Announcement of LM Ericsson Telephone company, dated October 22, 2004

 

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 22, 2004

 


 

LM ERICSSON TELEPHONE COMPANY

(Translation of registrant’s name into English)

 

16483 Stockholm, Sweden

(Address of principal executive offices)

 


 

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

Form 20-F  x  Form 40-F  ¨

 

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

 


 

Announcement of LM Ericsson Telephone company, dated October 22, 2004, regarding its Third Quarter Report 2004.


LOGO   

Third quarter report 2004

October 22, 2004

 

Ericsson reports continued solid performance

 

Third quarter summary

 

Net sales SEK 31.8 (28.0) b., nine months SEK 92.5 (81.5) b.

 

Gross margin 47.1% (35.9%)1)

 

Operating margin 22.7% (5.2%)2)

 

Income after financial items SEK 7.0 (1.1) b.2)

 

Net income SEK 4.8 (-3.9) b., nine months SEK 13.0 (-11.0) b.

 

Earnings per share SEK 0.30 (-0.25), nine months SEK 0.82 (-0.69)

 

     Third quarter

    Second quarter

 

SEK b.


   2004

    2003

    Change

    2004

    Change

 

Orders booked, net

   29.0     28.1     3 %   33.1     -13 %

Net sales

   31.8     28.0     14 %   32.6     -2 %

Gross margin (%)

   47.1 %   35.9 %1)   —       47.8 %   —    

Operating income

   7.2     1.52 )   —       7.73 )   —    

Income after financial items

   7.0     1.12 )   —       7.83 )   —    

Net income

   4.8     -3.9     —       5.3     —    

Earnings per share

   0.30     -0.25     —       0.33     —    

Cash flow before financing activities

   5.2     9.1     —       4.3     —    

1) Adjusted for restructuring charges in the third quarter 2003 SEK 1.1 b.
2) Adjusted for restructuring charges in the third quarter 2003, net, SEK 5.4 b.
3) Includes positive non-recurring effect of SEK 0.3 b.

 

Net sales in the quarter grew by 14% year-over-year to SEK 31.8 (28.0) b. and were slightly down sequentially mainly due to seasonality but also the gradually abating effect of operators’ catch up spending. Currency exchange effects negatively impacted sales by 6% year-over-year. Orders booked in the quarter grew by 3% year-over-year to SEK 29.0 (28.1) b. and was down sequentially.

 

Gross margin was 47.1% (35.9%) compared to 47.8% in the second quarter. Income after financial items was SEK 7.0 (1.1) b. compared to SEK 7.5 b. excluding the non-recurring positive effect of SEK 0.3 b. in the second quarter. Net currency exchange effects, compared to rates one year ago, have had a negative impact of SEK -1.0 b. on operating income in the quarter.

 

Cash flow before financing was SEK 5.2 (9.1) b., compared to SEK 4.3 b. the previous quarter. Work in progress has increased due to higher business activities. The financial position improved, with a net of financial assets and liabilities, i.e. net cash, of SEK 36.8 (20.5) b.

 


CEO COMMENTS

 

“We are proud to report continued solid performance,” says Carl-Henric Svanberg, president and CEO of Ericsson. “Through leveraging our industry leadership we are experiencing good progress throughout the world and across technologies. Understanding of consumer needs, technology leadership and responsiveness to our customers, will be key to further reinforce our leading position.

 

We continue to see healthy margin levels and strong results. This is a tribute to our employees’ ever-present focus on serving the needs of our customers and delivering operational excellence. It is our ambition to continue to deliver best in class margins.

 

Consumer convenience is crucial for our industry’s future development. Consumers want personal, reliable and easy-to-use services with broadband capabilities in both the fixed and mobile environment. Converging technologies will enable seamless services regardless of access method. Our ability to provide end-to-end solutions, cutting-edge infrastructure, handset technology and network integration, will be key to success.

 

Ericsson’s 3G Evolved, with HSDPA-capabilities, is a cornerstone in providing mobile broadband for richer consumer experiences. Our strong position in 3G and technology leadership has enabled us to take an early lead in HSDPA.

 

We are enjoying the benefits of our restructuring which enabled us to increase our focus on future growth areas. We are well positioned for profitable growth and continued market leadership,” concludes Carl-Henric Svanberg.

 

MARKET VIEW

 

The underlying growth drivers remain solid. Voice and data traffic is increasing steadily as a result of new services as well as the introduction of more efficient technology. Revenue growth via new services and increased usage is in focus for operators. Net subscriber additions continue at a high level.

 

Europe continues to show strong development as a result of continued 3G roll out and GSM capacity enhancements. Spending on WCDMA radio networks is quickly catching up with GSM in Western Europe. Operators’ more aggressive tariffing strategies add to the market dynamic. In Russia, Central Europe, Middle East and Africa the activity level is high with several new networks being rolled out and strong subscriber growth.

 

The Asia Pacific region continues to develop well with increasing usage and subscriber growth. Minutes of use per mobile subscriber are increasing steadily with India and China presently showing double the European levels. Japan is in the lead in 3G deployments and is experiencing strong subscriber take up and dramatic increases in data usage.

 

The North American market continues to show healthy development with increasing focus on quality of service. The Cingular/AWS merger regulatory process continues to affect the market. Latin America, where operator consolidation has taken place, now shows strong growth. The development is particularly encouraging in Brazil and Mexico with improving GSM coverage and capacity expansions.

 

During the quarter, nine new WCDMA networks were commercially launched, reaching a total of 45. During the quarter the number of WCDMA subscriptions grew from approximately 7 million to more than 10 million. The number of CDMA2000 1xEV-DO subscriptions has now reached more than 9 million.

 

2


Worldwide subscription penetration is 25% with a total of 1.6 billion subscriptions, of which more than 1.1 billion are in GSM. The global number of subscriptions could pass 2 billion already during 2006 and is expected to pass 2.5 billion by 2009.

 

OUTLOOK

 

The traffic growth in the world’s mobile networks should generate a slight to moderate growth in the global mobile systems market 2004. In addition to this underlying growth there is an effect from operators catching up on previous years’ limited investments. This effect has started to abate and we expect the market to gradually return to a more normal growth pattern.

 

The temporary catch up effect inflates the total mobile systems market growth in 2004. Therefore, compared to total growth in 2004, we expect the global market for mobile systems to show slight growth in 2005. Excluding this catch up effect in 2004, we estimate a moderate underlying market growth in 2005.

 

We maintain our view that the addressable market for professional services is expected to continue to show good growth.

 

All estimates are measured in USD and refer to market growth compared to previous year.

 

With our technology leadership and global presence we are well positioned to take advantage of these market opportunities.

 

CONSOLIDATED ACCOUNTS

 

FINANCIAL REVIEW

 

All comparative numbers are stated excluding restructuring charges.

 

Income

 

Orders booked were SEK 29.0 (28.1) b., an increase of 3% year-over-year, driven by strong development in Latin America, Central Europe, Middle East and Africa as well as South East Asia. India shows particularly exciting development during the year with significantly strengthened market leadership. Sequentially, orders booked decreased mainly reflecting temporarily lower bookings in China as well as the continued effect of operator consolidation in North America. Third quarter orders also reflect an SEK -0.8 b. order adjustment in Costa Rica.

 

Sales were SEK 31.8 (28.0) b., an increase of 14% year-over-year, reflecting good performance in Latin America, Europe and Africa. Currency exchange effected sales negatively by 6%. Sequentially, sales decreased slightly by 2%.

 

Gross margin decreased sequentially by 0.7 percentage points to 47.1% (35.9%).

 

Operating expenses amounted to SEK 8.9 (9.4) b. as a result of reductions in headcount and lower IS/IT related costs. This item also includes an increase in customer financing risk provisions by SEK 0.4 b.

 

Other operating revenues declined sequentially from SEK 0.8 b. to SEK 0.5 b. This item also includes revenues from IPR licensing that shows stable development.

 

Operating income was SEK 7.2 (1.5) b. compared to SEK 7.4 b., excluding a non-recurring positive effect of SEK 0.3 b., in the second quarter. Operating margin was 22.7% (5.2%). Income after financial items was SEK 7.0 (1.1) b. compared to SEK 7.8 b. in the second quarter. Net effects of currency exchange differences on operating income compared to the rates one year ago were SEK -1.0 b. in the quarter. Excluding effects from currency hedging the effects would have been SEK -0.5 b.

