Edgar Filing: ERICSSON LM TELEPHONE CO

Form 6-K

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 26, 2012

LM ERICSSON TELEPHONE COMPANY

(Translation of registrant’s name into English)

Torshamnsgatan 23, Kista

SE-164 83, Stockholm, Sweden

(Address of principal executive offices)

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

Form 20-F x Form 40-F ¨

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

Yes ¨ No x

Announcement of LM Ericsson Telephone Company, dated October 26, 2012 regarding “Ericsson Third Quarter Report 2012”

SIGNATURES

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


TELEFONAKTIEBOLAGET LM ERICSSON (publ)

By:		/s/ NINA MACPHERSON
		Nina Macpherson
		Senior Vice President and
		General Counsel

By:		/s/ HELENA NORRMAN
		Helena Norrman
		Senior Vice President
		Corporate Communications

Date: October 26, 2012

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CONTENTS


Financial Highlights			2
Segment Results			5
Regional Sales Overview			8
Market Data			9
Parent Company Information			10
Other Information			10
Auditors’ Review Report			12
Editor’s Note			13
Financial Statements and Additional Information			15

Ericsson third QUARTER report

October 26, 2012

•

Sales decreased -2% YoY and -1% QoQ.

•

Networks decreased YoY due to weaker sales in parts of Europe, China, Korea and Russia as well as continued decline in CDMA equipment sales. This was partly offset by strong development in North America. Operating margin was stable QoQ.

•

Global Services increased sales 19% YoY. Operating margin increased QoQ.

•

The underlying business mix, with higher share of coverage projects than capacity projects, is expected to prevail short-term.

•

Operating margin decreased YoY due to higher share of coverage projects and modernization projects in Europe. QoQ operating margin increased due to lower opex.

•

Cash flow from operations SEK 7.0 b. and cash conversion YTD at 52%.

•

Net income SEK 2.2 b., down from SEK 3.8 b. YoY, impacted by lower profitability in Networks.

•

EPS diluted SEK 0.67 (1.18). EPS Non-IFRS SEK 1.04 (1.52).


SEK b.	Q3 2012			Q3 2011			YoY Change			Q2 2012			QoQ Change			Nine m. 2012			Nine m. 2011
Net sales		54.6			55.5			–2	%		55.3			–1	%		160.8			163.3
Of which Networks		26.9			32.5			–17	%		27.8			–3	%		82.0			99.1
Of which Global Services		24.3			20.4			19	%		24.1			1	%		69.0			56.9
Of which Support Solutions		3.3			2.6			29	%		3.5			–5	%		9.8			7.2
Gross margin		30.4	%		35.0	%		—			32.0	%		—			31.9	%		37.1	%

EBITA margin excl JVs and Sony Ericsson sale		8.7	%		13.4	%		—			8.0	%		—			8.2	%		13.0	%
Operating income excl JVs and Sony Ericsson sale		3.7			6.3			–42	%		3.3			11	%		9.7			17.6
Operating margin excl JVs and Sony Ericsson sale		6.7	%		11.3	%		—			5.9	%		—			6.1	%		10.8	%
EBITA margin excl JVs		8.7	%		13.4	%		—			8.0	%		—			13.0	%		13.0	%
Operating income excl JVs		3.7			6.3			–42	%		3.3			11	%		17.4			17.6
Operating margin excl JVs		6.7	%		11.3	%		—			5.9	%		—			10.8	%		10.8	%

Of which Networks		5	%		13	%		—			5	%		—			5	%		15	%
Of which Global Services		8	%		9	%		—			6	%		—			6	%		7	%
Of which Support Solutions		14	%		3	%		—			12	%		—			9	%		–7	%

Operating income incl JVs		3.1			5.7			–45	%		2.1			49	%		14.3			15.7
Income after financial items		3.2			5.9			–45	%		1.8			81	%		14.1			16.3
Net income		2.2			3.8			–42	%		1.2			81	%		12.2			11.1

