Form 6-K/A

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K/A

REPORT OF FOREIGN ISSUER

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

the Securities Exchange Act of 1934

October 23, 2009

LM ERICSSON TELEPHONE COMPANY

(Translation of registrant’s name into English)

Torshamnsgatan 23, Kista

SE-164 83, Stockholm, Sweden

(Address of principal executive offices)

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

Form 20-F  x    Form 40-F  ¨

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes  ¨    No  x

 

 

Amended Form 6K dated October 23, 2009, to the announcement of LM Ericsson Telephone company, dated October 22, 2009 – On October 22, 2009, LM Ericsson Telephone Company filed its quarterly report for the third quarter ended September 30, 2009 on Form 6-K. This amendment to the Form 6-K filed on October 22, 2009 is being filed in order to include the Financial Statements and Additional Information inadvertently omitted from the earlier filing.


LOGO

 

 

THIRD QUARTER REPORT

October 22, 2009

 

  

ERICSSON REPORTS

THIRD QUARTER RESULTS

 

  
  

•        Sales SEK 46.4 (49.2) b, down 4% for comparable units, down 12% currency adjusted

 

•        Operating income1) before JVs SEK 5.5 (5.6) b

 

•        Operating margin1) before JVs 11.7% (11.5%)

 

•        Share in earnings from JVs1) SEK -1.5 (0.0) b

 

•        Income after financial items1) SEK 4.0 (6.2) b

 

•        Restructuring charges of SEK 2.7 (1.9) b, excl JV

 

•        Net income SEK 0.8 (2.9) b

 

•        Earnings per share SEK 0.25 (0.89)

 

•        Cash flow2) SEK 6.9 (2.7) b

  

 

1)      Excluding restructuring charges

2)      Excluding cash outlays for restructuring of SEK 1.2 (0.3) b and dividend from Sony Ericsson of SEK 1.4 b in Q3 2008

   CEO COMMENTS

SALES BY QUARTER

2008

AND 2009 (SEK B)

 

LOGO

  

“Sales of network equipment declined due to lower demand in the current tougher market environment. Despite lower volumes, Network margins remain stable. The strong development in Professional Services continued,” says Carl-Henric Svanberg, President and CEO of Ericsson (NASDAQ:ERIC). “Our cost reduction activities are running ahead of plan with further opportunities for efficiency improvements and savings.

 

As commented on in previous reports, the economic climate affects the global mobile infrastructure market and the credit environment is still tight in several emerging markets. However, other markets, including the world’s leading economies such as China, India, US and Japan show good development.

 

The technology shift from voice telephony to mobile broadband is ongoing. Mobile broadband users and traffic are increasing rapidly and will eventually connect billions of people to internet. With the shift follows the anticipated decline in GSM sales, accelerated by the current recession, which is not yet offset by the growth in mobile broadband.

 

Our services operation continues to show strong development. While managed services are often in focus, systems integration and consulting are increasingly important. Services margins are stable despite being negatively affected by the start up costs in the third quarter for the Sprint and Zain services contracts as well as the reduced scope and transformation costs for the renewed managed services agreement in Italy.

 

In late September, we were pleased to welcome the former Sprint employees into Ericsson, and we look forward to soon also welcome former Nortel employees. This, together with the major contract wins with Verizon, AT&T and Metro PCS in mobile and fixed broadband, makes Ericsson the leading provider of telecommunications technology and services in North America.

 

1


   While the current economic environment affects all parts of society the longer-term fundamentals for our industry remain solid. Mobile telephony is reaching a penetration beyond all expectations. We expect mobile broadband to show a similar exciting development over the years to come, not least as the vast majority of the world’s population will be able to reach internet only through mobile technology. We are well positioned to lead our industry forward,” concludes Carl-Henric Svanberg.

FINANCIAL HIGHLIGHTS

Income statement and cash flow

 

     Third quarter     Second quarter     Nine months  

SEK b.

   2009     2008     Change     2009     Change     2009     2008     Change  

Net sales

   46.4      49.2      -6   52.1      -11   148.1      141.9      4

Net sales for comparable units

   46.4      48.2      -4   52.1      -11   148.1      137.8      7

Gross margin

   36.2   37.0   —        36.3   —        36.3   37.5   —     

EBITDA margin excl JVs

   15.8   15.4   —        16.8   —        15.3   14.3   —     

Operating income excl JVs

   5.5      5.6      -3   6.9      -21   17.1      13.7      25

Operating margin excl JVs

   11.7   11.5   —        13.3   —        11.5   9.6   —     

Income after financial items

   4.0      6.2      -35   4.8      -18   12.2      15.3      -21

Net income

   0.8      2.9      -74   0.8      0   3.4      7.6      -55

EPS diluted, SEK

   0.25      0.89      -72   0.26      -4   1.05      2.31      -55

Adjusted cash flow1)

   6.9      2.7      —        9.9      —        15.1      14.2      —     

Cash flow from operations

   5.7      3.8      —        9.1      —        12.0      17.0      —     

All numbers, excl. EPS, Net income and Cash flow from operations excl. restructuring charges.

 

1) Cash flow from operations excl. restructuring cash outlays. Nine months cash outlays of SEK 3.2 (0.8) b and dividends from Sony Ericsson of SEK 0.0 (3.6) b

 

  

Sales in the quarter decreased 4% year-over-year for comparable units, i.e. excluding Ericsson Mobile Platforms, and decreased 12% adjusted for currency exchange rate effects and hedging. The third quarter last year was comparatively strong with no normal seasonality.

 

Sequential sales decreased 11%, negatively impacted by currency exchange rate effects, seasonality and a reduced scope of the renewed managed services agreement in Italy. The lower year-over-year sales in Networks and Multimedia were partly offset by stronger sales in Professional Services.

 

The gross margin, was flat sequentially despite the lower sales, and decreased only slightly year-over-year to 36.2% (37.0%). The year-over-year change is largely attributable to the sales mix, with a higher proportion of network rollout and professional services, efficiency gains and some currency exchange rate effects.

 

Operating expenses amounted to SEK 11.6 (12.9) b. in the quarter, excluding restructuring charges. The year-over-year reduction is primarily a result of ongoing cost reduction activities, offsetting negative impact from currency exchange rate effects.

 

Operating income excluding joint ventures and restructuring charges amounted to SEK 5.5 (5.6) b. in the quarter, resulting in a slightly improved operating margin of 11.7% (11.5%). The margin was stable sequentially when adjusted for a capital gain of SEK 0.8 b. in the second quarter 2009.

 

Ericsson Third Quarter Report 2009    2


  

Ericsson’s share in earnings from joint ventures amounted to SEK -1.5 (0.0) b. in the quarter, excluding restructuring charges. This is a significant reduction from the second quarter as a result of the ongoing efficiency improvements. Restructuring charges in joint ventures were insignificant in the quarter.

 

Financial net was SEK 0.0 (0.5) b. in the quarter, due to lower interest net.

 

Net income amounted to SEK 0.8 (2.9) b. in the quarter.

 

Adjusted cash flow amounted to SEK 6.9 (2.7) b. in the quarter, down sequentially from SEK 9.9 b., excluding cash outlays for restructuring of SEK 1.2 b. Year-to-date cash conversion rate was 87% (102%). Trade receivables was positively impacted by currency exchange rate effects and lower sales. While days sales outstanding (DSO) improved slightly sequentially to 118 (121) days, the credit environment is however still tough for second and third tier operators in emerging markets.

 

Inventory was reduced by SEK 2.2 b. in the quarter to SEK 26.8 b. and turnover was stable at 77 (78) days.

 

Balance sheet and other performance indicators   

SEK b.

   Sep 30
2009
    June 30
2009
    Mar 31
2009
    Dec 31
2008
 

Net cash

   33.9      27.9      22.9      34.7   

Interest-bearing liabilities and post-employment benefits

   45.9      47.6      41.2      40.4   

Trade receivables

   62.4      69.4      75.2      75.9   

Days sales outstanding

   118      121      124      106   

Inventory

   26.8      29.0      30.7      27.8   

Of which market unit inventory

   15.9      17.7      18.9      16.5   

Inventory days

   77      78      83      68   

Payable days

   57      59      65      55   

Customer financing, net

   2.7      3.1      2.8      2.8   

Return on capital employed

   4   5   7   11

Equity ratio

   52   51   52   50

 

  

The net cash position amounted to SEK 33.9 (27.9) b., up SEK 6.0 b. in the quarter. Cash, cash equivalents and short-term investments amounted to SEK 79.8 (75.5) b.

 

Customer financing remained low at of SEK 2.7 (3.1) b., reduced by a lower USD rate.

 

During the quarter, approximately SEK 3.1 b. of provisions were utilized, of which SEK 1.2 b. were related to restructuring. Additions of SEK 2.2 b. were made, of which SEK 0.5 b. related to restructuring. Reversals of SEK 0.1 b. were made.