 

3


Financial net has been negatively affected by SEK 0.2 b. due to the repurchase of bonds.

 

Net income was SEK 4.8 (-3.9) b. for the quarter.

 

Earnings per share were SEK 0.30 (-0.25).

 

The number of employees amounted to 50,300 (53,400) at the end of the quarter of which 21,800 (25,200) are in Sweden.

 

Balance sheet and financing

 

Numbers within brackets indicate year-end 2003.

 

The financial position remained strong with net of financial assets and debt, i.e. net cash, at SEK 36.8 (27.0) b. compared to SEK 31.7 b. at the end of the second quarter 2004. Cash was reduced by SEK 5.4 b. sequentially to SEK 72.6 (73.2) b.

 

Debt has been reduced by SEK 10.5 b. through repayment of maturing debt as well as repurchase of bonds.

 

Days sales outstanding (DSO) for trade receivables remained flat at 88 (79) days. Inventory, including work in progress, increased by SEK 1.7 b. sequentially to SEK 16.5 (11.0) b., due to the higher business activity. Inventory turnover was 4.8 (6.1), down sequentially from 5.1.

 

Gross customer financing exposure increased sequentially by SEK 0.4 b. to SEK 9.8 (12.3) b. Net customer financing credits on balance sheet increased sequentially by SEK 0.4 b. to SEK 3.4 (4.0) b.

 

The equity ratio was 40.9% (34.4%) compared to 37.5% at the end of the previous quarter.

 

Cash flow

 

Cash flow from operations remained strong at SEK 6.5 (9.9) b. Cash flow before financing activities amounted to SEK 5.2 (9.1) b. Cash flow from investing activities was SEK -1.3 (-0.8) b. net. The cash flow was negatively affected by increased work in progress as a result of the higher business activity.

 

Payment readiness decreased sequentially by SEK -1.1b. to SEK 82.0 (71.4) b.

 

Cash outlays of SEK 5.0 b., with regard to restructuring, are expected during 2004. Of this SEK 1.1b. was paid in the third quarter.

 

4


SEGMENT RESULTS

 

SYSTEMS

 

     Third quarter

    Second quarter

 

SEK b.


   2004

    2003

    Change

    2004

    Change

 

Orders booked

   27.4     26.5     3 %   31.2     -12 %

Mobile Networks

   22.8     21.5     6 %   25.5     -10 %

Fixed Networks

   0.7     1.5     -56 %   1.1     -38 %

Professional Services

   3.9     3.5     11 %   4.6     -16 %

Net sales

   29.6     25.9     14 %   30.4     -2 %

Mobile Networks

   23.8     19.8     20 %   24.3     -2 %

Fixed Networks

   1.0     1.7     -39 %   1.1     -9 %

Professional Services

   4.8     4.4     9 %   5.0     -4 %

Operating income

   6.5     1.4 1)   —       6.3     —    

Operating margin (%)

   22 %   5 %1)   —       21 %   —    

1) Adjusted for restructuring charges in the third quarter 2003, net, SEK 4.2 b.

 

Systems orders increased year-over-year by 3% to SEK 27.4 (26.5) b. and decreased sequentially. Systems sales increased 14% year-over-year and decreased sequentially by 2%.

 

The growth in the GSM/WCDMA track year-over-year is approximately 25%. WCDMA equipment and associated network rollout services share of total Mobile Networks sales has increased to 15% and of radio access sales 32% were WCDMA/EDGE related.

 

Sales development within Professional Services was favorable during the quarter and grew 15% year-over-year in local currencies and now represents approximately 16% of total Systems sales. Bookings fluctuate between quarters and the overall development and portfolio build up is encouraging.

 

OTHER OPERATIONS

 

     Third quarter

    Second quarter

 

SEK b.


   2004

    2003

    Change

    2004

    Change

 

Orders booked

   2.5     2.0     25 %   2.7     -9 %

Net sales

   2.8     2.5     13 %   2.8     1 %

Operating income

   0.3     0.1 1)   —       0.6     —    

Operating margin (%)

   9 %   5 %1)   —       20 %   —    

1) Adjusted for restructuring charges in the third quarter 2003 SEK 1. 1b.

 

Orders booked increased year-over-year but decreased sequentially. Sales were up both year-over-year and sequentially. The decrease in operating income for Other operations is attributable to completing agreed redundancy activities in Ericsson Microwave Systems.

 

SONY ERICSSON MOBILE COMMUNICATIONS

 

Sony Ericsson Mobile Communications (Sony Ericsson) reported continued growth in sales and profit. Sales increased by 29% year-over-year and net income improved significantly for the same period. Ericsson’s share in Sony Ericsson’s income after financial items was SEK 0.6 b. compared to SEK 0.5 b. in the previous quarter.

 

Units shipped in the quarter reached 10.7 million, a 51% increase compared to the same period last year, reflecting an enhanced portfolio with the launch of new products such as the first GSM mega pixel camera phone and a second 3G UMTS handset. Average selling price (ASP) increased sequentially in line with company expectation due to new mid and high-end Japanese and GSM products beginning to ship.

 

5


Transactions with Sony Ericsson Mobile Communications

 

SEK m.


   Third
quarter 2004


   Third
quarter 2003


   Nine months
2004


   Nine months
2003


Sales to Sony Ericsson

   166    534    1,065    2,044

Royalty from Sony Ericsson

   157    145    467    355

Purchases from Sony Ericsson

   51    590    465    1,343

Shareholder contribution

   —      —      —      1,384

Receivables from Sony Ericsson

   265    249    265    249

Liabilities to Sony Ericsson

   9    495    9    495

 

PARENT COMPANY INFORMATION

 

Net sales for the nine months period amounted to SEK 1.2 (1.3) b. and income after financial items was SEK 7.6 (3.5) b. Restructuring costs are excluded in income after financial items for 2003.

 

Major changes in the company’s financial position for the nine months period include decreased investments in subsidiaries of SEK 13.0 b. and increased short- and long-term receivables from subsidiaries of SEK 14.4 b. Notes and bond loans decreased by SEK 9.8 b. At the end of the quarter, cash and short-term cash investments amounted to SEK 67.1 (68.4) b.

 

In accordance with the conditions of the Stock Purchase Plans and Option Plans for Ericsson employees, 1,029,239 shares from treasury stock were sold or distributed to employees during the third quarter. The holding of treasury stock at September 30, 2004, was 301,862,534 Class B shares.

 

OTHER INFORMATION

 

With reference to the previously announced public cash offer for the 28.44% of the shares in Ericsson’s Italian subsidiary, Ericsson S.p.A, not already owned by Ericsson, Ericsson now owns more than 90% of the shares in Ericsson S.p.A. As a consequence, Ericsson is obliged to launch a residual tender offer on all the floating shares issued by Ericsson S.p.A. Upon completion of this process, and in accordance with Borsa Italia regulation, Ericsson S.p.A will be delisted.

 

In accordance with the decision by the extraordinary general meeting on August 31, 2004, the process of changing the difference in voting rights between A and B shares in Ericsson has commenced. Following the change in voting rights each A share confers to one vote and each B share confers one tenth of a vote. After the end of the quarter, as announced on October 5, shareholders in Ericsson have in the first conversion round tendered 265,519,834 B-shares for conversion to the same number of A-shares, which means that 40,46% of the conversion rights have been used for conversion. As a result of the first conversion round, the total number of shares in Ericsson is now 921,738,474 A-shares and 15,210,520,204 B-shares. The A-shares are now representing 37.7% of the voting rights in Ericsson and the B-shares are representing 62.3% of the voting rights.

 

Stockholm, October 22, 2004

 

Carl-Henric Svanberg

President and CEO

 

Date for next report: February 10, 2005

 

6


AUDITORS’ REPORT

 

We have reviewed the report for the nine-month period ended September 30, 2004, for Telefonaktiebolaget LM Ericsson (publ.). We conducted our review in accordance with the recommendation issued by FAR. A review is limited primarily to enquiries of company personnel and analytical procedures applied to financial data and thus provides less assurance than an audit. We have not performed an audit and, accordingly, we do not express an audit opinion.

