1,710         -1,323   

Earnings/dividends in JV and associated companies

     50         -10         120         330         258   

Depreciation, amortization and impairment losses

     2,546         2,481         7,393         7,255         10,137   

Other

     -327         267         -345         1,220         756   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     4,398         4,974         9,479         14,073         22,002   

Changes in operating net assets

              

Inventories

     357         -840         -469         -4,127         4,868   

Customer finance, current and non-current

     800         -1,101         1,972         -884         1,809   

Trade receivables

     -4,744         -1,222         -3,594         5,843         -8,504   

Trade payables

     -588         -1,519         -3,018         15         -2,158   

Provisions and post-employment benefits

     -970         -18         -1,567         -707         -3,298   

Other operating assets and liabilities, net

     2,206         -1,624         -23         -4,107         2,670   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     -2,939         -6,324         -6,699         -3,967         -4,613   

Cash flow from operating activities

     1,459         -1,350         2,780         10,106         17,389   

Investing activities

              

Investments in property, plant and equipment

     -778         -1,415         -3,252         -3,769         -4,503   

Sales of property, plant and equipment

     97         139         199         466         378   

Acquisitions/divestments of subsidiaries and other operations, net

     -1,794         -286         -1,969         -2,647         -2,682   

Product development

     -237         -155         -733         -537         -915   

Other investing activities

     -230         -1,302         -135         -1,859         -1,330   

Short-term investments

     -144         2,308         6,205         2,530         -2,057   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Cash flow from investing activities

     -3,086         -711         315         -5,816         -11,109   

Cash flow before financing activities

     -1,627         -2,061         3,095         4,290         6,280   

Financing activities

              

Dividends paid

     -21         -3         -8,945         -9,831         -9,153   

Other financing activities

     43         -1,288         -4,101         -8,750         -355   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Cash flow from financing activities

     22         -1,291         -13,046         -18,581         -9,508   

Effect of exchange rate changes on cash

     -1,711         2,306         432         4,238         641   

Net change in cash and cash equivalents

     -3,316         -1,046         -9,519         -10,053         -2,587   

Cash and cash equivalents, beginning of period

     38,479         33,088         44,682         42,095         44,682   

Cash and cash equivalents, end of period

     35,163         32,042         35,163         32,042         42,095   

 

Ericsson Third Quarter Report 2014

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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

 

     Jan - Sep      Jan - Sep      Jan - Dec  

SEK million

   2013      2014      2013  

Opening balance

     138,483         141,623         138,483   

Total comprehensive income

     4,118         10,957         11,881   

Sale/repurchase of own shares

     63         78         90   

Stock purchase plan

     297         547         388   

Dividends paid

     -8,945         -9,831         -9,153   

Transactions with non-controlling interests

     -66         0         -66   
  

 

 

    

 

 

    

 

 

 

Closing balance

     133,950         143,374         141,623   
  

 

 

    

 

 

    

 

 

 

 

Ericsson Third Quarter Report 2014

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CONSOLIDATED INCOME STATEMENT – ISOLATED QUARTERS

 

     2013     2014  

Isolated quarters, SEK million

   Q1     Q2     Q3     Q4     Q1     Q2     Q3  

Net sales

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

Cost of sales

     -35,394        -37,412        -36,028        -42,171        -30,184        -34,910        -37,362   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross income

     16,638        17,919        16,953        24,861        17,321        19,939        20,281   

Gross margin (%)

     32.0     32.4     32.0     37.1     36.5     36.4     35.2

Research and development expenses

     -7,877        -7,747        -7,710        -8,902        -8,275        -9,084        -9,281   

Selling and administrative expenses

     -6,643        -6,629        -5,778        -7,223        -6,452        -6,541        -6,000   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses

     -14,520        -14,376        -13,488        -16,125        -14,727        -15,625        -15,281   

Other operating income and expenses

     20        -1,040        805        328        21        -206        -1,134   

Shares in earnings of JV and associated companies

     -32        -38        -51        -9        15        -109        10   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

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

Financial income

     180        304        678        184        401        268        429   

Financial expenses

     -565        -606        -595        -327        -612        -465        -557   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income after financial items

     1,721        2,163        4,302        8,912        2,419        3,802        3,748   

Taxes

     -517        -647        -1,292        -2,468        -727        -1,140        -1,124   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

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

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to:

              

- Stockholders of the Parent Company

     1,205        1,469        2,921        6,410        2,120        2,579        2,646   

- Non-controlling interests

     -1        47        89        34        -428        83        -22   

Other information

              

Average number of shares, basic (million)

     3,222        3,224        3,227        3,230        3,233        3,235        3,238   

Earnings per share, basic (SEK) 1)

     0.37        0.46        0.91        1.98        0.66        0.80        0.82   

Earnings per share, diluted (SEK) 1)

     0.37        0.45        0.90        1.97        0.65        0.79        0.81   

 