 

Ericsson intends to repurchase its callable bond EUR LME 6.75%, maturing on November 28, 2010. The intention is to make a full redemption on November 28, 2009, of all outstanding notes with a total nominal amount of EUR 471 million. The repurchase will reduce gross debt and improve annual interest net.

 

Ericsson Third Quarter Report 2009    3


  

Cost reductions

 

In January, 2009, cost reduction activities were initiated, targeting annual savings of SEK 10 b. from the second half of 2010, split equally between cost of sales and operating expenses. Related restructuring charges were estimated to SEK 6-7 b.

 

Restructuring charges, excluding joint ventures, in the third quarter were SEK 2.7 b. with a total of SEK 7.0 b. of charges year-to-date. At the end of the quarter, cash outlays of SEK 3.3 b. remain to be made.

 

The transition to IP technologies with fewer software platforms as well as products with less hardware paves the way for synergies within the product portfolio. The program is ahead of plan and additional opportunities for efficiency improvements have evolved during the program. This will lead to further cost savings and related charges during the last three quarters of the program.

 

Restructuring charges, SEK b.

   Third quarter
2009
   Second quarter
2009
   First quarter
2009
   Full year
2008

Cost of sales

   -0.8    -1.3    -0.4    -2.5

Research and development expenses

   -1.8    -1.7    -0.3    -2.7

Selling and administrative expenses

   -0.1    -0.6    —      -1.5

Total

   -2.7    -3.6    -0.7    -6.7

SEGMENT RESULTS

 

     Third quarter     Second quarter     Nine months  

SEK b.

   2009     2008     Change     2009     Change     2009     2008     Change  

Networks sales

   30.3      33.0      -8   34.7      -13   98.6      96.3      2

Of which network rollout

   5.8      4.7      24   5.9      -2   16.4      14.0      18

EBITDA margin

   15   15   —        15   —        15   15   —     

Operating margin

   11   11   —        11   —        11   10   —     

Professional Services sales

   12.8      11.8      9   14.1      -9   39.7      32.8      21

Of which managed services

   3.6      3.5      3   4.6      -22   12.3      10.0      24

EBITDA margin

   17   19   —        17 %1)    —        17 %1)    17   —     

Operating margin

   15   16   —        16 %1)    —        15 %1)    14   —     

Multimedia sales2)

   3.4      3.5      -4   3.3      1   9.9      8.8      13

EBITDA margin2)

   19   16   —        17   —        15   9   —     

Operating margin2)

   11   9   —        9   —        7   1   —     

Sales from divested and transferred businesses

   0.0      0.9      —        0.0      —        0.0      4.0      —     

Total sales

   46.4      49.2      -6   52.1      -11   148.1      141.9      4

All numbers exclude restructuring charges

 

1) Second quarter 2009 excludes a capital gain of SEK 0.8 b. from divestment of TEMS
2) 2008 and 2009 numbers for Multimedia exclude divested Ericsson Mobile Platforms and PBX operations

 

  

Networks

 

Network sales in the third quarter declined year-over-year by 8%. Even though the comparison is tough with last year’s strong third quarter, the market was weaker. The markets are fairly strong in the world’s leading economies, while demand is weaker in several emerging markets affected by the present economic climate.

 

The rapid growth in demand for mobile broadband continues although the growth does not yet offset this year’s lower demand for GSM.

 

The ongoing efficiency and cost reduction activities are driven by new, less labor intense, products and fewer platforms. This leads to a consolidation of sites which is a key element in the ongoing cost reduction activities. Effects from the program are already visible, and despite lower sales and a high level of network rollout, EBITDA-margin was flat at 15%.

 

Ericsson Third Quarter Report 2009    4


   During the quarter, several strategic wins were achieved in mobile and IP and the footprint in North America was significantly improved. AT&T’s selection of Ericsson as one of its domain suppliers of wireline access, the LTE contract from Metro PCS and the planned acquisition of Nortel’s CDMA/LTE businesses, all contributed to the strengthened position. The Nortel businesses are expected to be consolidated in the fourth quarter and will be reported within segments Networks and Professional Services.

SEGMENT SALES BY

QUARTER,

2008 AND 2009 (SEK B)

 

LOGO

  

Professional Services

 

Professional Services sales increased 9% year-over-year. Growth in local currencies amounted to 4%. Total service sales, including network rollout, now account for 40% of Group sales. In the present financial climate there is strong demand for services targeting the operational efficiency of operators such as managed services and consulting. However, managed services sales increased by just 3% year-over-year due to the reduced scope of the renewed agreement in Italy. Other professional services sales increased by 11% year-over-year.

 

EBITDA-margin in the quarter declined to 17% (19%) negatively impacted by start-up costs from new managed services contracts with Sprint, Zain as well as costs associated to the renewed agreement in Italy. This was partially offset by continued efficiency gains.

 

The Sprint contract is a proof point of Ericsson’s service offering, as the services relate to a network with no Ericsson equipment. The added CDMA competence brought by the former Sprint employees opens up possibilities for further growth of the service business.

 

The total number of subscribers in managed operations is now 350 million, of which 50% are in high-growth markets.

 

Multimedia

 

Multimedia sales increased slightly sequentially despite seasonality. Multimedia brokering (IPX) and consumer and business applications continued to show good growth.

 

EBITDA-margin in the quarter for comparable units improved to 19% (16%). Sales and margins may still vary between quarters.

 

Sony Ericsson

 

     Third quarter     Second quarter     Nine months  

EUR m.

   2009     2008     Change     2009     Change     2009     2008     Change  

Number of units shipped (m.)

   14.1      25.7      -45   13.8      2   42.5      72.5      -41

Average selling price (EUR)

   114      109      5   122      -7   119      115      3

Net sales

   1,619      2,808      -42   1,684      -4   5,038      8,330      -40

Gross margin

   16   22   —        12   —        12   25   —     

Operating margin

   -12   -1   —        -16   —        -17   2   —     

Income before taxes

   -199      -23      —        -283      —        -853      179      —     

Income before taxes, excl restructuring charges

   -198      12      —        -283      —        -838      225      —     

Net income

   -164      -25      —        -213      —        -669      114      —     

 

   Units shipped in the quarter were 14.1 million, a sequential increase of 2% and a decrease of 45% year-over-year. Sales in the quarter were EUR 1,619 million, a sequential decrease of 4% and a decrease of 42% year-over-year. The sequential decline in average selling price was due to product mix and continued challenging market conditions. Gross margin improved sequentially but dropped year-over-year due to lower sales and currency exchange rate effects.

 

Ericsson Third Quarter Report 2009    5


 

The sequential improvement was seen in both percentage rate and in volume driven by cost saving activities and successful sales of the W995 Walkman phone.

 

Income before taxes for the quarter, excluding restructuring charges, was a loss of EUR -198 (12) million. The loss in the second quarter was EUR -283 million. The reduced loss was due to better cost of sales efficiency as well as reduced operating expenses. As of September 30, 2009, Sony Ericsson retained a net cash position of EUR 841 million.

 

Since the beginning of the quarter, facilities of EUR 455 million were signed to strengthen the balance sheet and improve liquidity. EUR 155 million were drawn by the end of September and EUR 100 million were drawn in the beginning of October. In addition, a two-year committed back-up facility of EUR 200 million is available but has not been utilized. The parent companies have guaranteed EUR 350 million of these facilities on a  50/50 basis.

 

Bert Nordberg, former head of Ericsson Silicon Valley and Executive Vice President in Ericsson has been appointed President of Sony Ericsson as of October 15, 2009.

 

Ericsson’s share in Sony Ericsson’s income before tax was SEK -1.0 (-0.1) b. in the quarter.

 

ST-Ericsson

     2009    2008

USD m.

   Third quarter    Second quarter    Feb-Mar    Proforma
third quarter

Net sales

   728    666    391    1,003

Adjusted operating income 1)

   -77    -165    -78    -34

Operating income before taxes

   -121    -224    -98    -59

Net income

   -112    -213    -89    NA

 

1)      Operating loss adjusted for amortization of acquisition related intangibles and restructuring charges

 

 

Net sales in the quarter showed an increase of 9% sequentially with solid performance in Asia.

 

Adjusted operating loss in the quarter was USD -77 (-34) m. The adjusted operating loss in the second quarter was USD -165 million. The reduced loss reflects a tight control of product costs and operational expenses as well as positive seasonal effects. The USD 250 m. cost synergies program, defined by ST-NXP Wireless in the third quarter 2008, is now substantially completed. The new restructuring plan of USD 230 m. cost synergies, announced at the end of April, had a limited benefit to the third quarter result.

 

Gilles Delfassy, with a long experience from the microelectronics business has been appointed President and CEO of ST-Ericsson as of November 2, 2009.

 

ST-Ericsson is reported in US-GAAP. Ericsson’s share in ST-Ericsson’s income before tax, adjusted to IFRS, was SEK -0.5 b. in the quarter, including restructuring charges of SEK 0.1 b. Ericsson Mobile Platforms incurred a loss of SEK 0.5 b. in January 2009, which is added to the result in segment ST-Ericsson year-to-date.