 

Based on our review, nothing has come to our attention that causes us to believe that the interim report does not comply with the requirements for interim reports in the Annual Accounts Act.

 

Stockholm, October 22, 2004

 

Bo Hjalmarsson   Peter Clemedtson   Thomas Thiel
Authorized Public Accountant   Authorized Public Accountant   Authorized Public Accountant
PricewaterhouseCoopers AB   PricewaterhouseCoopers AB    

 

Safe Harbor Statement of Ericsson under the Private Securities Litigation Reform Act of 1995;

 

All statements made or incorporated by reference in this release, other than statements or characterizations of historical facts, are forward-looking statements. These forward-looking statements are based on our current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by us. Forward-looking statements can often be identified by words such as “anticipates”, “expects”, “intends”, “plans”, “predicts”, “believes”, “seeks”, “estimates”, “may”, “will”, “should”, “would”, “potential”, “continue”, and variations or negatives of these words, and include, among others, statements regarding: (i) strategies, outlook and growth prospects; (ii) positioning to deliver future plans and to realize potential for future growth; (iii) liquidity and capital resources and expenditure, and our credit ratings; (iv) growth in demand for our products and services; (v) our joint venture activities; (vi) economic outlook and industry trends; (vii) developments of our markets; (viii) the impact of regulatory initiatives; (ix) research and development expenditures; (x) the strength of our competitors; (xi) future cost savings; and (xii) plans to launch new products and services.

 

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) further 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 fluctuations; and (vii) the successful implementation of our business and operational initiatives.

 

A glossary of all technical terms is available at: http://www.ericsson.com/about and in the Annual Report.

 

To read the full report, please go to: http://www.ericsson.com/investors/financial_reports/2004/9month04-en.pdf

 

7


FOR FURTHER INFORMATION PLEASE CONTACT

 

Henry Sténson, Senior Vice President, Communications

Phone: +46 8 719 4044

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

 

Investors

 

Gary Pinkham, Vice President, Investor Relations

Phone: +46 8 719 0000; E-mail: investor.relations@ericsson.com

 

Lotta Lundin, Investor Relations

Phone: +46 8 719 6553; E-mail: investor.relations@ericsson.com

 

Glenn Sapadin, Investor Relations

Phone: +1 212 843 8435; E-mail: investor.relations@ericsson.com

 

Media

 

Pia Gideon, Vice President, Market and External Communications

Phone: +46 8 719 2864, +46 70 519 8903; E-mail: press.relations@ericsson.com

 

Ase Lindskog, Director, Head of Media Relations

Phone: +46 8 719 9725, +46 730 244 872; E-mail: press.relations@ericsson.com

 

Ola Rembe, Director, Media Relations

Phone: +46 8 719 9727, +46 730 244 873; E-mail: press.relations@ericsson.com

 

Telefonaktiebolaget LM Ericsson (publ)

Org. number: 556016-0680

Torshamnsgatan 23

SE-164 83 Stockholm

Phone: +46 8 719 00 00

www.ericsson.com

 

FINANCIAL STATEMENTS AND ADDITIONAL INFORMATION

 

     Page

Financial statements

    

Consolidated income statement

   9

Consolidated balance sheet

   10

Consolidated statement of cash flows

   11

Changes in stockholders’ equity

   12

Consolidated income statement isolated quarters

   13
     Page

Additional information

    

Accounting policies and reporting

   14

Orders booked by segment by quarter

   15

Net sales by segment by quarter

   16

Operating income, operating margin

   17

Number of employees

   17

Orders booked by market area by quarter

   18

Net sales by market area by quarter

   19

External orders booked by market area by segment

   20

External net sales by market area by segment

   20

Top ten markets in orders and sales

   21

Customer financing risk exposure

   21

Trend of net sales and operating expenses isolated quarters

   21

Other information

   22

 

8


ERICSSON

CONSOLIDATED INCOME STATEMENT

 

     Jul - Sep

    Jan - Sep

 

SEK million


   2004

    2003

    Change

    2004

    2003

    Change

 

Net sales

   31,836     28,039     14 %   92,542     81,511     14 %

Cost of sales

   -16,849     -19,084     -12 %   -49,413     -56,957     -13 %
    

 

 

 

 

 

Gross margin

   14,987     8,955           43,129     24,554        

Research and development and other technical expenses

   -5,153     -6,846     -25 %   -14,674     -19,827     -26 %

Selling expenses

   -2,377     -3,354     -29 %   -6,852     -10,888     -37 %

Administrative expenses

   -1,388     -3,423     -59 %   -5,315     -7,069     -25 %
    

 

 

 

 

 

Operating expenses

   -8,918     -13,623     -35 %   -26,841     -37,784     -29 %

Other operating revenues and costs

   492     431           1,467     540        

Share in earnings of JV and associated companies

   654     247           1,709     -860        
    

 

       

 

     

Operating income

   7,215     -3,990           19,464     -13,550        

Financial income

   966     741     30 %   2,885     2,755     5 %

Financial expenses

   -1,163     -1,064     9 %   -3,205     -3,138     2 %
    

 

 

 

 

 

Income after financial items

   7,018     -4,313           19,144     -13,933        

Taxes

   -2,218     400           -5,911     3,067        

Minority interest

   -36     -33           -186     -120        
    

 

       

 

     

Net income

   4,764     -3,946           13,047     -10,986        

Other information

                                    

Average number of shares, basic (million)

   15,830     15,823           15,828     15,822        

Earnings per share, basic (SEK)

   0.30     -0.25           0.82     -0.69        

Earnings per share, diluted (SEK)

   0.30     -0.25           0.82     -0.69        

NOTE1

                                    

Restructuring costs, net

   —       -5,449           —       -12,441        
    

 

       

 

     

Total

   —       -5,449           —       -12,441        

-of which in

                                    

Cost of sales

   —       -1,111           —       -4,020        

Operating expenses

   —       -4,176           —       -7,831        

Other operating revenues and costs

   —       -162           —       -325        

Share in earnings of JV and associated companies / Phones

   —       —             —       -265        

NOTE 2

                                    

Key measurements, excluding restructuring costs

                                    

Net sales

   31,836     28,039           92,542     81,511        

Gross margin

   14,987     10,066           43,129     28,574        

- as percentage of net sales

   47.1 %   35.9 %         46.6 %   35.1 %      

Operating expenses

   -8,918     -9,447           -26,841     -29,953        

- as percentage of net sales

   28.0 %   33.7 %         29.0 %   36.7 %      

Other operating revenues and costs

   492     593           1,467     865        

Share in earnings of JV and assoc. companies

   654     247           1,709     -595        
    

 

       

 

     

Operating income

   7,215     1,459           19,464     -1,109        

Operating margin (%)

   22.7 %   5.2 %         21.0 %   -1.4 %      

Income after financial items

   7,018     1,136           19,144     -1,492        

 

9


ERICSSON

CONSOLIDATED BALANCE SHEET

 

SEK million


   Sep 30
2004


   Dec 31
2003


   Sep 30
2003


ASSETS

              

Fixed assets

              

Intangible assets

              

Capitalized development expenses

   4,548    4,784    4,408

Goodwill

   5,813    5,739    6,231

Other

   700    687    716

Tangible assets

   5,743    6,505    6,400

Financial assets

              

Equity in JV and associated companies

   3,992    2,970    2,662

Other investments

   547    433    548

Long-term customer financing

   2,222    3,027    3,041

Deferred tax assets

   23,213    27,130    28,875

Other long-term receivables

   1,267    1,342    1,802
    
  
  
     48,045    52,617    54,683
    
  
  

Current assets

              

Inventories

   16,451    10,965    11,381

Receivables

              

Accounts receivable - trade

   31,031    31,886    29,047

Short-term customer financing

   1,194    979    1,296

Other receivables

   10,923    12,718    17,161

Short-term cash investments, cash and bank

   72,608    73,207    69,552
    
  
  
     132,207    129,755    128,437
    
  
  

Total assets

   180,252    182,372    183,120
    
  
  

STOCKHOLDERS’ EQUITY, PROVISIONS AND LIABILITIES

              

Stockholders’ equity

   72,481    60,481    60,860
    
  
  

Minority interest in equity of consolidated subsidiaries

   1,164    2,299    2,239
    
  
  