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

 

Ericsson Third Quarter Report 2014

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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      Q3  

Operating activities

                    

Net income

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

Adjustments to reconcile net income to cash

                    

Taxes

     -1,849         -689         -881         2,096         -1,348         26         -388   

Earnings/dividends in JV and associated companies

     33         37         50         138         -16         356         -10   

Depreciation, amortization and impairment losses

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

Other

     -201         183         -327         1,101         549         404         267   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     1,598         3,483         4,398         12,523         3,237         5,862         4,974   

Changes in operating net assets

                    

Inventories

     -1,426         600         357         5,337         -2,099         -1,188         -840   

Customer finance, current and non-current

     260         912         800         -163         558         -341         -1,101   

Trade receivables

     -1,934         3,084         -4,744         -4,910         7,957         -892         -1,222   

Trade payables

     -2,948         518         -588         860         -110         1,644         -1,519   

Provisions and post-employment benefits

     1,155         -1,752         -970         -1,731         -464         -225         -18   

Other operating assets and liabilities, net

     325         -2,554         2,206         2,693         323         -2,806         -1,624   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     -4,568         808         -2,939         2,086         6,165         -3,808         -6,324   

Cash flow from operating activities

     -2,970         4,291         1,459         14,609         9,402         2,054         -1,350   

Investing activities

                    

Investments in property, plant and equipment

     -1,196         -1,278         -778         -1,251         -1,034         -1,320         -1,415   

Sales of property, plant and equipment

     91         11         97         179         274         53         139   

Acquisitions/divestments of subsidiaries and other operations, net

     -136         -39         -1,794         -713         -849         -1,512         -286   

Product development

     -282         -214         -237         -182         -197         -185         -155   

Other investing activities

     298         -203         -230         -1,195         -169         -388         -1,302   

Short-term investments

     -2,860         9,209         -144         -8,262         -6,790         7,012         2,308   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Cash flow from investing activities

     -4,085         7,486         -3,086         -11,424         -8,765         3,660         -711   

Cash flow before financing activities

     -7,055         11,777         -1,627         3,185         637         5,714         -2,061   

Financing activities

                    

Dividends paid

     -61         -8,863         -21         -208         —           -9,828         -3   

Other financing activities

     92         -4,236         43         3,746         -5,069         -2,393         -1,288   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Cash flow from financing activities

     31         -13,099         22         3,538         -5,069         -12,221         -1,291   

Effect of exchange rate changes on cash

     -214         2,357         -1,711         209         433         1,499         2,306   

Net change in cash and cash equivalents

     -7,238         1,035         -3,316         6,932         -3,999         -5,008         -1,046   

Cash and cash equivalents, beginning of period

     44,682         37,444         38,479         35,163         42,095         38,096         33,088   

Cash and cash equivalents, end of period

     37,444         38,479         35,163         42,095         38,096         33,088         32,042   

 

Ericsson Third Quarter Report 2014

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Table of Contents

PARENT COMPANY INCOME STATEMENT

 

     Jul - Sep      Jan - Sep  

SEK million

   2013      2014      2013      2014  

Net sales

     —           —           —           —     

Cost of sales

     —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Gross income

     —           —           —           —     

Operating expenses

     -300         -232         -886         -783   

Other operating income and expenses

     621         752         1,972         2,075   
  

 

 

    

 

 

    

 

 

    

 

 

 

Operating income

     321         520         1,086         1,292   

Financial net

     1,152         12,344         3,121         14,484   
  

 

 

    

 

 

    

 

 

    

 

 

 

Income after financial items

     1,473         12,864         4,207         15,776   

Transfers to (-) / from untaxed reserves

        —              —     

Taxes

     18         -237         -211         -498   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net income

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

 

 

    

 

 

    

 

 

    

 

 

 
STATEMENT OF COMPREHENSIVE INCOME            
     Jul - Sep      Jan - Sep  

SEK million

   2013      2014      2013      2014  

Net income

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

Cash flow hedges

     —           —           —           —     

Fair value remeasurement

     —           39         —           39   

Total other comprehensive income, net of tax

     —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total comprehensive income

     1,491         12,666         3,996         15,317   
  

 

 

    

 

 

    

 

 

    

 

 

 

PARENT COMPANY BALANCE SHEET

     Dec 31      Sep 30  

SEK million

   2013      2014  

ASSETS

     

Fixed assets

     

Intangible assets

     646         481   

Tangible assets

     571         615   

Financial assets

     94,741         96,835   
  

 

 

    

 

 

 
     95,958         97,931   

Current assets

     

Inventories

     7         11   

Receivables

     17,247         25,664   

Short-term investments

     34,520         33,536   

Cash and cash equivalents

     23,954         17,184   
  

 

 

    

 

 

 
     75,728         76,395   

Total assets

     171,686         174,326   
  

 