EPS diluted, SEK		0.67			1.18			–43	%		0.34			97	%		3.77			3.42
EPS (Non-IFRS), SEK¹⁾		1.04			1.52			–32	%		0.78			33	%		4.96			4.73
Cash flow from operations		7.0			1.6			—			–1.4			—			6.3			4.5
Cash conversion		149	%		24	%		—			–43	%		—			52	%		25	%
Net cash, end of period		29.0			35.4			–18	%		25.9			12	%		29.0			35.4

¹⁾	EPS, diluted, excl. amortizations, write-downs of acquired intangible assets and restructuring. Nine months 2012 includes a gain from the divestment of Sony Ericsson of SEK 7.7 b.

COMMENTS FROM HANS VESTBERG, PRESIDENT AND CEO

“Demand for Global Services and Support Solutions continued to be good, while Networks showed a decline in sales YoY. In North America Networks sales developed favorably, despite the expected decline in CDMA sales, while parts of Europe, China, Korea and Russia continued to be slow,” says Hans Vestberg, President and CEO of Ericsson (NASDAQ:ERIC). “The growing Global Services business contributes not only with topline but also with stable operating profitability and, together with Support Solutions, represented more than 50% of Group sales.


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NET SALES, SEK b.

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OPERATING INCOME INCL. JVs, SEK b.

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*	excl SEK 7.7 b. gain from Sony Ericsson divestment

NET INCOME, SEK b.

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*	excl SEK 7.7 b. gain from Sony Ericsson divestment

CASH FLOW FROM OPERATIONS, SEK b.

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We believe that the fundamentals for longer-term positive development for the industry remain solid. There are now one billion smartphones in the world and the number is expected to reach three billion in 2017. The introduction of new devices and applications put higher consumer demands on network performance and quality. This drives demand for our technology, software and services capabilities. However, at the same time, we see a continued macroeconomic slow down and political unrest in parts of the world, which has led to more cautious operator spending in some parts of the world.

Our joint venture ST-Ericsson is still in a challenging situation although performance improved in the quarter. Ericsson, together with STMicroelectronics, is continuously reviewing the strategy and business case. We remain confident that ST-Ericsson has a strategic position in the industry to enable the device ecosystem.

We have a strong portfolio, position and capabilities in place. However, our profitability is not satisfactory. Operating expenses for comparable units have declined -7% YoY and we also see steady improvements in execution of projects. These improvements are encouraging, but not enough and we will continue to proactively identify and execute additional efficiency gains and cost reductions,” concludes Vestberg.

Financial Highlights

INCOME STATEMENT AND CASH FLOW

Sales in the quarter decreased -2% YoY and -1% QoQ. Sales for comparable units, adjusted for FX and hedging, decreased -4% YoY. The acquired Telcordia operation added sales of SEK 1.1 b. in the quarter, split 50/50 between segments Global Services and Support Solutions.

Networks sales decreased -17% YoY primarily due to weaker sales in parts of Europe, China, Korea and Russia as well as continued decline in CDMA equipment sales. This was partly offset by strong development in North America. Networks sales decreased -3% QoQ due to seasonality. CDMA equipment sales continued its expected rapid decline with -50% YoY to SEK 1.6 b in the quarter.

Global Services continued its good momentum and grew 19% YoY and 1% QoQ. Global Services represented 45% (37%) of Group sales in the quarter compared to 44% in Q212. Support Solutions sales grew with 29% YoY and declined -5% QoQ. Both Global Services and Support Solutions were positively impacted by the added sales from the acquired Telcordia.

Ericsson restructuring charges amounted to SEK 0.6 (0.4) b., mainly related to execution of the service delivery strategy through transformation from local to global resource centers. For the nine months period, restructuring charges amount to SEK 1.7 b. As previously communicated, restructuring charges are estimated to approximately SEK 4 b., for the FY12.