 

Ericsson Third Quarter Report 2009    6


REGIONAL OVERVIEW

 

     Third quarter     Second quarter     Nine months  

Sales, SEK b.

   2009    2008    Change     2009    Change     2009    2008    Change  

Western Europe

   10.1    11.6    -13   11.4    -11   32.7    35.4    -8

Central and Eastern Europe, Middle East and Africa

   11.6    13.1    -11   12.6    -8   36.7    35.5    4

Asia Pacific

   15.3    14.1    9   17.4    -12   49.0    42.8    15

Latin America

   5.0    6.1    -18   4.8    4   14.2    15.2    -7

North America

   4.4    4.3    1   5.9    -27   15.5    13.0    19

Total

   46.4    49.2    -6   52.1    -11   148.1    141.9    4

 

REGIONAL SALES BY

QUARTER,

2008 AND 2009 (SEK B)

 

LOGO

  

Western Europe sales declined -6% year-over-year for comparable units. However, the region showed growth when adjusting for the impact of the reduced scope for the renewed managed services agreement in Italy. UK showed the strongest growth driven by managed services while Spain is still weak. Mobile broadband is growing strongly throughout the region. This creates demand for more spectrum, including new licenses for 2.6GHz and 800MHz spectrums and refarming of existing spectrum. There is also a continued increase in demand for managed services.

 

Sales in Central and Eastern Europe, Middle East and Africa decreased by -11% year-over-year. This is the region presently most impacted by the economic climate including credit constraints. Egypt, Nigeria, Turkey and Saudi Arabia showed the strongest development. The Turkish market remains particularly strong with a continued fast rollout of 3G networks. New licenses are issued in the region, latest in Tunisia, where Ericsson was selected as one of the main suppliers of a new 2G and 3G network. The interest for managed services is strong in the region and Ericsson has signed several new contracts.

 

Asia Pacific sales increased 9% year-over-year. India was the largest market for Ericsson in the quarter. China sales were up significantly year-over-year due to major 3G rollouts. Japan and Vietnam also showed strong growth while markets such as Bangladesh, Pakistan and Indonesia were down significantly. Several operators are forced to delay investments due to credit constraints despite traffic growth. Government driven next-generation broadband and fiber backhaul networks are being built in several countries across the region.

 

Latin American sales decreased by -18% year-over-year with lower demand across the region. Demand for mobile broadband continues to develop well. Meanwhile, due to delays of licensing of new spectrum and services, in larger countries like Mexico, Brazil and Argentina, operators hold back investments in new technologies and applications.

 

North American sales increased by 1% year-over-year in a tough year-over-year comparison. Data traffic shows strong growth and the demand for mobile broadband is high. AT&T named Ericsson as a domain supplier for their wireline access network. Ericsson was also selected sole LTE supplier to Metro PCS. The Sprint Network Advantage partnership commenced on September 21.

 

Ericsson Third Quarter Report 2009    7


  

MARKET DEVELOPMENT

 

Growth rates are based on Ericsson and market estimates

 

The global economic slowdown is affecting all parts of the society. However, we believe that the fundamentals for longer-term positive development for our industry remain solid. The need for telecommunication continues to grow and plays a vital role for the development of a sustainable and prosperous society. Ericsson is well positioned to drive and benefit from this development.

 

There is continued growth in mobile subscriptions, although the current growth rate is lower than in 2008. Mobile subscriptions grew by some 133 million in the quarter to a total of 4.4 billion. In India alone subscriptions are growing by some 14 million per month. The global number of new WCDMA subscriptions is accelerating and grew by 36 million in the quarter to a total of 411 million. In the second quarter, fixed broadband connections grew to 422 million, adding 12 million subscribers.

 

The traffic in the mobile networks is accelerating, which creates need for new and expanded mobile networks and corresponding professional services. GSM/WCDMA/LTE is the dominating technology track. The build-out of telecommunications in emerging markets continues, and although they represent less than one third of global GDP they represent significantly more of the market for mobile network equipment.

 

Data traffic, as part of operator revenues, continues to increase. For many large operators, mobile data revenues now constitute 25% of total service revenues or more. In addition to capacity enhancements, operators face the challenge of converting to all-IP broadband networks. This will include increased deployments of broadband access, routing and transmission equipment along with next-generation service delivery and revenue management systems.

 

There is continued strong growth in telecom services, fueled by operators’ desire to reduce operating expenses and improve efficiency in network operation and maintenance. The move toward all-IP and increased network complexity will create further demand for systems integration and consulting.

 

PARENT COMPANY INFORMATION

 

Net sales for the nine-month period amounted to SEK 0.3 (4.1) b. and income after financial items was SEK 5.8 (17.6) b. Effective January 1, 2009, the right to all license revenues from third parties related to patent licenses has been transferred to Ericsson AB, a wholly owned subsidiary, and consequently net sales in 2009 will be insignificant compared to 2008.

 

Major changes in the Parent Company’s financial position for the nine-month period include investments in the joint venture with ST-Ericsson of SEK 8.4 b., decreased current and non-current receivables from subsidiaries of SEK 13.6 b. and increased cash and bank and short-term investments of SEK 8.2 b.

 

Notes and bond loans increased by net SEK 5.8 b. through new borrowings and loan repayment during the second quarter. Current and non-current liabilities to subsidiaries increased by SEK 2.9 b. and other current liabilities decreased by SEK 6.6 b. As per September 30, 2009, cash and bank and short-term investments amounted to SEK 67.4 (59.2) b.

 

In accordance with the conditions of the Stock Purchase Plans and Option Plans for Ericsson employees, 2,164,500 shares from treasury stock were sold or distributed to employees during the third quarter. The holding of treasury stock at September 30, 2009, was 82,215,837 Class B shares.

 

Ericsson Third Quarter Report 2009    8


OTHER INFORMATION

Ericsson to acquire majority of Nortel’s North American wireless business

On July 25, 2009, Ericsson announced that it has entered into an asset purchase agreement to acquire the parts of the Carrier Networks division of Nortel relating to CDMA and LTE technology in North America. The purchase is structured as an asset sale at a cash purchase price of USD 1.13 b. on a cash and debt free basis.

Completion of the transaction is still subject to approval in the United States.

New President of Sony Ericsson appointed

On August 17, 2009, Bert Nordberg, Executive Vice President of Ericsson was appointed President of Sony Ericsson as of October 15, 2009. Nordberg left his position in Ericsson when he joined Sony Ericsson.

New President and CEO of ST-Ericsson

On September 2, 2009, Gilles Delfassy, was appointed President and CEO of ST-Ericsson as of November 2, 2009. Delfassy is a highly regarded expert in the wireless industry.

Head of strategy appointed

On August 11, 2009, Douglas L. Gilstrap was appointed Senior Vice President and Head of Group Function Strategy as of October 1, 2009. Gilstrap brings more than 15 years of experience in the global telecommunications and IT industry.

Assessment of risk environment

Ericsson’s operational and financial risk factors and uncertainties are described under “Risk factors Assessment of risk environment” in our Annual Report 2008.

Risk factors and uncertainties in focus during the forthcoming six-month period for the Parent Company and the Ericsson Group include:

 

   

potential negative effects of the continued uncertainty in the financial markets and the weak economic business environment on operators’ willingness to invest in network development as well as uncertainty regarding the financial stability of suppliers, for example due to lack of borrowing facilities, or reduced consumer telecom spending, or increased pressure on us to provide financing;

 

   

effects on gross margins and/or working capital of the product mix in the Networks segment between sales of software, upgrades and extensions and the pro-portion of new network build-outs and break-in contracts;

 

   

a volatile sales pattern in the Multimedia segment or variability in our overall sales seasonality could make it more difficult to forecast future sales;

 

   

results and capital needs of our two major joint ventures, Sony Ericsson and ST-Ericsson, which both are negatively affected to a larger extent than our three other segments by the current economic slowdown;

 

   

effects of the ongoing industry consolidation among our customers as well as between our largest competitors, e.g. intensified price competition;

 

   

changes in foreign exchange rates, in particular USD and EUR;

 

   

continued political unrest or instability in certain markets.

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

Please refer further to Ericsson’s Annual Report 2008, where we describe our risks and uncertainties along with our strategies and tactics to mitigate the risk exposures or limit unfavorable outcomes.

Stockholm, October 22, 2009

Carl-Henric Svanberg

President and CEO

Telefonaktiebolaget LM Ericsson (publ)

Date for next report: January 25, 2010

 

Ericsson Third Quarter Report 2009    9


AUDITORS’ REVIEW REPORT

We have reviewed this report for the period January 1 to September 30, 2009, for Telefonaktiebolaget LM Ericsson (publ). 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 Annual Accounts Act. Our responsibility is to ex-press a conclusion on this interim report based on our review.