 

    

 

 

 

STOCKHOLDERS’ EQUITY, PROVISIONS AND LIABILITIES

     

Equity

     

Restricted equity

     48,018         48,018   

Non-restricted equity

     23,798         29,507   
  

 

 

    

 

 

 
     71,816         77,525   

Provisions

     2,097         1,567   

Non-current liabilities

     44,491         44,312   

Current liabilities

     53,282         50,922   

Total stockholders’ equity, provisions and liabilities

     171,686         174,326   
  

 

 

    

 

 

 

Assets pledged as collateral

     553         499   

Contingent liabilities

     15,999         19,990   
  

 

 

    

 

 

 

 

Ericsson Third Quarter Report 2014

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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 September 30, 2014 and IFRS as endorsed by the EU.

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

 

Ericsson Third Quarter Report 2014

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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     Q3  

Networks

     28,133        28,142        26,655        34,769        24,383        28,964        30,030   

Global Services

     21,452        24,851        23,974        27,166        20,356        23,059        24,467   

Of which Professional Services

     14,626        16,773        16,229        18,767        15,078        16,554        17,794   

Of which Managed Services

     5,888        6,754        6,264        6,574        5,754        6,485        7,175   

Of which Network Rollout

     6,826        8,078        7,745        8,399        5,278        6,505        6,673   

Support Solutions

     2,447        2,338        2,352        5,097        2,765        2,824        3,057   

Modems

     —          —          —          —          1        2        89   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

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

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     2013     2014  

Sequential change, percent

   Q1     Q2     Q3     Q4     Q1     Q2     Q3  

Networks

     -20     0     -5     30     -30     19     4

Global Services

     -24     16     -4     13     -25     13     6

Of which Professional Services

     -23     15     -3     16     -20     10     7

Of which Managed Services

     -13     15     -7     5     -12     13     11

Of which Network Rollout

     -26     18     -4     8     -37     23     3

Support Solutions

     -33     -4     1     117     -46     2     8

Modems

     —          —          —          —          —          —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     -22     6     -4     27     -29     15     5
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     2013     2014  

Year over year change, percent

   Q1     Q2     Q3     Q4     Q1     Q2     Q3  

Networks

     3     1     -1     -1     -13     3     13

Global Services

     4     3     -1     -3     -5     -7     2

Of which Professional Services

     -2     -1     -1     -1     3     -1     10

Of which Managed Services

     3     4     -1     -3     -2     -4     15

Of which Network Rollout

     19     13     -2     -8     -23     -19     -14

Support Solutions

     -19     -33     -29     40     13     21     30

Modems

     —          —          —          —          —          —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     2     0     -3     0     -9     -1     9
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     2013     2014  

Year to date, SEK million

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

Networks

     28,133        56,275        82,930        117,699        24,383        53,347        83,377   

Global Services

     21,452        46,303        70,277        97,443        20,356        43,415        67,882   

Of which Professional Services

     14,626        31,399        47,628        66,395        15,078        31,632        49,426   

Of which Managed Services

     5,888        12,642        18,906        25,480        5,754        12,239        19,414   

Of which Network Rollout

     6,826        14,904        22,649        31,048        5,278        11,783        18,456   

Support Solutions

     2,447        4,785        7,137        12,234        2,765        5,589        8,646   

Modems

     —          —          —          —          1        3        92   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

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

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
Year to date,    2013     2014  

year over year change, percent

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

Networks

     3     2     1     0     -13     -5     1

Global Services

     4     4     2     0     -5     -6     -3

Of which Professional Services

     -2     -1     -1     -1     3     1     4

Of which Managed Services

     3     4     2     1     -2     -3     3

Of which Network Rollout

     19     16     9     4     -23     -21     -19

Support Solutions

     -19     -26     -27     -9     13     17     21

Modems

     —          —          —          —          —          —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     2     1     0     0     -9     -5     0
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

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

Sequential change, percent

   Q1     Q2     Q3     Q4     Q1     Q2     Q3  

Networks

     -17     0     -3     31     -30     16     -2

Global Services

     -20     17     -2     13     -25     11     5

Support Solutions

     -30     -5     3     102     -45     1     6

Modems

     —          —          —          —          —          —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     -19     6     -2     27     -28     13     2
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
Isolated quarter,    2013     2014  

year over year change, percent

   Q1     Q2     Q3     Q4     Q1     Q2     Q3  

Networks

     7     8     4     3     -10     5     7

Global Services

     9     9     3     1     -3     -8     -2

Support Solutions

     -3     -19     -15     35     4     5     10

Modems

     —          —          —          —          —          —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     7     7     3     4     -7     -1     3
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
Year to date,    2013     2014  

year over year change, percent

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

Networks

     7     7     6     5     -10     -3     0

Global Services

     9     9     7     5     -3     -5     -4

Support Solutions

     -3     -12     -13     0     4     4     7

Modems

     —          —          —          —          —          —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     7     7     5     5     -7     -4     -2
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