Provisions

              

Pensions

   10,358    8,005    11,581

Other provisions

   25,775    28,063    23,470
    
  
  
     36,133    36,068    35,051
    
  
  

Long-term liabilities

   24,851    29,772    28,124
    
  
  

Current liabilities

              

Interest-bearing liabilities

   2,335    9,509    10,448

Accounts payable

   9,924    8,895    8,568

Other current liabilities

   33,364    35,348    37,830
    
  
  
     45,623    53,752    56,846
    
  
  

Total stockholders’ equity, provisions and liabilities

   180,252    182,372    183,120
    
  
  

Of which interest-bearing provisions and liabilities

   35,813    46,209    49,018

Net cash

   36,795    26,998    20,534

Assets pledged as collateral

   7,716    8,023    7,631

Contingent liabilities

   1,784    2,691    3,003

 

10


ERICSSON

CONSOLIDATED STATEMENT OF CASH FLOWS

 

     Jul - Sep

   Jan - Sep

   Jan - Dec

SEK million


   2004

   2003

   2004

   2003

   2003

Net income

   4,764    -3,946    13,047    -10,986    -10,844

Adjustments to reconcile net income to cash

   2,651    455    6,089    2,227    6,387
    
  
  
  
  
     7,415    -3,491    19,136    -8,759    -4,457

Changes in operating net assets

                        

Inventories

   -1,847    1,106    -5,483    2,038    2,286

Customer financing, short-term and long-term

   -441    5,273    785    8,220    7,999

Accounts receivable

   617    882    1,033    7,680    4,131

Other

   765    6,150    721    9,006    12,908
    
  
  
  
  

Cash flow from operating activities

   6,509    9,920    16,192    18,185    22,867

Product development

   -330    -458    -792    -1,731    -2,359

Other investing activities

   -1,002    -357    -3,044    -1,556    -1,053
    
  
  
  
  

Cash flow from investing activities

   -1,332    -815    -3,836    -3,287    -3,412
    
  
  
  
  

Cash flow before financing activities

   5,177    9,105    12,356    14,898    19,455
    
  
  
  
  

Dividends paid

   -142    -192    -152    -209    -206

Other equity transactions

   2    3    9    5    8

Other financing activities

   -10,361    -1,453    -13,056    -10,988    -11,726
    
  
  
  
  

Cash flow from financing activities

   -10,501    -1,642    -13,199    -11,192    -11,924

Effect of exchange rate changes on cash

   -71    -269    244    -368    -538
    
  
  
  
  

Net change in cash

   -5,395    7,194    -599    3,338    6,993

Cash and cash equivalents, beginning of period

   78,003    62,358    73,207    66,214    66,214
    
  
  
  
  

Cash and cash equivalents, end of period

   72,608    69,552    72,608    69,552    73,207
    
  
  
  
  

 

11


CHANGES IN STOCKHOLDERS’ EQUITY

 

SEK million


   Jan-Sep
2004


   Jan-Dec
2003


   Jan-Sep
2003


Opening balance

   60,481    73,607    73,607

Effect of changed accounting principle

   -1,275    —      —  
    
  
  

Opening balance in accordance with new accounting principle

   59,206    73,607    73,607

Stock issue, net

   —      158    158

Sale of own shares

   9    8    5

Stock Purchase and Option Plans

   103    151    125

Repurchase of own stock

   —      -158    -158

Changes in cumulative translation effects due to changes in foreign currency exchange rates

   116    -2,444    -1,891

Adjustment of cost for stock issue 2002

   —      3    —  

Net income

   13,047    -10,844    -10,986
    
  
  

Closing balance

   72,481    60,481    60,860
    
  
  

 

12


ERICSSON

CONSOLIDATED INCOME STATEMENT - ISOLATED QUARTERS

 

     2003

    2004

 

SEK million


   Q1

    Q2

    Q3

    Q4

    Q1

    Q2

    Q3

 

Net sales

   25,859     27,613     28,039     36,227     28,111     32,595     31,836  

Cost of sales

   -18,862     -19,011     -19,084     -21,944     -15,544     -17,020     -16,849  
    

 

 

 

 

 

 

Gross margin

   6,997     8,602     8,955     14,283     12,567     15,575     14,987  

Research and development and other technical expenses

   -6,897     -6,084     -6,846     -7,309     -4,792     -4,729     -5,153  

Selling expenses

   -3,449     -4,085     -3,354     -4,227     -2,232     -2,243     -2,377  

Administrative expenses

   -1,804     -1,842     -3,423     -1,693     -1,710     -2,217     -1,388  
    

 

 

 

 

 

 

Operating expenses

   -12,150     -12,011     -13,623     -13,229     -8,734     -9,189     -8,918  

Other operating revenues and costs

   -86     195     431     1,001     164     811     492  

Share in earnings of JV and assoc. companies

   -742     -365     247     256     517     538     654  
    

 

 

 

 

 

 

Operating income

   -5,981     -3,579     -3,990     2,311     4,514     7,735     7,215  

Financial income

   1,164     850     741     1,240     932     987     966  

Financial expenses

   -1,218     -856     -1,064     -1,721     -1,133     -909     -1,163  
    

 

 

 

 

 

 

Income after financial items

   -6,035     -3,585     -4,313     1,830     4,313     7,813     7,018  

Taxes

   1,847     820     400     -1,607     -1,243     -2,450     -2,218  

Minority interest

   -124     37     -33     -81     -77     -73     -36  
    

 

 

 

 

 

 

Net income

   -4,312     -2,728     -3,946     142     2,993     5,290     4,764  

Other information

                                          

Average number of shares, basic (million)

   15,820     15,822     15,823     15,825     15,749     15,829     15,830  

Earnings per share, basic (SEK)

   -0.27     -0.17     -0.25     0.01     0.19     0.33     0.30  

Earnings per share, diluted (SEK)

   -0.27     -0.17     -0.25     0.01     0.19     0.33     0.30  

NOTE 1

                                          

Restructuring costs, net

   -3,193     -3,799     -5,449     -4,022     —       —       —    
    

 

 

 

 

 

 

Total

   -3,193     -3,799     -5,449     -4,022     —       —       —    

-of which in

                                          

Cost of sales

   -1,813     -1,096     -1,111     -770     —       —       —    

Operating expenses

   -1,359     -2,296     -4,176     -3,145     —       —       —    

Other operating revenues and costs

   -21     -142     -162     -20     —       —       —    

Share in earnings of JV and associated companies / Phones

   —       -265     —       -87     —       —       —    

NOTE 2

                                          
Key measurements, excluding restructuring costs                                           

Net sales

   25,859     27,613     28,039     36,227     28,111     32,595     31,836  

Gross margin

   8,810     9,698     10,066     15,053     12,567     15,575     14,987  

- as percentage of net sales

   34.1 %   35.1 %   35.9 %   41.6 %   44.7 %   47.8 %   47.1 %

Operating expenses

   -10,791     -9,715     -9,447     -10,084     -8,734     -9,189     -8,918  

- as percentage of net sales

   41.7 %   35.2 %   33.7 %   27.8 %   31.1 %   28.2 %   28.0 %

Other operating revenues and costs

   -65     337     593     1,021     164     811     492  

Share in earnings of JV and assoc. companies

   -742     -100     247     343     517     538     654  
    

 

 

 

 

 

 

Operating income

   -2,788     220     1,459     6,333     4,514     7,735     7,215  

Operating margin (%)

   -10.8 %   0.8 %   5.2 %   17.5 %   16.1 %   23.7 %   22.7 %

Income after financial items

   -2,842     214     1,136     5,852     4,313     7,813     7,018  

 

13


ACCOUNTING POLICIES AND REPORTING

 

ACCOUNTING POLICIES

 

Interim reports are prepared in accordance with RR20 “Interim Financial Reporting.”