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

Based on our review, nothing has come to our attention that causes us to believe that the 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 22, 2009

PricewaterhouseCoopers AB

Peter Clemedtson

Authorized Public Accountant

 

Ericsson Third Quarter Report 2009    10


EDITOR’S NOTE

To read the complete report with tables, please go to:

www.ericsson.com/investors/financial_reports/2009/9month09-en.pdf

Ericsson invites media, investors and analysts to a press conference at the Ericsson headquarters, Torshamnsgatan 23, Stockholm, at 09.00 (CET), October 22.

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

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

FOR FURTHER INFORMATION, PLEASE CONTACT

Henry Sténson, Senior Vice President, Communications

Phone: +46 10 719 4044

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

 

Investors

Gary Pinkham, Vice President,

Investor Relations

Phone: +46 10 719 0000

E-mail: investor.relations@ericsson.com

Susanne Andersson,

Investor Relations

Phone: +46 10 719 4631

E-mail: investor.relations@ericsson.com

Lars Jacobsson,

Investor Relations

Phone: +46 10 719 9489

E-mail: investor.relations@ericsson.com

 

Media

Åse Lindskog, Vice President,

Head of Public and Media Relations

Phone: +46 10 719 9725, +46 730 244 872

E-mail: press.relations@ericsson.com

Ola Rembe,

Public and Media Relations

Phone: +46 10 719 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 10 719 0000

www.ericsson.com

 

Ericsson Third Quarter Report 2009    11


Disclosure Pursuant to the Swedish Securities Markets Act

Ericsson discloses the information provided herein pursuant to the Securities Markets Act. The information was submitted for publication at 07.30 CET, on October 22, 2009.

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

All statements made or incorporated by reference in this release, other than statements or characterizations of historical facts, are forward-looking statements. These forward-looking statements are based on our current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by us. Forward-looking statements can often be identified by words such as “anticipates”, “expects”, “intends”, “plans”, “predicts”, “believes”, “seeks”, “estimates”, “may”, “will”, “should”, “would”, “potential”, “continue”, and variations or negatives of these words, and include, among others, statements regarding: (i) strategies, outlook and growth prospects; (ii) positioning to deliver future plans and to realize potential for future growth; (iii) liquidity and capital resources and expenditure, and our credit ratings; (iv) growth in demand for our products and services; (v) our joint venture activities; (vi) economic outlook and industry trends; (vii) developments of our markets; (viii) the impact of regulatory initiatives; (ix) re-search 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 ad-verse changes in the markets in which we operate or in global economic conditions; (ii) increased product and price competition; (iii) reductions in capital expenditure by network operators; (iv) the cost of technological innovation and increased expenditure to improve quality of service; (v) significant changes in market share for our principal products and services; (vi) foreign exchange rate or interest rate fluctuations; and (vii) the successful implementation of our business and operational initiatives.

 

Ericsson Third Quarter Report 2009    12


FINANCIAL STATEMENTS AND ADDITIONAL INFORMATION

 

     Page

Financial statements

  

Consolidated income statement and statement of comprehensive income

   14

Consolidated balance sheet

   15

Consolidated statement of cash flows

   16

Consolidated statement of changes in equity

   17

Consolidated income statement - isolated quarters

   18

Consolidated statement of cash flows - isolated quarters

   19

Parent Company income statement

   20

Parent Company balance sheet

   20
     Page

Additional information

  

Accounting policies

   21

Net sales by segment by quarter

   22

Operating income by segment by quarter

   23

Operating margin by segment by quarter

   23

EBITDA by segment by quarter

   24

EBITDA margin by segment by quarter

   24

Net sales by market area by quarter

   25

External net sales by market area by segment

   26

Top 15 markets in sales

   26

Provisions

   27

Number of employees

   27

Information on investments in assets subject to depreciation, amortization and impairment

   27

Other information

   28

Ericsson planning assumptions for year 2009

   28

Consolidated operating income, excluding restructuring charges

   29

Restructuring charges by function

   29

Restructuring charges by segment

   29

Operating income by segment, excluding restructuring charges

   30

Operating margin by segment, excluding restructuring charges

   30

EBITDA by segment, excluding restructuring charges

   30

EBITDA margin by segment, excluding restructuring charges

   30

 

Ericsson Third Quarter Report 2009    13


Consolidated Income Statement

 

     Jul - Sep           Jan - Sep        

SEK million

   2009     2008     Change     2009     2008     Change  

Net sales

   46,433      49,198      -6   148,144      141,905      4

Cost of sales

   -30,455      -31,577      -4   -96,943      -90,139      8
                                    

Gross income

   15,978      17,621      -9   51,201      51,766      -1

Gross margin %

   34.4   35.8     34.6   36.5  

Research and development expenses

   -8,218      -7,859      5   -23,749      -25,357      -6

Selling and administrative expenses

   -5,279      -6,304      -16   -19,585      -18,681      5
                                    

Operating expenses

   -13,497      -14,163      -5   -43,334      -44,038      -2

Other operating income and expenses

   222      332      -33   2,204      1,475      49
                                    

Operating income before shares in earnings of JV and associated companies

   2,703      3,790      -29   10,071      9,203      9

Operating margin % before shares in earnings of JV and associated companies

   5.8   7.7     6.8   6.5  

Shares in earnings of JV and associated companies

   -1,559      -131        -5,939      842     
                                    

Operating income

   1,144      3,659      -69   4,132      10,045      -59

Financial income

   296      1,099        1,560      2,267     

Financial expenses

   -294      -618        -830      -1,602     
                                    

Income after financial items

   1,146      4,140      -72   4,862      10,710      -55

Taxes

   -374      -1,202        -1,460      -3,107     
                                    

Net income

   772      2,938      -74   3,402      7,603      -55
                                    

Net income attributable to:

            

- stockholders of the Parent Company

   810      2,842        3,358      7,388     

- minority interests

   -38      96        44      215     

Other information

            

Average number of shares, basic (million) 1)

   3,190      3,184        3,188      3,182     

Earnings per share, basic (SEK) 1) 2)

   0.25      0.89        1.05      2.32     

Earnings per share, diluted (SEK) 1) 2)

   0.25      0.89        1.05      2.31     

Statement of Comprehensive Income

 

     Jul - Sep    Jan - Sep

SEK million

   2009    2008    2009    2008

Net income

   772    2,938    3,402    7,603

Actuarial gains and losses related to pensions

   -73    -652    -355    -1,731

Revaluation of other investments in shares and participations Fair value remeasurement reported in equity

   —      44    -1    930

Cash flow hedges

           

Gains(+)/losses(-) arising during the period

   2,106    -2,317    1,202    -1,130

Less: Reclassification adjustments for gains(-)/losses(+) included in profit or loss

   -295    -60    5,149    -1,076

Less: Adjustments for amounts transferred to initial carrying amount of hegded items

   —      —      -1,261    —  

Changes in cumulative translation adjustments

   -5,522    4,928    -3,655    2,922

Tax on items reported directly in or transferred from equity

   -539    946    -1,565    1,180

Other comprehensive income

   -4,323    2,889    -486    1,095
                   

Total comprehensive income

   -3,551    5,827    2,916    8,698
                   

Total Comprehensive Income attributable to:

           

- Stockholders of the Parent Company

   -3,417    5,607    2,963    8,381

- Minority interests

   -134    220    -47    317

 

1)

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

2)

Based on Net income attributable to stockholders of the Parent Company

 

Ericsson Third Quarter Report, October 22, 2009

   14


Consolidated Balance Sheet

 

     Sep 30    Jun 30    Dec 31

SEK million

   2009    2009    2008

ASSETS

        

Non-current assets

        

Intangible assets

        

Capitalized development expenses

   1,668    1,601    2,782

Goodwill

   23,791    25,241    24,877

Intellectual property rights, brands and other intangible assets

   15,260    17,776    20,587

Property, plant and equipment

   9,468    10,161    9,995

Financial assets

        

Equity in JV and associated companies

   12,279    14,661    7,988

Other investments in shares and participations

   291    306    309

Customer financing, non-current

   854    987    846

Other financial assets, non-current

   2,567    4,071    4,917

Deferred tax assets

   13,946    13,676    14,858
              
   80,124    88,480    87,159

Current assets

        

Inventories

   26,774    29,036    27,836

Trade receivables

   62,425    69,374    75,891

Customer financing, current

   1,875    2,161    1,975

Other current receivables

   17,286    16,744    17,818

Short-term investments

   54,104    38,556    37,192

Cash and cash equivalents

   25,685    36,963    37,813
              
   188,149    192,834    198,525

Total assets

   268,273    281,314    285,684
              

EQUITY AND LIABILITIES

        

Equity

        

Stockholders’ equity

   138,378    141,658    140,823

Minority interests in equity of subsidiaries

   1,051    1,286    1,261
              
   139,429    142,944    142,084

Non-current liabilities

        

Post-employment benefits

   8,221    8,065    9,873

Provisions, non-current

   385    460    311

Deferred tax liabilities

   2,020    2,517    2,738

Borrowings, non-current

   34,513    35,949    24,939

Other non-current liabilities

   1,907    1,904    1,622
              
   47,046    48,895    39,483

Current liabilities

        