Ericsson Third Quarter Report 2014

  27


Table of Contents

OPERATING INCOME BY SEGMENT BY QUARTER

 

     2013     2014  

Isolated quarters, SEK million

   Q1     Q2     Q3     Q4     Q1     Q2     Q3  

Networks

     1,565        1,335        2,557        5,861        2,476        3,574        3,175   

Global Services

     726        1,564        1,808        2,087        1,036        1,487        1,607   

Of which Professional Services

     1,837        2,285        2,279        2,628        1,893        2,095        2,059   

Of which Network Rollout

     -1,111        -721        -471        -541        -857        -608        -452   

Support Solutions

     -29        -283        -113        1,880        12        -378        -108   

Modems

     —          —          —          -543        -745        -456        -739   

Unallocated 1)

     -156        -151        -33        -230        -149        -228        -59   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

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

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     2013     2014  

Year to date, SEK million

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

Networks

     1,565        2,900        5,457        11,318        2,476        6,050        9,225   

Global Services

     726        2,290        4,098        6,185        1,036        2,523        4,130   

Of which Professional Services

     1,837        4,122        6,401        9,029        1,893        3,988        6,047   

Of which Network Rollout

     -1,111        -1,832        -2,303        -2,844        -857        -1,465        -1,917   

Support Solutions

     -29        -312        -425        1,455        12        -366        -474   

Modems

     —          —          —          -543        -745        -1,201        -1,940   

Unallocated 1)

     -156        -307        -340        -570        -149        -377        -436   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

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

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
OPERATING MARGIN BY SEGMENT BY QUARTER   

As percentage of net sales,

isolated quarters

   2013     2014  
   Q1     Q2     Q3     Q4     Q1     Q2     Q3  

Networks

     6     5     10     17     10     12     11

Global Services

     3     6     8     8     5     6     7

Of which Professional Services

     13     14     14     14     13     13     12

Of which Network Rollout

     -16     -9     -6     -6     -16     -9     -7

Support Solutions

     -1     -12     -5     37     0     -13     -4

Modems

     —          —          —          —          —          —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     4     4     8     14     6     7     7
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

As percentage of net sales,

Year to date

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

Networks

     6     5     7     10     10     11     11

Global Services

     3     5     6     6     5     6     6

Of which Professional Services

     13     13     13     14     13     13     12

Of which Network Rollout

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

Support Solutions

     -1     -7     -6     12     0     -7     -5

Modems

     —          —          —          —          —          —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     4     4     5     8     6     6     7
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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

 

Ericsson Third Quarter Report 2014

  28


Table of Contents

EBITA BY SEGMENT BY QUARTER

 

     2013     2014  

Isolated quarters, SEK million

   Q1     Q2     Q3     Q4     Q1     Q2     Q3  

Networks

     2,302        2,074        3,320        6,525        3,052        4,156        3,773   

Global Services

     942        1,783        2,043        2,342        1,257        1,731        1,857   

Of which Professional Services

     2,009        2,443        2,466        2,820        2,073        2,289        2,254   

Of which Network Rollout

     -1,067        -660        -423        -478        -816        -558        -397   

Support Solutions

     118        -132        38        2,076        192        -196        95   

Modems

     —          —          —          -499        -699        -416        -698   

Unallocated 1)

     -155        -150        -32        -229        -149        -226        -59   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

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

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     2013     2014  

Year to date, SEK million

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

Networks

     2,302        4,376        7,696        14,221        3,052        7,208        10,981   

Global Services

     942        2,725        4,768        7,110        1,257        2,988        4,845   

Of which Professional Services

     2,009        4,452        6,918        9,738        2,073        4,362        6,616   

Of which Network Rollout

     -1,067        -1,727        -2,150        -2,628        -816        -1,374        -1,771   

Support Solutions

     118        -14        24        2,100        192        -4        91   

Modems

     —          —          —          -499        -699        -1,115        -1,813   

Unallocated 1)

     -155        -305        -337        -566        -149        -375        -434   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

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

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
EBITA MARGIN BY SEGMENT BY QUARTER   

As percentage of net sales, isolated quarters

   2013     2014  
   Q1     Q2     Q3     Q4     Q1     Q2     Q3  

Networks

     8     7     12     19     13     14     13

Global Services

     4     7     9     9     6     8     8

Of which Professional Services

     14     15     15     15     14     14     13

Of which Network Rollout

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

Support Solutions

     5     -6     2     41     7     -7     3

Modems

     —          —          —          —          —          —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     6     6     10     15     8     9     9
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

As percentage of net sales, year to date

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

Networks

     8     8     9     12     13     14     13

Global Services

     4     6     7     7     6     7     7

Of which Professional Services

     14     14     15     15     14     14     13

Of which Network Rollout

     -16     -12     -9     -8     -15     -12     -10

Support Solutions

     5     0     0     17     7     0     1

Modems

     —          —          —          —          —          —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     6     6     8     10     8     9     9
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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