 

CHANGED ACCOUNTING POLICIES AND REPORTING IN 2004

 

RR29 “Employee Benefits”, which is based on IAS 19 “Employee Benefits” issued by International Accounting Standards Committee (“IASC”), has been adopted as from January 1, 2004. When applying RR 29, defined benefit plans for pensions and other post-employment benefits are accounted for using consistent principles. Prior to 2004, such plans have been accounted for by using local principles for each country in the consolidated accounts. The effect of this standard is mainly a change in timing of pension costs compared to previous principles, so that pension costs for future salary increases are estimated and recognized during the service period. In accordance with the transition rules, a transition liability was determined as of 1 January 2004. This transition liability exceeded the liability for pensions recognized per December 31, 2003 in accordance with earlier principles and the net effect of the change in accounting principles at adoption has in accordance with RR29 been charged to stockholders’ equity. The one-time effect of adopting RR29 was an increase of the pension liability as of January 1, 2004, by SEK 1.8 billion. The effect on equity, net after taxes, was SEK 1.3 billion. RR29 has not had material impact on reported Net Income or Earnings Per Share.

 

The company has chosen to follow the guidance of the draft interpretation URA43 “Accounting for particular social taxes and wealth tax” issued by The Swedish Accounting Standards Council.

 

INTERNATIONAL FINANCIAL REPORTING STANDARDS 2005

 

From 2005, Ericsson will be required to report according to IFRS. An internal project is underway to identify differences between current GAAP and what changes will be necessary. The company is in the process of evaluating the impact. It is expected that IAS 39 regarding financial instruments, IFRS 3 Business combinations and IAS 38 Intangible Assets will be the standards with the largest impact.

 

REPORTING

 

CHANGED DEFINITIONS COMPARED TO PREVIOUS ANNUAL REPORT

 

Items affecting comparability

 

During 2003 restructuring costs, non-operational capital gains/losses and capitalization of development expenses were reported as items affecting comparability. Due to the immateriality of the non-operational capital gains/losses for 2003 and the fact that the capitalization of development expenses are no longer, per se, affecting comparability, these items are no longer reported as items affecting comparability.

 

14


ORDERS BOOKED BY SEGMENT BY QUARTER

 

SEK million

 

     2003

    2004

 

Isolated quarters


   Q1

    Q2

    Q3

    Q4

    Q1

    Q2

    Q3

 

Systems

   24,996     26,336     26,518     27,592     31,107     31,191     27,369  

- Mobile Networks

   17,475     20,020     21,508     20,455     24,944     25,457     22,800  

- Fixed Networks

   1,990     1,724     1,513     1,128     1,173     1,081     670  

Total Network Equipment

   19,465     21,744     23,021     21,583     26,117     26,538     23,470  

- Of which Network Rollout

   2,542     2,000     2,025     2,153     2,705     3,226     2,581  

Professional Services

   5,531     4,592     3,497     6,009     4,990     4,653     3,899  

Other Operations

   2,587     2,312     1,963     2,330     2,384     2,703     2,454  

Less: Intersegment Orders

   -523     -300     -353     -458     -477     -782     -857  
    

 

 

 

 

 

 

Total

   27,060     28,348     28,128     29,464     33,014     33,112     28,966  
    

 

 

 

 

 

 

     2003

    2004

 

Sequential change


   Q1

    Q2

    Q3

    Q4

    Q1

    Q2

    Q3

 

Systems

   -12 %   5 %   1 %   4 %   13 %   0 %   -12 %

- Mobile Networks

   -16 %   15 %   7 %   -5 %   22 %   2 %   -10 %

- Fixed Networks

   4 %   -13 %   -12 %   -25 %   4 %   -8 %   -38 %

Total Network Equipment

   -15 %   12 %   6 %   -6 %   21 %   2 %   -12 %

- Of which Network Rollout

   -37 %   -21 %   1 %   6 %   26 %   19 %   -20 %

Professional Services

   -3 %   -17 %   -24 %   72 %   -17 %   -7 %   -16 %

Other Operations

   1 %   -11 %   -15 %   19 %   2 %   13 %   -9 %

Less: Intersegment Orders

   30 %   -43 %   18 %   30 %   4 %   64 %   10 %
    

 

 

 

 

 

 

Total

   -12 %   5 %   -1 %   5 %   12 %   0 %   -13 %
    

 

 

 

 

 

 

     2003

    2004

 

Year over year change


   Q1

    Q2

    Q3

    Q4

    Q1

    Q2

    Q3

 

Systems

   -34 %   -16 %   48 %   -3 %   24 %   18 %   3 %

- Mobile Networks

   -40 %   -13 %   73 %   -2 %   43 %   27 %   6 %

- Fixed Networks

   -26 %   -42 %   -14 %   -41 %   -41 %   -37 %   -56 %

Total Network Equipment

   -39 %   -16 %   62 %   -5 %   34 %   22 %   2 %

- Of which Network Rollout

   -46 %   -49 %   44 %   -46 %   6 %   61 %   27 %

Professional Services

   -2 %   -14 %   -7 %   5 %   -10 %   1 %   11 %

Other Operations

   -47 %   -52 %   -37 %   -9 %   -8 %   17 %   25 %

Less: Intersegment Orders

   -25 %   -61 %   -31 %   14 %   -9 %   161 %   143 %
    

 

 

 

 

 

 

Total

   -35 %   -20 %   37 %   -4 %   22 %   17 %   3 %
    

 

 

 

 

 

 

     2003

    2004

 

Year to Date


   0303

    0306

    0309

    0312

    0403

    0406

    0409

 

Systems

   24,996     51,332     77,850     105,442     31,107     62,298     89,667  

- Mobile Networks

   17,475     37,495     59,003     79,458     24,944     50,401     73,201  

- Fixed Networks

   1,990     3,714     5,227     6,355     1,173     2,254     2,924  

Total Network Equipment

   19,465     41,209     64,230     85,813     26,117     52,655     76,125  

- Of which Network Rollout

   2,542     4,542     6,567     8,720     2,705     5,931     8,512  

Professional Services

   5,531     10,123     13,620     19,629     4,990     9,643     13,542  

Other Operations

   2,587     4,899     6,862     9,192     2,384     5,087     7,541  

Less: Intersegment Orders

   -523     -823     -1,176     -1,634     -477     -1,259     -2,116  
    

 

 

 

 

 

 

Total

   27,060     55,408     83,536     113,000     33,014     66,126     95,092  
    

 

 

 

 

 

 

     2003

    2004

 

YTD year over year change


   0303

    0306

    0309

    0312

    0403

    0406

    0409

 

Systems

   -34 %   -25 %   -10 %   -9 %   24 %   21 %   15 %

- Mobile Networks

   -40 %   -28 %   -9 %   -7 %   43 %   34 %   24 %

- Fixed Networks

   -26 %   -34 %   -29 %   -32 %   -41 %   -39 %   -44 %

Total Network Equipment

   -39 %   -29 %   -11 %   -10 %   34 %   28 %   19 %

- Of which Network Rollout

   -46 %   -47 %   -35 %   -38 %   6 %   31 %   30 %

Professional Services

   -2 %   -8 %   -8 %   -4 %   -10 %   -5 %   -1 %

Other Operations

   -47 %   -50 %   -46 %   -40 %   -8 %   4 %   10 %

Less: Intersegment Orders

   -25 %   -44 %   -40 %   -31 %   -9 %   53 %   80 %
    

 

 

 

 

 

 

Total

   -35 %   -28 %   -14 %   -12 %   22 %   19 %   14 %
    

 

 

 

 

 

 

 

15


NET SALES BY SEGMENT BY QUARTER

 

SEK million

 

     2003

    2004

 

Isolated quarters


   Q1

    Q2

    Q3

    Q4

    Q1

    Q2

    Q3

 

Systems

   23,961     25,224     25,907     33,574     26,092     30,380     29,627  

- Mobile Networks

   17,643     18,949     19,826     25,635     21,081     24,241     23,773  

- Fixed Networks

   1,898     2,177     1,670     2,220     896     1,129     1,027  

Total Network Equipment

   19,541     21,126     21,496     27,855     21,977     25,370     24,800  

- Of which Network Rollout

   2,577     2,532     2,791     3,213     2,205     2,490     2,648  

Professional Services

   4,420     4,098     4,411     5,719     4,115     5,010     4,827  

Other Operations

   2,363     2,534     2,508     3,174     2,449     2,806     2,828  

Less: Intersegment Sales

   -465     -145     -376     -521     -430     -591     -619  
    

 

 

 

 

 

 

Total

   25,859     27,613     28,039     36,227     28,111     32,595     31,836  
    

 