Provisions, current

   12,001    13,497    14,039

Borrowings, current

   3,152    3,573    5,542

Trade payables

   16,887    19,722    23,504

Other current liabilities

   49,758    52,683    61,032
              
   81,798    89,475    104,117

Total equity and liabilities

   268,273    281,314    285,684
              

Of which interest-bearing liabilities and post-employment benefits

   45,886    47,587    40,354

Net cash

   33,903    27,932    34,651

Assets pledged as collateral

   461    429    416

Contingent liabilities

   984    931    1,080

 

Ericsson Third Quarter Report, October 22, 2009    15


Consolidated Statement of Cash Flows

 

     Jul - Sep    Jan - Sep    Jan - Dec
2008

SEK million

   2009    2008    2009    2008   

Operating activities

              

Net income

   772    2,938    3,402    7,603    11,667

Adjustments to reconcile net income to cash

              

Taxes

   -1,137    -343    -2,405    -933    1,032

Earnings/dividends in JV and associated companies

   1,319    909    4,801    2,604    4,154

Depreciation, amortization and impairment losses

   3,268    1,872    8,232    6,615    8,674

Other

   978    1,257    -288    837    458
                        

Net income affecting cash

   5,200    6,633    13,742    16,726    25,985

Changes in operating net assets

              

Inventories

   660    -1,878    -96    -6,695    -3,927

Customer financing, current and non-current

   394    137    126    1,168    549

Trade receivables

   3,655    -3,776    10,482    -1,850    -11,434

Trade payables

   -2,096    1,403    -5,319    2,630    4,794

Provisions and post-employment benefits

   -1,060    1,620    -2,793    3,158    3,830

Other operating assets and liabilities, net

   -1,076    -376    -4,192    1,900    4,203
                        
   477    -2,870    -1,792    311    -1,985

Cash flow from operating activities

   5,677    3,763    11,950    17,037    24,000

Investing activities

              

Investments in property, plant and equipment

   -690    -997    -2,897    -2,836    -4,133

Sales of property, plant and equipment

   99    428    238    745    1,373

Acquisitions/divestments of subsidiaries and other operations, net

   -750    114    -9,260    723    1,836

Product development

   -245    -261    -781    -1,016    -1,409

Other investing activities

   3,226    -156    2,695    60    944

Short-term investments

   -17,847    -4,606    -17,749    -1,939    -7,155
                        

Cash flow from investing activities

   -16,207    -5,478    -27,754    -4,263    -8,544

Cash flow before financing activities

   -10,530    -1,715    -15,804    12,774    15,456

Financing activities

              

Dividends paid

   -20    -188    -5,976    -8,202    -8,240

Other financing activities

   535    4,783    10,421    176    1,032
                        

Cash flow from financing activities

   515    4,595    4,445    -8,026    -7,208

Effect of exchange rate changes on cash

   -1,263    127    -769    644    1,255

Net change in cash

   -11,278    3,007    -12,128    5,392    9,503

Cash and cash equivalents, beginning of period

   36,963    30,695    37,813    28,310    28,310

Cash and cash equivalents, end of period

   25,685    33,702    25,685    33,702    37,813

 

Ericsson Third Quarter Report, October 22, 2009    16


Consolidated Statement of Changes in Equity

 

SEK million

   Jan - Sep
2009
   Jan - Sep
2008
   Jan - Dec
2008

Opening balance

   142,084    135,052    135,052

Total comprehensive income

   2,916    8,698    14,615

Stock issue

   135    100    100

Sale of own shares

   -87    -20    -12

Repurchase of own shares

   —      —      —  

Stock purchase and stock option plans

   441    395    589

Dividends paid

   -5,976    -8,202    -8,240

Business combinations

   -84    -20    -20
              

Closing balance

   139,429    136,003    142,084
              

 

Ericsson Third Quarter Report, October 22, 2009    17


Consolidated Income Statement – Isolated Quarters

 

     2009     2008  

SEK million

   Q3     Q2     Q1     Q4     Q3     Q2     Q1  

Net sales

   46,433      52,142      49,569      67,025      49,198      48,532      44,175   

Cost of sales

   -30,455      -34,531      -31,957      -44,522      -31,577      -31,206      -27,356   
                                          

Gross income

   15,978      17,611      17,612      22,503      17,621      17,326      16,819   

Gross margin %

   34.4   33.8   35.5   33.6   35.8   35.7   38.1

Research and development expenses

   -8,218      -8,451      -7,080      -8,227      -7,859      -8,932      -8,566   

Selling and administrative expenses

   -5,279      -7,443      -6,863      -8,293      -6,304      -6,271      -6,106   
                                          

Operating expenses

   -13,497      -15,894      -13,943      -16,520      -14,163      -15,203      -14,672   

Other operating income and expenses

   222      1,640      342      1,502      332      704      439   
                                          

Operating income before shares in earnings of JV and associated companies

   2,703      3,357      4,011      7,485      3,790      2,827      2,586   

Operating margin % before shares in earnings of JV and associated companies

   5.8   6.4   8.1   11.2   7.7   5.8   5.9

Shares in earnings of JV and associated companies

   -1,559      -2,144      -2,236      -1,278      -131      62      911   
                                          

Operating income

   1,144      1,213      1,775      6,207      3,659      2,889      3,497   

Financial income

   296      4      1,260      1,191      1,099      503      665   

Financial expenses

   -294      -79      -457      -882      -618      -511      -473   
                                          

Income after financial items

   1,146      1,138      2,578      6,516      4,140      2,881      3,689   

Taxes

   -374      -341      -745      -2,452      -1,202      -835      -1,070   
                                          

Net income

   772      797      1,833      4,064      2,938      2,046      2,619   
                                          

Net income attributable to:

              

- Stockholders of the Parent Company

   810      831      1,717      3,885      2,842      1,901      2,645   

- Minority interests

   -38      -34      116      179      96      145      -26   

Other information

              

Average number of shares, basic (million) 1)

   3,190      3,188      3,187      3,185      3,184      3,183      3,181   

Earnings per share, basic (SEK) 1) 2)

   0.25      0.26      0.54      1.22      0.89      0.60      0.83   

Earnings per share, diluted (SEK) 1) 2)

   0.25      0.26      0.54      1.21      0.89      0.59      0.83   

 

1)

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

2)

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

 

Ericsson Third Quarter Report, October 22, 2009    18


Consolidated Statement of Cash Flows – Isolated Quarters

 

     2009    2008

SEK million

   Q3    Q2    Q1    Q4    Q3    Q2    Q1

Operating activities

                    

Net income

   772    797    1,833    4,064    2,938    2,046    2,619

Adjustments to reconcile net income to cash

                    

Taxes

   -1,137    -640    -628    1,965    -343    -278    -311

Earnings/dividends in JV and associated companies

   1,319    1,718    1,764    1,550    909    -41    1,736

Depreciation, amortization and impairment losses

   3,268    3,112    1,852    2,059    1,872    2,529    2,214

Other

   978    -643    -623    -379    1,257    169    -589
                                  

Net income affecting cash

   5,200    4,344    4,198    9,259    6,633    4,425    5,669

Changes in operating net assets

                    

Inventories

   660    1,606    -2,362    2,768    -1,878    -1,906    -2,912

Customer financing, current and non-current

   394    -267    -1    -619    137    371    660

Trade receivables

   3,655    5,017    1,810    -9,584    -3,776    -356    2,282

Trade payables

   -2,096    -1,863    -1,360    2,164    1,403    1,833    -606

Provisions and post-employment benefits

   -1,060    1,532    -3,265    672    1,620    967    571

Other operating assets and liabilities, net

   -1,076    -1,238    -1,878    2,303    -376    3,210    -934
                                  
   477    4,787    -7,056    -2,296    -2,870    4,119    -939

Cash flow from operating activities

   5,677    9,131    -2,858    6,963    3,763    8,544    4,730

Investing activities

                    

Investments in property, plant and equipment

   -690    -1,189    -1,018    -1,297    -997    -893    -946

Sales of property, plant and equipment

   99    114    25    628    428    108    209

Acquisitions/divestments of subsidiaries and other operations, net

   -750    981    -9,491    1,113    114    602    7

Product development

   -245    -327    -209    -393    -261    -422    -333

Other investing activities

   3,226    886    -1,417    884    -156    12    204

Short-term investments

   -17,847    522    -424    -5,216    -4,606    -1,392    4,059
                                  

Cash flow from investing activities

   -16,207    987    -12,534    -4,281    -5,478    -1,985    3,200

Cash flow before financing activities

   -10,530    10,118    -15,392    2,682    -1,715    6,559    7,930

Financing activities

                    