 

Ericsson Third Quarter Report 2014

  29


Table of Contents

NET SALES BY REGION BY QUARTER

 

     2013     2014  

Isolated quarters, SEK million

   Q1     Q2     Q3     Q4     Q1     Q2     Q3  

North America

     15,773        15,341        14,453        13,772        12,215        15,179        14,033   

Latin America

     4,374        5,565        5,294        6,749        4,710        5,414        5,882   

Northern Europe & Central Asia 1) 2)

     2,283        2,708        2,949        3,678        2,436        2,717        3,151   

Western & Central Europe 2)

     4,349        4,522        4,399        5,215        4,381        4,582        4,646   

Mediterranean 2)

     5,271        6,159        5,659        7,067        4,785        5,487        5,218   

Middle East

     3,160        3,978        4,386        5,914        3,859        4,514        6,039   

Sub Saharan Africa

     2,131        2,653        2,693        2,572        1,813        1,886        2,447   

India

     1,606        1,279        1,280        1,973        1,695        1,645        2,000   

North East Asia

     6,054        6,642        6,053        8,649        4,908        6,406        7,033   

South East Asia & Oceania

     4,129        3,758        3,617        4,283        3,446        3,662        3,794   

Other 1) 2)

     2,902        2,726        2,198        7,160        3,257        3,357        3,400   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

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

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

1)  Of which in Sweden

     1,020        1,276        798        1,333        999        1,008        1,090   

2)  Of which in EU

     9,782        10,816        10,111        12,835        9,720        10,320        10,736   
     2013     2014  

Sequential change, percent

   Q1     Q2     Q3     Q4     Q1     Q2     Q3  

North America

     -7     -3     -6     -5     -11     24     -8

Latin America

     -33     27     -5     27     -30     15     9

Northern Europe & Central Asia 1) 2)

     -24     19     9     25     -34     12     16

Western & Central Europe 2)

     -20     4     -3     19     -16     5     1

Mediterranean 2)

     -25     17     -8     25     -32     15     -5

Middle East

     -38     26     10     35     -35     17     34

Sub Saharan Africa

     -40     24     2     -4     -30     4     30

India

     0     -20     0     54     -14     -3     22

North East Asia

     -41     10     -9     43     -43     31     10

South East Asia & Oceania

     -9     -9     -4     18     -20     6     4

Other 1) 2)

     -3     -6     -19     226     -55     3     1
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     -22     6     -4     27     -29     15     5
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

1)  Of which in Sweden

     -20     25     -37     67     -25     1     8

2)  Of which in EU

     -24     11     -7     27     -24     6     4
     2013     2014  

Year-over-year change, percent

   Q1     Q2     Q3     Q4     Q1     Q2     Q3  

North America

     23     18     3     -19     -23     -1     -3

Latin America

     -9     6     -2     4     8     -3     11

Northern Europe & Central Asia 1) 2)

     0     -19     9     23     7     0     7

Western & Central Europe 2)

     1     10     21     -4     1     1     6

Mediterranean 2)

     14     -1     5     0     -9     -11     -8

Middle East

     0     7     21     17     22     13     38

Sub Saharan Africa

     -3     -5     -4     -28     -15     -29     -9

India

     13     -25     -26     23     6     29     56

North East Asia

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

South East Asia & Oceania

     22     2     3     -5     -17     -3     5

Other 1) 2)

     2     -13     -34     141     12     23     55
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     2     0     -3     0     -9     -1     9
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

1)  Of which in Sweden

     22     0     -52     5     -2     -21     37

2)  Of which in EU

     3     -3     -5     -1     -1     -5     6

 

Ericsson Third Quarter Report 2014

  30


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     Jan - Sep  

North America

     15,773        31,114        45,567        59,339        12,215        27,394        41,427   

Latin America

     4,374        9,939        15,233        21,982        4,710        10,124        16,006   

Northern Europe & Central Asia 1) 2)

     2,283        4,991        7,940        11,618        2,436        5,153        8,304   

Western & Central Europe 2)

     4,349        8,871        13,270        18,485        4,381        8,963        13,609   

Mediterranean 2)

     5,271        11,430        17,089        24,156        4,785        10,272        15,490   

Middle East

     3,160        7,138        11,524        17,438        3,859        8,373        14,412   

Sub Saharan Africa

     2,131        4,784        7,477        10,049        1,813        3,699        6,146   

India

     1,606        2,885        4,165        6,138        1,695        3,340        5,340   

North East Asia

     6,054        12,696        18,749        27,398        4,908        11,314        18,347   

South East Asia & Oceania

     4,129        7,887        11,504        15,787        3,446        7,108        10,902   