Gross margin was down YoY to 30.4% (35.0%), and from 32.0% QoQ. The YoY decrease is due to the increased Global Services share as well as a higher proportion of coverage projects and network modernization projects in Europe. Approximately 50% of the YoY gross margin decline is related to the increased services share. The QoQ gross margin reduction is due to lower software sales and a higher Global Services share than in Q212.

The underlying business mix, with higher share of coverage projects than capacity projects, is expected to prevail short-term. The negative impact from the network modernization projects in Europe will start to gradually decline end 2012.


Ericsson Third Quarter Report 2012		2

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Total operating expenses amounted to SEK 13.3 (13.5) b. due to seasonality and effects from cost reductions. Excluding acquisitions and restructuring charges, total operating expenses amounted to SEK 12.5 b. down -7% YoY. R&D expenses amounted to SEK 7.5 (7.8) b. and declined YoY despite added acquisitions. Full year R&D expenses is expected to be SEK 30-32 b. Selling and general administrative expenses (SG&A) amounted to SEK 5.8 (5.7) b. and declined QoQ by SEK 1.1 b.

Other operating income and expenses was SEK 0.3 (0.4) b. where of the divestment of Multimedia brokering (IPX) amounted to SEK 0.2 b.

Operating income, excluding JVs, decreased to SEK 3.7 (6.3) b. due to higher share of coverage projects and modernization projects in Europe as well as lower sales. Operating margin was 6.7% (11.3%) compared to 5.9% in Q212. The sequential improvement is driven by lower operating expenses.

Ericsson’s share in ST-Ericsson’s income before tax was SEK -0.6 (-0.7) b.

Financial net amounted to SEK 0.1 (0.2) b. and increased QoQ from SEK -0.3 b. mainly due to positive currency exchange revaluation effects on financial investments and liabilities.

Net income decreased to SEK 2.2 (3.8) b. due to lower profitability in Networks.

EPS diluted was SEK 0.67 (1.18). EPS Non-IFRS, excluding restructuring, was SEK 1.04 (1.52).

Cash flow from operations was positive SEK 7.0 (1.6) b., driven by good collection in the quarter. Cash conversion YTD is 52%. Cash outlays for restructuring amounted to SEK 0.2 (0.7) b. Cash outlays of SEK 0.9 b. remain to be made from the restructuring provision.


Ericsson Third Quarter Report 2012		3

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DAYS SALES OUTSTANDING

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INVENTORY DAYS

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PAYABLE DAYS

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BALANCE SHEET AND OTHER PERFORMANCE INDICATORS

Trade receivables decreased QoQ to SEK 61.6 (67.3) b., reflecting good collections and changes in FX. As a result, days sales outstanding (DSO) decreased from 111 to 101 days QoQ.

Inventory continued on a high level due to the high project activity. Inventory decreased QoQ to SEK 32.4 (33.1) b., mainly positively impacted by changes in FX. Inventory turnover days decreased from 84 to 82 days.

During the quarter, Ericsson has performed refinancing activities to extend the average debt maturity profile and to further diversify funding sources.

Cash, cash equivalents and short-term investments amounted to SEK 68.8 (66.4) b. The net cash position increased QoQ by SEK 3.1 b. to SEK 29.0 (25.9) b., mainly due to positive operating cash flow.

During the quarter, approximately SEK 0.7 b. of provisions was utilized, of which SEK 0.2 b. related to restructuring. Additions of SEK 0.8 b. were made, of which SEK 0.2 b. related to restructuring. Reversals of SEK 0.1 b. were made.

Total number of employees at the end of the quarter increased to 109,214 (108,095). The increase is mainly due to addition of service professionals mainly in India and the acquisition of Technicolor Broadcast Service Division. This offsets headcount reductions in other areas.


Ericsson Third Quarter Report 2012		4

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SEGMENT SALES, SEK b.

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NETWORKS QUARTERLY SALES, SEK b.