Dividends paid

   -20    -5,956    —      -38    -188    -8,008    -6

Other financing activities

   535    8,012    1,874    856    4,783    -3,581    -1,026
                                  

Cash flow from financing activities

   515    2,056    1,874    818    4,595    -11,589    -1,032

Effect of exchange rate changes on cash

   -1,263    441    53    611    127    308    209

Net change in cash

   -11,278    12,615    -13,465    4,111    3,007    -4,722    7,107

Cash and cash equivalents, beginning of period

   36,963    24,348    37,813    33,702    30,695    35,417    28,310

Cash and cash equivalents, end of period

   25,685    36,963    24,348    37,813    33,702    30,695    35,417

 

Ericsson Third Quarter Report, October 22, 2009    19


Parent Company Income Statement

 

     Jul - Sep    Jan - Sep

SEK million

   2009    2008    2009    2008

Net sales

   27    950    291    4,079

Cost of sales

   -10    -123    -1    -611
                   

Gross income

   17    827    290    3,468

Operating expenses

   -753    -487    -2,336    -1,708

Other operating income and expenses

   738    613    2,211    1,968
                   

Operating income

   2    953    165    3,728

Financial net

   620    9,593    5,676    13,823
                   

Income after financial items

   622    10,546    5,841    17,551

Transfers to (-) / from untaxed reserves

           

Taxes

   -91    -405    -463    -1,291
                   

Net income

   531    10,141    5,378    16,260
                   
Parent Company Balance Sheet

SEK million

             Sep 30
2009
   Dec 31
2008

ASSETS

           

Fixed assets

           

Intangible assets

         2,315    2,604

Tangible assets

         690    695

Financial assets

         101,683    98,837
               
         104,688    102,136

Current assets

           

Inventories

         60    80

Receivables

         21,388    31,124

Cash, bank and short-term investments

         67,398    59,214
               
         88,846    90,418

Total assets

         193,534    192,554
               

STOCKHOLDERS’ EQUITY, PROVISIONS AND LIABILITIES

           

Equity

           

Restricted equity

         47,859    47,724

Non-restricted equity

         40,672    41,954
               
         88,531    89,678

Untaxed reserves

         1,817    1,817

Provisions

         1,456    1,059

Non-current liabilities

         61,602    50,994

Current liabilities

         40,128    49,006

Total stockholders’ equity, provisions and liabilities

         193,534    192,554
               

Assets pledged as collateral

         461    414

Contingent liabilities

         12,733    13,029

 

Ericsson Third Quarter Report, October 22, 2009    20


Accounting Policies

The Group

This interim report is prepared in accordance with IAS 34. The term “IFRS” used in this document refers to the application of IAS and IFRS as well as interpretations of these standards as issued by IASB’s Standards Interpretation Committee (SIC) and International Financial Reporting Interpretations Committee (IFRIC).

As from January 1, 2009, the Company has applied the following new or amended IFRS:

 

   

IAS 1 (Revised), “Presentation of Financial Statements”. The revised standard requires all non-owner changes in equity to be shown in a performance statement. The Company therefore presents two statements, the Income Statement and a Statement of Comprehensive Income.

Also, to improve the understanding of the Company’s financial performance, a new subtotal line has been added in the Income Statement, “Operating income before share in earnings of JV and associated companies”. This is to distinguish between operating income from operations consolidated and from shares in earnings of JV and associated companies accounted for using the equity method. In the interim report text, this line item is for simplicity referred to as “Operating income before joint ventures”.

 

   

IFRS 8 “Operating Segments”. This standard replaces IAS 14 “Segment Reporting” and requires a “management approach”, under which segment information is presented on the same basis as that used for internal reporting to the Chief Operating Decision Maker (CODM). In Ericsson, the Group Management Team is defined as the CODM function. The new standard has not resulted in any changes of the reportable segments.

The new joint venture, ST-Ericsson, established in February 2009, is presented as a new reportable segment. Segment Phones has been renamed to Sony Ericsson. No other changes have been made in relation to this reported segment.

None of the following new or amended standards and interpretations have had any significant impact on the financial result or position of the Company:

 

   

IFRS 2 (Amendment), “Share-Based Payments”. The amended standard deals with vesting conditions and cancellations.

 

   

Revised IAS 23, “Borrowing Costs” and “Improvements to IFRSs”, (May 2008), in relation to IAS 23.

 

   

IAS 32 and IAS 1 (Amendments), “Puttable Financial Instruments” and “Obligations Arising on Liquidation”.

 

   

“Improvements to IFRSs”, published in May 2008. These are improvements to twenty two already effective IFRSs.

 

   

IFRIC 12, “Service Concession Arrangements”

 

   

IFRIC 13, “Customer Loyalty Programmes”

 

   

IFRIC 16, “Hedges of a Net Investment on A Foreign Operation”

 

   

IFRIC 15, “Agreements for Construction of Real Estate”

 

   

“Amendment to IAS39: Effective Date and Transition”

The Company has not yet applied the following interpretations and amendments since these are still subject to EU endorsement:

 

   

“Amendments to IFRS 7 Improving Disclosures about Financial Instruments”

 

   

“Amendments to IFRIC 9 and IAS 39 Embedded Derivatives”

 

   

IFRIC 18 “Transfers of Assets from Customers”

 

   

IFRIC 17 “Distributions of Non-Cash Assets to Owners”

 

   

“Amendments to IFRS 2 Group Cash-settled Share-based Payment Transactions”

 

   

“Amendment to IAS 32 Classification of Rights Issues”

However, none of the interpretations and amendments is expected to have any significant impact on the Company’s financial statements.

Company amendment of key ratio “Inventory turnover”

Prior to 2009, this key ratio disclosed the number of times the inventory was turned over per year.

As from January 1, 2009, the inventory turnover key ratio has been amended by the Company to disclose the number of turnover days of inventory.

 

Ericsson Third Quarter Report, October 22, 2009

   21


Net Sales by Segment by Quarter

 

Since the segments Sony Ericsson and ST-Ericsson are reported in accordance with the equity method, their sales are not included below. Net sales related to these segments are disclosed under SEGMENT RESULTS. Net sales related to other segments are set out below.

 

     2009     2008  

Isolated quarters, SEK million

   Q3     Q2     Q1     Q4     Q3     Q2     Q1  

Networks

   30,302      34,737      33,529      45,767      33,017      33,274      29,992   

Of which Network rollout

   5,798      5,942      4,687      7,555      4,679      4,776      4,520   

Professional Services

   12,780      14,077      12,799      16,199      11,750      11,018      10,011   

Of which Managed services

   3,570      4,587      4,178      4,270      3,458      3,416      3,112   

Multimedia

   3,351      3,328      3,241      5,059      4,431      4,240      4,172   

Of which PBX and Mobile Platforms

   —        —        —        1,147      951      1,532      1,586   

Multimedia excluding PBX and Mobile Platforms

   3,351      3,328      3,241      3,912      3,480      2,708      2,586   
                                          

Total

   46,433      52,142      49,569      67,025      49,198      48,532      44,175   
                                          
     2009     2008  

Sequential change, percent

   Q3     Q2     Q1     Q4     Q3     Q2     Q1  

Networks

   -13   4   -27   39   -1   11   -20

Of which Network rollout

   -2   27   -38   61   -2   6   -30

Professional Services

   -9   10   -21   38   7   10   -17

Of which Managed services

   -22   10   -2   23   1   10   -6

Multimedia

   1   3   -36   14   5   2   -14

Of which PBX and Mobile Platforms

   —        —        —        21   -38   -3   —     

Multimedia excluding PBX and Mobile Platforms

   1   3   -17   12   29   5   —     
                                          

Total

   -11   5   -26   36   1   10   -19
                                          
     2009     2008  

Year over year change, percent

   Q3     Q2     Q1     Q4     Q3     Q2     Q1  

Networks

   -8   4   12   22   16   -1   2

Of which Network rollout

   24   24   4   17   17   11   20

Professional Services

   9   28   28   34   7   7   5

Of which Managed services

   3   34   34   29   3   17   20

Multimedia

   -24   -22   -22   4   10   16   24

Of which PBX and Mobile Platforms

   —        —        —        —        —        —        —     

Multimedia excluding PBX and Mobile Platforms

   -4   23   25   —        —        —        —     
                                          

Total

   -6   7   12   23   13   2   5
                                          
     2009     2008  

Year to date, SEK million

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

Networks

   98,568      68,266      33,529      142,050      96,283      63,266      29,992   

Of which Network rollout

   16,427      10,629      4,687      21,530      13,975      9,296      4,520   

Professional Services

   39,656      26,876      12,799      48,978      32,779      21,029      10,011   

Of which Managed services

   12,335      8,765      4,178      14,256      9,986      6,528      3,112   

Multimedia

   9,920      6,569      3,241      17,902      12,843      8,412      4,172   

Of which PBX and Mobile Platforms

   —        —        —        5,216      4,069      3,118      1,586   

Multimedia excluding PBX and Mobile Platforms

   9,920      6,569      3,241      12,686      8,774      5,294      2,586   
                                          

Total

   148,144      101,711      49,569      208,930      141,905      92,707      44,175   
                                          