Other 1) 2)

     2,902        5,628        7,826        14,986        3,257        6,614        10,014   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

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

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

1)  Of which in Sweden

     1,020        2,296        3,094        4,427        999        2,007        3,097   

2)  Of which in EU

     9,782        20,598        30,709        43,544        9,720        20,040        30,776   
Year to date,    2013     2014  

year-over-year change, percent

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

North America

     23     21     14     5     -23     -12     -9

Latin America

     -9     -1     -2     0     8     2     5

Northern Europe & Central Asia 1) 2)

     0     -12     -5     2     7     3     5

Western & Central Europe 2)

     1     6     10     6     1     1     3

Mediterranean 2)

     14     6     5     4     -9     -10     -9

Middle East

     0     4     10     12     22     17     25

Sub Saharan Africa

     -3     -4     -4     -11     -15     -23     -18

India

     13     -8     -14     -5     6     16     28

North East Asia

     -34     -28     -28     -24     -19     -11     -2

South East Asia & Oceania

     22     12     9     5     -17     -10     -5

Other1) 2)

     2     -6     -16     22     12     18     28
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     2     1     0     0     -9     -5     0
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

1)  Of which in Sweden

     22     9     -18     -12     -2     -13     0

2)  Of which in EU

     3     -1     -2     -2     -1     -3     0
TOP 5 COUNTRIES IN SALES               
                 Q3     Jan - Sep        

Country

               2013     2014     2013     2014        

UNITED STATES

         28     24     28     26  

CHINA

         5     6     4     6  

JAPAN

         5     5     6     4  

INDIA

         2     4     3     3  

BRAZIL

         3     3     3     3  

 

Ericsson Third Quarter Report 2014

  31


Table of Contents

NET SALES BY REGION BY SEGMENT

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

 

    Q3 2014     Jan - Sep 2014  

SEK milion

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

North America

    6,829        6,452        752        —          14,033        21,082        17,855        2,490        0        41,427   

Latin America

    2,691        2,860        331        —          5,882        7,741        7,541        724        0        16,006   

Northern Europe & Central Asia

    2,143        937        71        —          3,151        5,270        2,855        179        0        8,304   

Western & Central Europe

    1,773        2,720        153        —          4,646        5,397        7,770        442        0        13,609   

Mediterranean

    2,088        2,943        187        —          5,218        6,526        8,409        555        0        15,490   

Middle East

    3,705        2,028        306        —          6,039        8,054        5,676        682        0        14,412   

Sub Saharan Africa

    1,237        1,126        84        —          2,447        2,820        2,911        415        0        6,146   

India

    1,106        743        151        —          2,000        2,881        2,152        307        0        5,340   

North East Asia

    4,463        2,293        277        —          7,033        11,545        6,324        478        0        18,347   

South East Asia & Oceania

    2,048        1,677        69        —          3,794        5,724        4,893        285        0        10,902   

Other

    1,947        688        676        89        3,400        6,337        1,496        2,089        92        10,014   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

    30,030        24,467        3,057        89        57,643        83,377        67,882        8,646        92        159,997   

Share of Total

    52     43     5     0     100     52     43     5     0     100
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    Q3 2014                                

Sequential change, percent

  Net-
works
    Global
Services
    Support
Solutions
    Modems     Total        

North America

    -11     1     -32     —          -8  

Latin America

    3     8     112     —          9  

Northern Europe & Central Asia

    22     3     45     —          16  

Western & Central Europe

    -3     5     -4     —          1  

Mediterranean

    -15     3     6     —          -5  

Middle East

    46     14     55     —          34  

Sub Saharan Africa

    44     18     15     —          30  

India

    25     5     215     —          22  

North East Asia

    4     14     215     —          10  

South East Asia & Oceania

    13     -3     -44     —          4  

Other

    -11     34     5     —          1  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Total

    4     6     8     —          5  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   
   

 

Q3 2014

   

Year over year change, percent

  Net-
works
    Global
Services
    Support
Solutions
    Modems     Total    

North America

    4     -11     28     —          -3  

Latin America

    -3     24     54     —          11  

Northern Europe & Central Asia

    8     2     39     —          7  

Western & Central Europe

    2     7     21     —          6  

Mediterranean

    -19     -1     43     —          -8  

Middle East

    64     12     -6     —          38  

Sub Saharan Africa

    -9     1     -62     —          -9  

India

    95     10     297     —          56  

North East Asia

    26     -7     386     —          16  

South East Asia & Oceania

    7     7     -47     —          5  

Other

    43     91     43     —          55  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Total

    13     2     30     —          9  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   
   

 

Jan - Sep 2014

   