 

 

 

 

 

     2003

    2004

 

Sequential change


   Q1

    Q2

    Q3

    Q4

    Q1

    Q2

    Q3

 

Systems

   -28 %   5 %   3 %   30 %   -22 %   16 %   -2 %

- Mobile Networks

   -28 %   7 %   5 %   29 %   -18 %   15 %   -2 %

- Fixed Networks

   -38 %   15 %   -23 %   33 %   -60 %   26 %   -9 %

Total Network Equipment

   -29 %   8 %   2 %   30 %   -21 %   15 %   -2 %

- Of which Network Rollout

   -33 %   -2 %   10 %   15 %   -31 %   13 %   6 %

Professional Services

   -20 %   -7 %   8 %   30 %   -28 %   22 %   -4 %

Other Operations

   -39 %   7 %   -1 %   27 %   -23 %   15 %   1 %

Less: Intersegment Sales

   22 %   -69 %   159 %   39 %   -17 %   37 %   5 %
    

 

 

 

 

 

 

Total

   -30 %   7 %   2 %   29 %   -22 %   16 %   -2 %
    

 

 

 

 

 

 

     2003

    2004

 

Year over year change


   Q1

    Q2

    Q3

    Q4

    Q1

    Q2

    Q3

 

Systems

   -28 %   -27 %   -15 %   1 %   9 %   20 %   14 %

- Mobile Networks

   -31 %   -30 %   -17 %   4 %   19 %   28 %   20 %

- Fixed Networks

   -42 %   -27 %   -30 %   -27 %   -53 %   -48 %   -39 %

Total Network Equipment

   -32 %   -29 %   -18 %   1 %   12 %   20 %   15 %

- Of which Network Rollout

   -38 %   -34 %   -5 %   -16 %   -14 %   -2 %   -5 %

Professional Services

   -1 %   -15 %   2 %   3 %   -7 %   22 %   9 %

Other Operations

   -45 %   -44 %   -27 %   -18 %   4 %   11 %   13 %

Less: Intersegment Sales

   -32 %   -82 %   -29 %   37 %   -8 %   308 %   65 %
    

 

 

 

 

 

 

Total

   -30 %   -28 %   -16 %   -1 %   9 %   18 %   14 %
    

 

 

 

 

 

 

     2003

    2004

 

Year to Date


   0303

    0306

    0309

    0312

    0403

    0406

    0409

 

Systems

   23,961     49,185     75,092     108,666     26,092     56,472     86,099  

- Mobile Networks

   17,643     36,592     56,418     82,053     21,081     45,322     69,095  

- Fixed Networks

   1,898     4,075     5,745     7,965     896     2,025     3,052  

Total Network Equipment

   19,541     40,667     62,163     90,018     21,977     47,347     72,147  

- Of which Network Rollout

   2,577     5,109     7,900     11,113     2,205     4,695     7,343  

Professional Services

   4,420     8,518     12,929     18,648     4,115     9,125     13,952  

Other Operations

   2,363     4,897     7,405     10,579     2,449     5,255     8,083  

Less: Intersegment Sales

   -465     -610     -986     -1,507     -430     -1,021     -1,640  
    

 

 

 

 

 

 

Total

   25,859     53,472     81,511     117,738     28,111     60,706     92,542  
    

 

 

 

 

 

 

     2003

    2004

 

YTD year over year change


   0303

    0306

    0309

    0312

    0403

    0406

    0409

 

Systems

   -28 %   -28 %   -24 %   -18 %   9 %   15 %   15 %

- Mobile Networks

   -31 %   -30 %   -26 %   -19 %   19 %   24 %   22 %

- Fixed Networks

   -42 %   -35 %   -34 %   -32 %   -53 %   -50 %   -47 %

Total Network Equipment

   -32 %   -31 %   -27 %   -20 %   12 %   16 %   16 %

- Of which Network Rollout

   -38 %   -36 %   -28 %   -25 %   -14 %   -8 %   -7 %

Professional Services

   -1 %   -9 %   -5 %   -3 %   -7 %   7 %   8 %

Other Operations

   -45 %   -45 %   -40 %   -35 %   4 %   7 %   9 %

Less: Intersegment Sales

   -32 %   -59 %   -51 %   -37 %   -8 %   67 %   66 %
    

 

 

 

 

 

 

Total

   -30 %   -29 %   -25 %   -19 %   9 %   14 %   14 %
    

 

 

 

 

 

 

 

16


OPERATING INCOME, OPERATING MARGIN AND EMPLOYEES BY SEGMENT BY QUARTER

 

SEK million

 

OPERATING INCOME AND MARGIN

 

     20031)

    2004

 

Year to date


   0303

    0306

    0309

    0312

    0403

    0406

    0409

 

Systems

   -1,487     -503     863     6,646     4,199     10,514     17,011  

Phones

   -500     -683     -483     -183     435     960     1,565  

Other Operations

   -483     -833     -710     -447     45     606     868  

Unallocated2)

   -318     -549     -779     -792     -165     169     20  
    

 

 

 

 

 

 

Total

   -2,788     -2,568     -1,109     5,224     4,514     12,249     19,464  
    

 

 

 

 

 

 

     20031)

    2004

 

As percentage of net sales


   0303

    0306

    0309

    0312

    0403

    0406

    0409

 

Systems

   -6 %   -1 %   1 %   6 %   16 %   19 %   20 %

Phones3)

   —       —       —       —       —       —       —    

Other Operations

   -20 %   -17 %   -10 %   -4 %   2 %   12 %   11 %
    

 

 

 

 

 

 

Total

   -11 %   -5 %   -1 %   4 %   16 %   20 %   21 %
    

 

 

 

 

 

 

     20031)

    2004

 

Isolated quarters


   Q1

    Q2

    Q3

    Q4

    Q1

    Q2

    Q3

 

Systems

   -1,487     984     1,366     5,783     4,199     6,315     6,497  

Phones

   -500     -183     200     300     435     525     605  

Other Operations

   -483     -350     123     263     45     561     262  

Unallocated2)

   -318     -231     -230     -13     -165     334     -149  
    

 

 

 

 

 

 

Total

   -2,788     220     1,459     6,333     4,514     7,735     7,215  
    

 

 

 

 

 

 

    
    20031)

   
   
   
    2004

   
 

As percentage of net sales


   Q1

    Q2

    Q3

    Q4

    Q1

    Q2

    Q3

 

Systems

   -6 %   4 %   5 %   17 %   16 %   21 %   22 %

Phones3)

   —       —       —       —       —       —       —    

Other Operations

   -20 %   -14 %   5 %   8 %   2 %   20 %   9 %
    

 

 

 

 

 

 

Total

   -11 %   1 %   5 %   17 %   16 %   24 %   23 %
    

 

 

 

 

 

 


1) 2003 figures are reported excluding restructuring costs.
2) “Unallocated” consists mainly of costs for corporate staffs and non-operational gains and losses
3) Calculation not applicable

 

NUMBER OF EMPLOYEES

 

     2003

    2004

 
     0303

    0306

    0309

    0312

    0403

    0406

    0409

 

Systems

   53,532     50,510     46,669     45,176     45,209     45,108     44,998  

Other Operations

   7,047     6,786     6,409     6,110     5,440     5,568     5,260  

Unallocated

   361     348     323     297     —       —       —    
    

 

 

 

 

 

 

Total

   60,940     57,644     53,401     51,583     50,649     50,676     50,258  
    

 

 

 

 

 

 

     2003

    2004

 

Change in percent


   0303

    0306

    0309

    0312

    0403

    0406

    0409

 

Systems

   -25 %   -23 %   -25 %   -20 %   -16 %   -11 %   -4 %

Other Operations

   -34 %   -31 %   -27 %   -20 %   -23 %   -18 %   -18 %

Unallocated

   -9 %   -22 %   -20 %   -23 %   —       —       —    
    

 

 

 

 

 

 

Total

   -26 %   -24 %   -26 %   -20 %   -17 %   -12 %   -6 %
    

 

 

 

 

 

 

 

17


ORDERS BOOKED BY MARKET AREA BY QUARTER

 

SEK million

 

     20031)

    20041)

 

Isolated quarters


   Q1

    Q2

    Q3

    Q4

    Q1

    Q2

    Q3

 