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EBITA MARGIN, PERCENT

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Segment Results

NETWORKS


SEK b.	Q3 2012			Q3 2011			YoY Change			Q2 2012			QoQ Change			Nine m. 2012			Nine m. 2011
Network sales		26.9			32.5			–17	%		27.8			–3	%		82.0			99.1
EBITA margin ¹⁾		8	%		16	%		—			7	%		—			8	%		17	%
Operating margin		5	%		13	%		—			5	%		—			5	%		15	%

¹⁾	EBITA – Earnings before interest, tax, amortizations and write-downs of acquired intangibles.

Organic and FX adjusted sales declined YoY -17%. The decline is related to lower sales in parts of Europe, continued decline in CDMA, lower GSM sales in China as well as lower 3G sales in Russia. Korea declined YoY as a result of the large 3G investments in Q311. North America showed good development both YoY and QoQ. The sequential decline is due to seasonality.

The good traction for the Smart Services Router (SSR) continued in the quarter with 13 new contracts signed compared to seven in Q212. Overall the fixed and mobile IP portfolio showed good growth in the quarter. We also saw accelerating demand for AIR, the world’s first commercially deployed antenna-integrated radio and part of the RBS6000 family, providing enhanced radio performance and ease of deployment.

Operating margin was negatively impacted YoY by lower sales as well as the underlying business mix, with more coverage than capacity projects, and the European network modernization projects. Operating margin was stable QoQ with positive impact from seasonally low operating expenses while a lower share of software impacted negatively.

After the initial large-scale LTE rollouts in the US, Korea and Japan, we now start to see other countries following. Lately Latin America started LTE rollouts and after executing awarded contracts Ericsson will have a footprint of more than 50%, substantially higher than the 3G market share in the region.

The introduction of new devices and applications put higher consumer demands on network performance. Faster HSPA speeds, coverage and capacity enhancements as well as tiered price plans are required for successful service differentiation.

Segment Networks has a continued strong focus on improving profitability and leveraging the installed base of radio, core and transport equipment. Other key priorities are to grow IP sales and secure contracts for Voice over LTE. In CDMA, the priority is to support customers’ migration to our LTE solution and excel in life-cycle management.

CDMA sales in the quarter amounted to SEK 1.6 b., a decline of -50% YoY and with lower operating margin than average in Networks. The work to reduce cost in the CDMA business continued and as of January 1, 2013, the CDMA operations will transition into the Networks organization. There is no impact on financial reporting.


Ericsson Third Quarter Report 2012		5

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GLOBAL SERVICES QUARTERLY SALES, SEK b.

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EBITA MARGIN, PERCENT

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GLOBAL SERVICES


SEK b.	Q3 2012			Q3 2011			YoY Change			Q2 2012			QoQ Change			Nine m. 2012			Nine m. 2011
Global Services sales		24.3			20.4			19	%		24.1			1	%		69.0			56.9
Of which Professional Services		16.4			14.7			11	%		16.9			–3	%		48.2			40.8
Of which Managed Services		6.3			5.3			19	%		6.5			–3	%		18.5			15.0
Of which Network Rollout		7.9			5.7			38	%		7.1			11	%		20.8			16.2

EBITA margin ¹⁾		8	%		9	%		—			7	%		—			7	%		8	%
Of which Professional Services		15	%		14	%		—			14	%		—			14	%		13	%
Of which Network Rollout		–5	%		–4	%		—			–10	%		—			–8	%		–7	%

Operating margin		8	%		9	%		—			6	%		—			6	%		7	%
Of which Professional Services		14	%		14	%		—			13	%		—			13	%		13	%
Of which Network Rollout		–6	%		–5	%		—			–11	%		—			–9	%		–8	%

¹⁾	EBITA – Earnings before interest, tax, amortizations and write-downs of acquired intangibles.

Organic and FX adjusted sales growth was 16% YoY. The growth in Professional Services is mainly related to Managed Services. Operators continue to focus on increasing their operational efficiencies and reduce operating expenses through transformation activities in the voice, IP and OSS/BSS domains which drive demand for managed services and consulting and systems integration. The increase in Network Rollout is related to major activities in North East Asia, Europe, North America, and Sub-Saharan Africa. The QoQ decline in Professional Services is reflecting seasonality, while the increase in Network Rollout is a result of the continued high project activity.