Year to date,    2009     2008  

year over year change, percent

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

Networks

   2   8   12   10   5   0   2

Of which Network rollout

   18   14   4   16   16   15   20

Professional Services

   21   28   28   14   7   6   5

Of which Managed services

   24   34   34   17   13   19   20

Multimedia

   -23   -22   -22   13   16   20   24

Of which PBX and Mobile Platforms

   —        —        —        —        —        —        —     

Multimedia excluding PBX and Mobile Platforms

   13   24   25   —        —        —        —     
                                          

Total

   4   10   12   11   6   3   5
                                          

 

Ericsson Third Quarter Report, October 22, 2009

   22


Operating Income by Segment by Quarter

 

     2009    2008

Isolated quarters, SEK million

   Q3    Q2    Q1    Q4    Q3    Q2    Q1

Networks

   936    1,248    2,838    4,943    2,454    1,803    1,945

Professional Services

   1,628    2,266    1,749    2,226    1,509    1,337    1,274

Multimedia

   330    18    44    554    9    -172    -509

Multimedia excluding PBX and Mobile Platforms

   —      —      —      679    179    -161    -251

Unallocated 1)

   -168    -323    -77    -236    -171    -103    -108
                                  

Subtotal Segments excluding Sony Ericsson and ST-Ericsson

   2,726    3,209    4,554    7,487    3,801    2,865    2,602

Sony Ericsson

   -1,036    -1,543    -2,070    -1,280    -142    24    895

ST-Ericsson 2)

   -546    -453    -709    —      —      —      —  
                                  

Subtotal Sony Ericsson and ST-Ericsson

   -1,582    -1,996    -2,779    -1,280    -142    24    895
                                  

Total

   1,144    1,213    1,775    6,207    3,659    2,889    3,497
                                  
     2009    2008

Year to date, SEK million

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

Networks

   5,022    4,086    2,838    11,145    6,202    3,748    1,945

Professional Services

   5,643    4,015    1,749    6,346    4,120    2,611    1,274

Multimedia

   392    62    44    -118    -672    -681    -509

Multimedia excluding PBX and Mobile Platforms

   —      —      —      446    -233    -412    -251

Unallocated 1)

   -568    -400    -77    -618    -382    -211    -108
                                  

Subtotal Segments excluding Sony Ericsson and ST-Ericsson

   10,489    7,763    4,554    16,755    9,268    5,467    2,602

Sony Ericsson

   -4,649    -3,613    -2,070    -503    777    919    895

ST-Ericsson 2)

   -1,708    -1,162    -709    —      —      —      —  
                                  

Subtotal Sony Ericsson and ST-Ericsson

   -6,357    -4,775    -2,779    -503    777    919    895
                                  

Total

   4,132    2,988    1,775    16,252    10,045    6,386    3,497
                                  

 

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

2)       First quarter 2009 includes a loss of SEK 0.5 b for January for Ericsson Mobile Platforms operations which as from February 1, 2009, are reported in ST-Ericsson. Second quarter 2009 includes a capital gain of SEK 0.1 b related to Ericsson Mobile Platforms.

Operating Margin by Segment by Quarter

 

As percentage of net sales,

isolated quarters

   2009     2008  
   Q3     Q2     Q1     Q4     Q3     Q2     Q1  

Networks

   3   4   8   11   7   5   7

Professional Services

   13   16   14   14   13   12   13

Multimedia

   10   1   1   11   0   -4   -12

Multimedia excluding PBX and Mobile Platforms

   —        —        —        17   5   -6   -10
                                          

Subtotal excluding Sony Ericsson and ST-Ericsson

   6   6   9   11   8   6   6
                                          

As percentage of net sales,

Year to date

   2009     2008  
   Jan-Sep     Jan-Jun     Jan-Mar     Jan-Dec     Jan-Sep     Jan-Jun     Jan-Mar  

Networks

   5   6   8   8   6   6   7

Professional Services

   14   15   14   13   13   12   13

Multimedia

   4   1   1   -1   -5   -8   -12

Multimedia excluding PBX and Mobile Platforms

   —        —        —        4   -3   -8   -10
                                          

Subtotal excluding Sony Ericsson and ST-Ericsson

   7   8   9   8   7   6   6
                                          

 

Ericsson Third Quarter Report, October 22, 2009

   23


EBITDA by Segment by Quarter

 

     2009    2008

Isolated quarters, SEK million

   Q3    Q2    Q1    Q4    Q3    Q21)    Q1

Networks

   3,610    3,909    4,153    6,417    3,628    3,510    3,690

Professional Services

   1,926    2,464    1,977    2,365    1,811    1,589    1,480

Multimedia

   619    273    306    1,001    403    400    -246

Multimedia excluding PBX & Mobile Platforms

   —      —      —      963    425    80    14

Unallocated 2)

   -168    -323    -77    -236    -171    -103    -108
                                  

Subtotal Segments excluding Sony Ericsson and ST-Ericsson

   5,987    6,323    6,359    9,547    5,671    5,396    4,816

Sony Ericsson

   -1,036    -1,543    -2,070    -1,280    -142    24    895

ST-Ericsson 3)

   -540    -453    -663    —      —      —      —  
                                  

Subtotal Sony Ericsson and ST-Ericsson

   -1,576    -1,996    -2,733    -1,280    -142    24    895
                                  

Total

   4,411    4,327    3,626    8,267    5,529    5,420    5,711
                                  
     2009    2008

Year to date, SEK million

   Jan-Sep    Jan-Jun    Jan-Mar    Jan-Dec1)    Jan-Sep1)    Jan-Jun1)    Jan-Mar

Networks

   11,672    8,062    4,153    17,245    10,828    7,200    3,690

Professional Services

   6,367    4,441    1,977    7,245    4,880    3,069    1,480

Multimedia

   1,198    579    306    1,558    557    154    -246

Multimedia excluding PBX & Mobile Platforms

   —      —      —      1,482    519    94    14

Unallocated 2)

   -568    -400    -77    -618    -382    -211    -108
                                  

Subtotal Segments excluding Sony Ericsson and ST-Ericsson

   18,669    12,682    6,359    25,430    15,883    10,212    4,816

Sony Ericsson

   -4,649    -3,613    -2,070    -503    777    919    895

ST-Ericsson 3)

   -1,656    -1,116    -663    —      —      —      —  
                                  

Subtotal Sony Ericsson and ST-Ericsson

   -6,305    -4,729    -2,733    -503    777    919    895
                                  

Total

   12,364    7,953    3,626    24,927    16,660    11,131    5,711
                                  

 

1)

Second quarter 2008 for Multimedia was affected by SEK 156 m. due to changed allocation of capitalized development expenses.

2)

“Unallocated” consists mainly of costs for corporate staffs, non-operational capital gains and losses.

3)

First quarter 2009 includes a loss of SEK 0.5 b for January for Ericsson Mobile Platforms operations which as from February 1, 2009, are reported in ST-Ericsson. Second quarter 2009 includes a capital gain of SEK 0.1 b related to Ericsson Mobile Platforms.

EBITDA Margin by Segment by Quarter

 

As percentage of net sales,

isolated quarters

   2009     2008  
   Q3     Q2     Q1     Q4     Q3     Q21)     Q1  

Networks

   12   11   12   14   11   11   12

Professional Services

   15   18   15   15   15   14   15

Multimedia

   18   8   9   20   9   9   -6

Multimedia excluding PBX & Mobile Platforms

   —        —        —        25   12   3   1
                                          

Subtotal excluding Sony Ericsson and ST-Ericsson

   13   12   13   14   12   11   11
                                          

As percentage of net sales,

Year to date

   2009     2008  
   Jan-Sep     Jan-Jun     Jan-Mar     Jan-Dec1)     Jan-Sep1)     Jan-Jun1)     Jan-Mar  

Networks

   12   12   12   12   11   11   12

Professional Services

   16   17   15   15   15   15   15

Multimedia

   12   9   9   9   4   2   -6

Multimedia excluding PBX & Mobile Platforms

   —        —        —        12   6   2   1
                                          

Subtotal excluding Sony Ericsson and
ST-Ericsson

   13   12   13   12   11   11   11
                                          

 

1)

Second quarter 2008 for Multimedia was affected by SEK 156 m. due to changed allocation of capitalized development expenses.