Europe, Middle East & Africa*

   14,081     14,425     14,140     11,521     17,836     17,749     15,846  

North America

   4,693     4,622     4,380     6,542     4,679     2,434     2,459  

Latin America

   2,621     1,669     2,245     2,547     3,700     4,587     4,460  

Asia Pacific

   5,665     7,632     7,363     8,854     6,799     8,342     6,201  
    

 

 

 

 

 

 

Total

   27,060     28,348     28,128     29,464     33,014     33,112     28,966  
    

 

 

 

 

 

 

* Of which Sweden

   1,406     1,190     967     854     964     1,317     977  

* Of which EU

   9,643     7,172     8,655     8,062     10,098     10,476     8,751  
     20031)

    20041)

 

Sequential change


   Q1

    Q2

    Q3

    Q4

    Q1

    Q2

    Q3

 

Europe, Middle East & Africa*

   -25 %   2 %   -2 %   -19 %   55 %   0 %   -11 %

North America

   -16 %   -2 %   -5 %   49 %   -28 %   -48 %   1 %

Latin America

   —       -36 %   35 %   13 %   45 %   24 %   -3 %

Asia Pacific

   -12 %   35 %   -4 %   20 %   -23 %   23 %   -26 %
    

 

 

 

 

 

 

Total

   -12 %   5 %   -1 %   5 %   12 %   0 %   -13 %
    

 

 

 

 

 

 

* Of which Sweden

   6 %   -15 %   -19 %   -12 %   13 %   37 %   -26 %

* Of which EU

   0 %   -25 %   21 %   -7 %   25 %   4 %   -16 %
     20031)

    20041)

 

Year over year change


   Q1

    Q2

    Q3

    Q4

    Q1

    Q2

    Q3

 

Europe, Middle East & Africa*

   -28 %   -18 %   48 %   -38 %   27 %   23 %   12 %

North America

   -33 %   -21 %   -2 %   18 %   0 %   -47 %   -44 %

Latin America

   -46 %   -50 %   58 %   —       41 %   175 %   99 %

Asia Pacific

   -46 %   -9 %   45 %   38 %   20 %   9 %   -16 %
    

 

 

 

 

 

 

Total

   -35 %   -20 %   37 %   -4 %   22 %   17 %   3 %
    

 

 

 

 

 

 

* Of which Sweden

   -42 %   -53 %   -28 %   -36 %   -31 %   11 %   1 %

* Of which EU

   -1 %   -47 %   110 %   -24 %   5 %   46 %   1 %
     20031)

    20041)

 

Year to date


   0303

    0306

    0309

    0312

    0403

    0406

    0409

 

Europe, Middle East & Africa*

   14,081     28,506     42,646     54,167     17,836     35,585     51,431  

North America

   4,693     9,315     13,695     20,237     4,679     7,113     9,572  

Latin America

   2,621     4,290     6,535     9,082     3,700     8,287     12,747  

Asia Pacific

   5,665     13,297     20,660     29,514     6,799     15,141     21,342  
    

 

 

 

 

 

 

Total

   27,060     55,408     83,536     113,000     33,014     66,126     95,092  
    

 

 

 

 

 

 

* Of which Sweden

   1,406     2,596     3,563     4,417     964     2,281     3,258  

* Of which EU

   9,643     16,815     25,470     33,532     10,098     20,574     29,325  
     20031)

    20041)

 

YTD year over year change


   0303

    0306

    0309

    0312

    0403

    0406

    0409

 

Europe, Middle East & Africa*

   -28 %   -23 %   -9 %   -17 %   27 %   25 %   21 %

North America

   -33 %   -27 %   -21 %   -12 %   0 %   -24 %   -30 %

Latin America

   -46 %   -48 %   -32 %   -5 %   41 %   93 %   95 %

Asia Pacific

   -46 %   -30 %   -14 %   -3 %   20 %   14 %   3 %
    

 

 

 

 

 

 

Total

   -35 %   -28 %   -14 %   -12 %   22 %   19 %   14 %
    

 

 

 

 

 

 

* Of which Sweden

   -42 %   -47 %   -43 %   -42 %   -31 %   -12 %   -9 %

* Of which EU

   -1 %   -28 %   -7 %   -11 %   5 %   22 %   15 %

1) “Of which EU”: Restated due to new members since April 1, 2004.

 

18


NET SALES BY MARKET AREA BY QUARTER

 

SEK million

 

     20031)

    20041)

 

Isolated quarters


   Q1

    Q2

    Q3

    Q4

    Q1

    Q2

    Q3

 

Europe, Middle East & Africa*

   13,983     15,083     14,144     19,633     14,986     17,119     18,247  

North America

   3,940     4,217     4,271     5,199     4,404     4,939     3,328  

Latin America

   1,764     2,197     2,663     3,301     2,867     3,455     3,665  

Asia Pacific

   6,172     6,116     6,961     8,094     5,854     7,082     6,596  
    

 

 

 

 

 

 

Total

   25,859     27,613     28,039     36,227     28,111     32,595     31,836  
    

 

 

 

 

 

 

* Of which Sweden

   1,403     1,437     1,371     1,657     1,341     1,543     1,457  

* Of which EU

   8,584     8,847     8,488     12,224     8,167     10,144     10,053  
     20031)

    20041)

 

Sequential change


   Q1

    Q2

    Q3

    Q4

    Q1

    Q2

    Q3

 

Europe, Middle East & Africa*

   -32 %   8 %   -6 %   39 %   -24 %   14 %   7 %

North America

   -40 %   7 %   1 %   22 %   -15 %   12 %   -33 %

Latin America

   -26 %   25 %   21 %   24 %   -13 %   21 %   6 %

Asia Pacific

   -13 %   -1 %   14 %   16 %   -28 %   21 %   -7 %
    

 

 

 

 

 

 

Total

   -30 %   7 %   2 %   29 %   -22 %   16 %   -2 %
    

 

 

 

 

 

 

* Of which Sweden

   -32 %   2 %   -5 %   21 %   -19 %   15 %   -6 %

* Of which EU

   -36 %   2 %   -1 %   43 %   -33 %   24 %   -1 %
     20031)

    20041)

 

Year over year change


   Q1

    Q2

    Q3

    Q4

    Q1

    Q2

    Q3

 

Europe, Middle East & Africa*

   -21 %   -21 %   -16 %   -5 %   7 %   13 %   29 %

North America

   -3 %   -30 %   -33 %   -21 %   12 %   17 %   -22 %

Latin America

   -59 %   -29 %   -7 %   38 %   63 %   57 %   38 %

Asia Pacific

   -44 %   -41 %   -7 %   14 %   -5 %   16 %   -5 %
    

 

 

 

 

 

 

Total

   -30 %   -28 %   -16 %   -1 %   9 %   18 %   14 %
    

 

 

 

 

 

 

* Of which Sweden

   -29 %   -44 %   -18 %   -20 %   -4 %   7 %   6 %

* Of which EU

   -27 %   -27 %   -14 %   -8 %   -5 %   15 %   18 %
     20031)

    20041)

 

Year to date


   0303

    0306

    0309

    0312

    0403

    0406

    0409

 

Europe, Middle East & Africa*

   13,983     29,066     43,210     62,843     14,986     32,105     50,352  

North America

   3,940     8,157     12,428     17,627     4,404     9,343     12,671  

Latin America

   1,764     3,961     6,624     9,925     2,867     6,322     9,987  

Asia Pacific

   6,172     12,288     19,249     27,343     5,854     12,936     19,532  
    

 

 

 

 

 

 

Total

   25,859     53,472     81,511     117,738     28,111     60,706     92,542  
    

 

 

 

 

 

 

* Of which Sweden

   1,403     2,840     4,211     5,868     1,341     2,884     4,341  

* Of which EU

   8,584     17,431     25,919     38,143     8,167     18,311     28,364  
     20031)

    20041)

 

YTD year over year change


   0303

    0306

    0309

    0312

    0403

    0406

    0409

 

Europe, Middle East & Africa*

   -21 %   -21 %   -19 %   -15 %   7 %   10 %   17 %

North America

   -3 %   -20 %   -25 %   -24 %   12 %   15 %   2 %

Latin America

   -59 %   -47 %   -36 %   -22 %   63 %   60 %   51 %

Asia Pacific

   -44 %   -42 %   -33 %   -24 %   -5 %   5 %   1 %
    

 

 

 

 

 

 

Total

   -30 %   -29 %   -25 %   -19 %   9 %   14 %   14 %
    

 

 

 

 

 

 

* Of which Sweden

   -29 %   -38 %   -32 %   -29 %   -4 %   2 %   3 %
* Of which EU    -27 %   -27 %   -23 %   -19 %   -5 %   5 %   9 %

1) “Of which EU”: Restated due to new members since April 1, 2004.