Year over year change, percent

  Net-
works
    Global
Services
    Support
Solutions
    Modems     Total    

North America

    -9     -14     59     —          -9  

Latin America

    0     14     -15     —          5  

Northern Europe & Central Asia

    8     -1     3     —          5  

Western & Central Europe

    -3     6     16     —          3  

Mediterranean

    -18     -4     27     —          -9  

Middle East

    47     8     -11     —          25  

Sub Saharan Africa

    -24     -5     -41     —          -18  

India

    51     6     31     —          28  

North East Asia

    8     -19     137     —          -2  

South East Asia & Oceania

    -12     6     -18     —          -5  

Other

    20     39     41     —          28  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Total

    1     -3     21     —          0  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

           

 

Ericsson Third Quarter Report 2014

  32


Table of Contents

PROVISIONS

 

     2013     2014  

Isolated quarters, SEK million

   Q1     Q2     Q3     Q4     Q1     Q2     Q3  

Opening balance

     8,638        9,499        7,716        6,414        5,362        4,928        4,579   

Additions

     1,915        1,215        658        911        625        430        675   

Utilization/Cash out

     -758        -2,365        -1,534        -1,364        -977        -642        -648   

Of which restructuring

     -324        -1,001        -457        -307        -512        -246        -231   

Reversal of excess amounts

     -209        -586        -191        -575        -88        -298        -132   

Reclassification, translation difference and other

     -87        -47        -235        -24        6        161        93   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Closing balance

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

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     2013     2014  

Year to date, SEK million

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

Opening balance

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

Additions

     1,915        3,130        3,788        4,699        625        1,055        1,730   

Utilization/Cash out

     -758        -3,123        -4,657        -6,021        -977        -1,619        -2,267   

Of which restructuring

     -324        -1,325        -1,782        -2,089        -512        -758        -989   

Reversal of excess amounts

     -209        -795        -986        -1,561        -88        -386        -518   

Reclassification, translation difference and other

     -87        -134        -369        -393        6        167        260   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Closing balance

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

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
INFORMATION ON INVESTMENTS IN ASSETS SUBJECT TO DEPRECIATION, AMORTIZATION, IMPAIRMENT AND WRITE-DOWNS    
     2013     2014  

Isolated quarters, SEK million

   Q1     Q2     Q3     Q4     Q1     Q2     Q3  

Additions

              

Property, plant and equipment

     1,196        1,278        778        1,251        1,034        1,320        1,415   

Capitalized development expenses

     282        214        237        182        197        185        155   

IPR, brands and other intangible assets

     196        22        1,418        562        77        621        935   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

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

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Depreciation, amortization and impairment losses

              

Property, plant and equipment

     1,008        983        1,008        1,210        1,004        1,048        1,078   

Capitalized development expenses

     303        342        388        374        333        315        311   

IPR, brands and other intangible assets, etc.

     1,100        1,111        1,150        1,160        1,023        1,051        1,092   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

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

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
RECONCILIATION TABLE, NON-IFRS MEASUREMENTS       
CASH CONVERSION     
     2013     2014  

Isolated quarters, SEK million

   Q1     Q2     Q3     Q4     Q1     Q2     Q3  

Net income

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

Net income reconciled to cash

     1,598        3,483        4,398        12,523        3,237        5,862        4,974   

Cash flow from operating activities

     -2,970        4,291        1,459        14,609        9,402        2,054        -1,350   

Cash conversion

     -185.9     123.2     33.2     116.7     290.5     35.0     -27.1
NET CASH, END OF PERIOD     

SEK million

                     Dec 31
2013
    Mar 31
2014
    Jun 30
2014
    Sep 30
2014
 

Cash and cash equivalents

           42,095        38,096        33,088        32,042   

+ Short term investments

           34,994        41,779        35,310        34,011   

- Borrowings, non-current

           22,067        18,900        19,504        20,647   

- Borrowings, current

           7,388        5,737        3,525        1,997   

- Post employment benefits

           9,825        11,633        12,884        13,972   

Net cash, end of period

           37,809        43,605        32,485        29,437   

 

Ericsson Third Quarter Report 2014

  33


Table of Contents

OTHER INFORMATION

 

    

Jul - Sep

    Jan - Sep     Jan - Dec  
     2013     2014     2013     2014     2013  

Number of shares and earnings per share

          

Number of shares, end of period (million)

     3,305        3,305        3,305        3,305        3,305   

Of which class A-shares (million)

     262        262        262        262        262   

Of which class B-shares (million)

     3,043        3,043        3,043        3,043        3,043   

Number of treasury shares, end of period (million)

     77        66        77        66        74   

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

     3,228        3,239        3,228        3,239        3,231   

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

     3,259        3,271        3,259        3,271        3,262   

Average number of treasury shares (million)

     78        67        81        70        79   

Average number of shares outstanding, basic (million)

     3,227        3,238        3,225        3,235        3,226   

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

     3,258        3,270        3,256        3,268        3,257   

Earnings per share, basic (SEK)

     0.91        0.82        1.74        2.27        3.72   

Earnings per share, diluted (SEK) 1)