 

Ericsson Third Quarter Report, October 22, 2009    24


Net Sales by Market Area by Quarter

 

     2009     2008  

Isolated quarters, SEK million

   Q3     Q2     Q1     Q4     Q3     Q2     Q1  

Western Europe 1)

   10,110      11,365      11,203      16,135      11,629      12,125      11,681   

Central & Eastern Europe, Middle East & Africa

   11,621      12,647      12,485      17,635      13,069      11,253      11,123   

Asia Pacific

   15,354      17,396      16,282      20,500      14,114      15,785      12,908   

Latin America

   4,994      4,801      4,381      7,855      6,083      4,956      4,154   

North America

   4,354      5,933      5,218      4,900      4,303      4,413      4,309   
                                          

Total 2)

   46,433      52,142      49,569      67,025      49,198      48,532      44,175   
                                          

 

              

1)       Of which Sweden

   1,076      1,091      1,197      2,384      2,191      2,308      1,993   

2)       Of which EU

   11,033      12,595      12,604      18,371      13,059      13,427      12,744   
     2009     2008  

Sequential change, percent

   Q3     Q2     Q1     Q4     Q3     Q2     Q1  

Western Europe 1)

   -11   1   -31   39   -4   4   -24

Central & Eastern Europe, Middle East & Africa

   -8   1   -29   35   16   1   -22

Asia Pacific

   -12   7   -21   45   -11   22   -6

Latin America

   4   10   -44   29   23   19   -38

North America

   -27   14   6   14   -2   2   0
                                          

Total 2)

   -11   5   -26   36   1   10   -19
                                          

 

              

1)       Of which Sweden

   -1   -9   -50   9   -5   16   -19

2)       Of which EU

   -12   0   -31   41   -3   5   -27
     2009     2008  

Year-over-year change, percent

   Q3     Q2     Q1     Q4     Q3     Q2     Q1  

Western Europe 1)

   -13   -6   -4   5   -6   -3   -7

Central & Eastern Europe, Middle East & Africa

   -11   12   12   24   9   -2   1

Asia Pacific

   9   10   26   49   17   -5   5

Latin America

   -18   -3   5   16   43   21   25

North America

   1   34   21   13   44   47   39
                                          

Total 2)

   -6   7   12   23   13   2   5
                                          

 

              

1)       Of which Sweden

   -51   -53   -40   -3   13   12   3

2)       Of which EU

   -16   -6   -1   5   -4   -4   -8
      2009     2008  

Year to date, SEK million

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

Western Europe 1)

   32,678      22,568      11,203      51,570      35,435      23,806      11,681   

Central & Eastern Europe, Middle East & Africa

   36,753      25,132      12,485      53,080      35,445      22,376      11,123   

Asia Pacific

   49,032      33,678      16,282      63,307      42,807      28,693      12,908   

Latin America

   14,176      9,182      4,381      23,048      15,193      9,110      4,154   

North America

   15,505      11,151      5,218      17,925      13,025      8,722      4,309   
                                          

Total 2)

   148,144      101,711      49,569      208,930      141,905      92,707      44,175   
                                          

 

              

1)       Of which Sweden

   3,364      2,288      1,197      8,876      6,492      4,301      1,993   

2)       Of which EU

   36,232      25,199      12,604      57,601      39,230      26,171      12,744   
Year to date,    2009     2008  

year-over-year change, percent

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

Western Europe 1)

   -8   -5   -4   -2   -5   -5   -7

Central & Eastern Europe, Middle East & Africa

   4   12   12   9   3   0   1

Asia Pacific

   15   17   26   16   5   -1   5

Latin America

   -7   1   5   25   31   23   25

North America

   19   28   21   34   43   43   39
                                          

Total 2)

   4   10   12   11   6   3   5
                                          

 

              

1)       Of which Sweden

   -48   -47   -40   6   9   8   3

2)       Of which EU

   -8   -4   -1   -2   -5   -6   -8

 

Ericsson Third Quarter Report, October 22, 2009

   25


External Net Sales by Market Area by Segment

Since the segments Sony Ericsson and ST-Ericsson are reported in accordance with the equity method, their sales are not included below. Net sales related to these segments are disclosed under SEGMENT RESULTS. Net sales related to other segments are set out below.

 

Isolated quarter, SEK million

Q3 2009

   Networks     Professional
Services
    Multimedia     Total  

Western Europe

   5,820      3,764      526      10,110   

Central & Eastern Europe, Middle East & Africa

   7,110      3,230      1,281      11,621   

Asia Pacific

   11,541      2,944      869      15,354   

Latin America

   3,287      1,425      282      4,994   

North America

   2,544      1,417      393      4,354   
                        

Total

   30,302      12,780      3,351      46,433   
                        

Share of Total

   65   28   7   100

Year to date, SEK million

Jan - Sep 2009

   Networks     Professional
Services
    Multimedia     Total  

Western Europe

   17,195      13,693      1,790      32,678   

Central & Eastern Europe, Middle East & Africa

   23,942      9,044      3,767      36,753   

Asia Pacific

   37,950      8,674      2,408      49,032   

Latin America

   9,008      4,371      797      14,176   

North America

   10,473      3,874      1,158      15,505   
                        

Total

   98,568      39,656      9,920      148,144   
                        

Share of Total

   66   27   7   100

Top 15 Markets in Sales

 

Market

   Jan - Sep
2009
    Jan - Sep
2008
    Q3
2009
    Q3
2008
 

United States

   9   7   7   8

China

   9   7   7   5

India

   8   7   9   8

Italy

   4   5   4   4

United Kingdom

   4   3   5   3

Indonesia

   4   4   3   5

Japan

   4   2   4   2

Brazil

   4   4   4   5

Spain

   3   4   3   3

Sweden

   2   5   2   4

Turkey

   2   1   3   1

Germany

   2   2   2   2

Australia

   2   2   2   2

Nigeria

   2   2   2   2

Canada

   2   2   2   1

 

Ericsson Third Quarter Report, October 22, 2009    26


Provisions

 

     2009    2008

Isolated quarters, SEK million

   Q3    Q2    Q1    Q4    Q3    Q2    Q1

Opening balance

   13,957    12,592    14,350    12,995    11,106    10,056    9,726

Additions

   2,169    3,710    1,672    3,800    3,418    2,724    2,019

Utilization/Cash out

   -3,083    -1,982    -3,052    -2,321    -1,595    -1,343    -781

of which restructuring

   -1,241    -753    -1,179    -956    -303    -196    -301

Reversal of excess amounts

   -121    -146    -287    -832    -117    -244    -622

Reclassification, translation difference and other

   -536    -217    -91    708    183    -87    -286
                                  

Closing balance

   12,386    13,957    12,592    14,350    12,995    11,106    10,056
                                  
     2009    2008

Year to date, SEK million

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

Opening balance

   14,350    14,350    14,350    9,726    9,726    9,726    9,726

Additions

   7,551    5,382    1,672    11,961    8,161    4,743    2,019

Utilization/Cash out

   -8,117    -5,034    -3,052    -6,040    -3,719    -2,124    -781

of which restructuring

   -3,173    -1,932    -1,179    -1,756    -800    -497    -301

Reversal of excess amounts

   -554    -433    -287    -1,815    -983    -866    -622

Reclassification, translation difference and other

   -844    -308    -91    518    -190    -373    -286
                                  

Closing balance

   12,386    13,957    12,592    14,350    12,995    11,106    10,056
                                  

 

Number of Employees

 

     2009    2008

End of period

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

Western Europe 1)

   39,050    38,350    38,550    41,600    41,800    42,000    42,100

Central & Eastern Europe, Middle East & Africa

   10,200    9,800    9,550    8,000    7,650    7,300    7,000

Asia Pacific

   16,350    15,950    15,350    15,150    14,800    14,400    14,150

Latin America

   5,700    7,850    8,000    8,250    7,450    6,600    6,250

North America

   11,200    5,300    5,450    5,750    5,650    5,500    5,500
                                  

Total

   82,500    77,250    76,900    78,750    77,350    75,800    75,000
                                  

 

                    

1)       Of which Sweden

   18,300    18,600    18,800    20,150    20,250    20,250    20,200

 

Information on investments in assets subject to depreciation, amortization and impairment

 

     2009    2008

SEK million

   Q3    Q2    Q1    Q4    Q3    Q2    Q1

Additions

                    

Property, plant and equipment

   690    1,189    1,018    1,297    997    893    946

Capitalized development expenses

   245    327    209    393    261    422    333

IPR, brands and other intangible assets

   438    50    7    20    —      —      —  
                                  

Total

   1,373    1,566    1,234    1,710    1,258    1,315    1,279
                                  

Depreciation, amortization and impairment losses

                    

Property, plant and equipment

   776    844    817    901    787    713    704

Capitalized development expenses

   177    173    202    286    279    1,034    689

IPR, brands and other intangible assets

   2,315    2,095    833    872    806    782    821
                                  

Total

   3,268    3,112    1,852    2,059    1,872    2,529    2,214
                                  

 

Ericsson Third Quarter Report, October 22, 2009    27


Other Information

 

     Jul - Sep     Jan - Sep     Jan - Dec
2008
 
     2009     2008     2009     2008    

Number of shares and earnings per share 1)

          

Number of shares, end of period (million)

   3,273      3,246      3,273      3,246      3,246   

of which A-shares (million)

   262      262      262      262      262   

of which B-shares (million)

   3,011      2,984      3,011      2,984      2,984   

Number of treasury shares, end of period (million)

   82      62      82      62      61   

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

   3,191      3,184