 

19


EXTERNAL ORDERS BOOKED BY MARKET AREA BY SEGMENT

 

SEK million

 

Jan - Sep 2004


   Systems

    Share of
Systems


    Other

    Share of
Other


    Total

    Share of
Total


 

Europe, Middle East & Africa

   46,347     53 %   5,084     76 %   51,431     54 %

North America

   9,167     10 %   405     6 %   9,572     10 %

Latin America

   12,551     14 %   196     3 %   12,747     13 %

Asia Pacific

   20,306     23 %   1,036     15 %   21,342     23 %
    

 

 

 

 

 

Total

   88,371     100 %   6,721     100 %   95,092     100 %
    

 

 

 

 

 

Share of Total

   93 %         7 %         100 %      

Jan - Sep 2003


   Systems

    Share of
Systems


    Other

    Share of
Other


    Total

    Share of
Total


 

Europe, Middle East & Africa

   37,857     49 %   4,789     76 %   42,646     51 %

North America

   13,215     17 %   480     8 %   13,695     16 %

Latin America

   6,372     8 %   163     3 %   6,535     8 %

Asia Pacific

   19,849     26 %   811     13 %   20,660     25 %
    

 

 

 

 

 

Total

   77,293     100 %   6,243     100 %   83,536     100 %
    

 

 

 

 

 

Share of Total

   93 %         7 %         100 %      

Change


   Systems

          Other

          Total

       

Europe, Middle East & Africa

   22 %         6 %         21 %      

North America

   -31 %         -16 %         -30 %      

Latin America

   97 %         20 %         95 %      

Asia Pacific

   2 %         28 %         3 %      
    

       

       

     

Total

   14 %         8 %         14 %      
    

       

       

     

 

EXTERNAL NET SALES BY MARKET AREA BY SEGMENT

 

SEK million

 

Jan - Sep 2004


   Systems

    Share of
Systems


    Other

    Share of
Other


    Total

    Share of
Total


 

Europe, Middle East & Africa

   44,831     53 %   5,521     74 %   50,352     54 %

North America

   12,160     14 %   511     7 %   12,671     14 %

Latin America

   9,721     11 %   266     4 %   9,987     11 %

Asia Pacific

   18,455     22 %   1,077     15 %   19,532     21 %
    

 

 

 

 

 

Total

   85,167     100 %   7,375     100 %   92,542     100 %
    

 

 

 

 

 

Share of Total

   92 %         8 %         100 %      

Jan - Sep 2003


   Systems

    Share of
Systems


    Other

    Share of
Other


    Total

    Share of
Total


 

Europe, Middle East & Africa

   37,920     50 %   5,290     77 %   43,210     53 %

North America

   12,080     16 %   348     5 %   12,428     15 %

Latin America

   6,384     9 %   240     4 %   6,624     8 %

Asia Pacific

   18,311     25 %   938     14 %   19,249     24 %
    

 

 

 

 

 

Total

   74,695     100 %   6,816     100 %   81,511     100 %
    

 

 

 

 

 

Share of Total

   92 %         8 %         100 %      

Change


   Systems

          Other

          Total

       

Europe, Middle East & Africa

   18 %         4 %         17 %      

North America

   1 %         47 %         2 %      

Latin America

   52 %         11 %         51 %      

Asia Pacific

   1 %         15 %         1 %      
    

       

       

     

Total

   14 %         8 %         14 %      
    

       

       

     

 

20


TOP 10 MARKETS IN ORDERS AND SALES

Year to date - Jan-Sep 2004

 

Orders


   Share of
total orders


   

Sales


   Share of
total sales


 

China

   9 %   United States    12 %

United States

   9 %   China    8 %

Italy

   8 %   Italy    6 %

Brazil

   6 %   Sweden    5 %

Spain

   5 %   Spain    4 %

Mexico

   4 %   Brazil    4 %

India

   4 %   Mexico    4 %

Russian Federation

   4 %   United Kingdom    3 %

Sweden

   3 %   Russian Federation    3 %

United Kingdom

   3 %   Germany    3 %

 

CUSTOMER FINANCING RISK EXPOSURE

 

(SEK billion)


   Sep 30
2003


   Dec 31
2003


   Mar 31
2004


   Jun 30
2004


   Sep 30
2004


On-balance-sheet credits

   10.4    10.6    10.3    8.6    9.0

Off-balance-sheet credits

   1.8    2.0    1.2    1.1    1.1
    
  
  
  
  

Total credits

   12.2    12.6    11.5    9.7    10.1

Accrued interest

   0.1    0.1    0.1    0.2    0.2

Less third party risk coverage

   -0.5    -0.4    -0.4    -0.5    -0.5
    
  
  
  
  

Ericsson risk exposure

   11.8    12.3    11.2    9.4    9.8
    
  
  
  
  

On-balance-sheet credits, net book value

   4.3    4.0    3.9    3.0    3.4

Off-balance-sheet credits recorded as contingent liabilities

   1.5    1.7    1.0    0.8    0.6

Financing commitments

   6.7    6.1    3.7    3.0    2.7

 

TREND OF NET SALES AND OPERATING EXPENSES - ISOLATED QUARTERS

 

SEK million


   2003

    2004

 
   Q1

    Q2

    Q3

    Q4

    Q1

    Q2

    Q3

 

Net sales

   25,859     27,613     28,039     36,227     28,111     32,595     31,836  

R&D and other technical expenses

   -6,444     -5,855     -4,772     -6,121     -4,718     -4,700     -5,020  

Selling expenses

   -3,153     -2,667     -3,092     -3,053     -2,232     -2,243     -2,377  

Administrative expenses

   -1,808     -1,605     -1,765     -1,286     -1,710     -2,217     -1,388  

Capitalization of development expenses, net

   614     412     182     376     -74     -29     -133  
    

 

 

 

 

 

 

Operating expenses

   -10,791     -9,715     -9,447     -10,084     -8,734     -9,189     -8,918  

Operating expenses as percentage of net sales

   41.7 %   35.2 %   33.7 %   27.8 %   31.1 %   28.2 %   28.0 %

Restructuring costs

   -1,359     -2,296     -4,176     -3,145     —       —       —    
    

 

 

 

 

 

 

Operating expenses incl. restructuring costs

   -12,150     -12,011     -13,623     -13,229     -8,734     -9,189     -8,918  

Items as % of net sales

                                          

R&D and other technical expenses

   24.9 %   21.2 %   17.0 %   16.9 %   16.8 %   14.4 %   15.8 %

Selling expenses

   12.2 %   9.7 %   11.0 %   8.4 %   7.9 %   6.9 %   7.5 %

G&A expenses

   7.0 %   5.8 %   6.3 %   3.5 %   6.1 %   6.8 %   4.4 %

Operating expenses, excluding capitalization of development

   -11,405     -10,127     -9,629     -10,460     -8,660     -9,160     -8,785  

- as percentage of net sales

   44.1 %   36.7 %   34.3 %   28.9 %   30.8 %   28.1 %   27.6 %

 

21


ERICSSON

OTHER INFORMATION

 

SEK million


  

Jul - Sep

2004


   

Jul - Sep

2003


   

Jan - Sep

2004


   

Jan - Sep

2003


   

Jan - Dec

2003


 

Number of shares and earnings per share

                              

Number of shares, end of period (million)

   16,132     16,132     16,132     16,132     16,132  

Number of treasury shares, end of period (million)

   302     308     302     308     306  

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

   15,830     15,824     15,830     15,824     15,826  

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

   15,861     15,841     15,861     15,841     15,844  

Average number of tresury shares (million)

   303     309     304     248     270  

Average number of shares outstanding, basic (million)

   15,830     15,823     15,828     15,822     15,823