     0.90        0.81        1.72        2.25        3.69   

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

     1.16        1.05        2.46        2.94        4.69   

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

     1.31        1.11        3.19        3.08        5.62   

Ratios

          

Days sales outstanding

     —          —          109        111        97   

Inventory turnover days

     73        68        72        69        62   

Payable days

     51        55        53        57        53   

Equity ratio (%)

     —          —          52.4     52.3     52.6

Return on equity (%)

     8.8     7.6     5.5     6.9     8.7

Return on capital employed (%)

     11.5     9.7     7.7     8.6     10.7

Capital turnover (times)

     1.2        1.3        1.2        1.2        1.3   

Cash conversion %, end of period

     33.2     -27.1     29.3     71.8     79.0

Payment readiness, end of period

     —          —          69,651        78,595        82,631   

Payment readiness, as percentage of sales

     —          —          32.6     36.8     36.3

Exchange rates used in the consolidation

          

SEK/EUR - average rate

     —          —          8.60        9.04        8.67   

  - closing rate

     —          —          8.66        9.15        8.90   

SEK/USD - average rate

     —          —          6.53        6.69        6.52   

  - closing rate

     —          —          6.42        7.27        6.46   

Other

          

Regional inventory, end of period,

     18,416        17,094        18,416        17,094        14,652   

Export sales from Sweden

     24,019        26,871        73,728        79,106        108,944   

 

1)  Potential ordinary shares are not considered when their conversion to ordinary shares would increase earnings per share
2)  Excluding amortizations and write-downs of acquired intangibles

 

NUMBER OF EMPLOYEES              
    2013     2014  

End of period

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

North America

    15,404        15,047        14,825        14,931        14,902        15,306        15,554   

Latin America

    11,153        11,412        11,402        11,445        9,731        11,179        10,901   

Northern Europe & Central Asia 1)

    21,043        21,148        22,038        21,892        21,484        21,476        21,691   

Western & Central Europe

    11,118        11,235        11,612        11,530        11,455        12,624        12,606   

Mediterranean

    12,015        12,405        12,350        12,314        12,253        12,475        13,306   

Middle East

    3,951        3,951        3,766        3,752        3,749        3,736        3,831   

Sub Saharan Africa

    1,967        2,101        2,081        2,084        2,094        2,284        2,288   

India

    14,588        16,183        16,978        17,622        17,991        18,495        19,413   

North East Asia

    14,088        14,059        14,625        14,503        13,490        13,448        13,653   

South East Asia & Oceania

    4,321        4,264        4,312        4,267        4,234        4,359        4,265   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

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

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

1)    Of which in Sweden

    17,550        17,264        18,008        17,858        17,545        17,497        17,655   

 

Ericsson Third Quarter Report 2014

  34


Table of Contents

RESTRUCTURING CHARGES BY FUNCTION

 

     2013      2014  

Isolated quarters, SEK million

   Q1      Q2      Q3      Q4      Q1      Q2      Q3  

Cost of sales

     -698         -707         -600         -652         -82         -116         -168   

Research and development expenses

     -552         -117         -64         -139         -19         -80         -92   

Selling and administrative expenses

     -589         -110         -55         -170         -29         -47         -19   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

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

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     2013      2014  

Year to date, SEK million

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

Cost of sales

     -698         -1,405         -2,005         -2,657         -82         -198         -366   

Research and development expenses

     -552         -669         -733         -872         -19         -99         -191   

Selling and administrative expenses

     -589         -699         -754         -924         -29         -76         -95   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

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

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
RESTRUCTURING CHARGES BY SEGMENT   
     2013      2014  

Isolated quarters, SEK million

   Q1      Q2      Q3      Q4      Q1      Q2      Q3  

Networks

     -1,251         -316         -299         -316         -93         -128         -80   

Global Services

     -385         -586         -410         -616         -32         -81         -122   

Of which Professional Services

     -270         -389         -290         -420         -25         -63         -85   

Of which Network Rollout

     -115         -197         -120         -196         -7         -18         -37   

Support Solutions

     -111         -34         -11         -30         -5         -34         -77   

Modems

     —           —           —           —           —           —           —     

Unallocated

     -92         2         1         1         0         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

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

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     2013      2014  

Year to date, SEK million

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

Networks

     -1,251         -1,567         -1,866         -2,182         -93         -221         -301   

Global Services

     -385         -971         -1,381         -1,997         -32         -113         -235   

Of which Professional Services

     -270         -659         -949         -1,369         -25         -88         -173   

Of which Network Rollout

     -115         -312         -432         -628         -7         -25         -62   

Support Solutions

     -111         -145         -156         -186         -5         -39         -116   

Modems

     —           —           —           —           —           —           —     

Unallocated

     -92         -90         -89         -88         —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

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

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

Ericsson Third Quarter Report 2014

  35