The segment shows stable margin development due to continued efficiency gains. The QoQ margin improvement in Network Rollout is mainly a result of continued improvements in project execution and somewhat more favorable project mix. The margin impact from restructuring charges was 2%-points Q312 for Global Services (1%-point Q311) and 2%-points for Professional Services (2%-points Q311).

Ericsson supports networks with more than 2.5 billion subscribers. The strategy to centralize the service delivery continues and the number of services professionals increased with hiring of new employees in the Global Service Center in India as well as the acquisition of Technicolor Broadcast Service Division.


Other information	Q3 2012		Q2 2012		Q1 2012		Full year 2011
No. of signed managed services contracts		11		17		9		70
Of which expansions/extensions		5		5		4		32
No. of signed significant consulting & systems integration contracts¹⁾		3		7		6		34
Number of subscribers in networks managed by Ericsson, end of period ²⁾		~ 950 m.		> 900 m.		> 900 m.		900 m.
Of which in network operations contracts		550 m.		500 m.		500 m.		500 m.
Number of Ericsson services professionals, end of period		59,000		57,000		57,000		56,000

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

2)	The figure includes network operations contracts and field operation contracts.


Ericsson Third Quarter Report 2012		6

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SUPPORT SOLUTIONS QUARTERLY SALES,

SEK b.

EBITA MARGIN, PERCENT

SUPPORT SOLUTIONS


SEK b.	Q3 2012			Q3 2011			YoY Change			Q2 2012			QoQ Change			Nine m. 2012			Nine m. 2011
Support Solutions sales		3.3			2.6			29	%		3.5			–5	%		9.8			7.2
EBITA margin ¹⁾		19	%		11	%		—			17	%		—			15	%		0	%
Operating margin		14	%		3	%		—			12	%		—			9	%		–7	%

¹⁾	EBITA – Earnings before interest, tax, amortizations and write-downs of acquired intangibles.

Organic and FX adjusted sales growth was 4% YoY. The acquired Telcordia operation added sales of SEK 0.6 b. in the quarter and showed good QoQ sales performance. The YoY sales increase for the segment was driven by business support solutions BSS (charging solutions), mainly in Latin America and Middle East.

Operating margin is positively impacted by a capital gain of SEK 0.2 b. from the divestment of Multimedia brokering (IPX). Excluding IPX, operating margin was 7% in the quarter. IPX contributed with sales of SEK 1.2 b. for the first nine months of the year. Focus continues to be on transforming the business for sustainable profit generation as well as integrating Telcordia and newly acquired ConceptWave.

The number of subscribers served by our charging and billing solutions was 2.0 billion at end of period.

ST-ERICSSON


USD m.	Q3 2012		Q3 2011		YoY Change			Q2 2012		QoQ Change
Net sales		359		412		–13	%		344		4	%
Adjusted operating income ¹⁾		–148		–194		24	%		–235		37	%
Operating income		–174		–224		22	%		–309		44	%
Net income		–190		–211		10	%		–318		40	%

¹⁾	Operating income adjusted for amortization of acquired intangibles and restructuring charges.

ST-Ericsson’s sales increased 4% QoQ, reflecting the continued ramp of NovaThor platforms shipping to customers as well as revenue from IP licensing. The net debt at the end of the quarter was USD -1.4 b. Last quarter net debt was USD -1.2 b. ST-Ericsson is reported in US GAAP and Ericsson’s share in ST-Ericsson’s income before tax, adjusted to IFRS, was SEK -0.6 (-0.7) b. in the quarter. By the end of the quarter, ST-Ericsson had utilized USD 1.4 b. of a short-term credit facility of USD 1.4 b. granted on a 50/50 basis by the parent companies, which corresponds to an increase of USD 0.2 b. since Q212.

Ericsson Group balance sheet items related to its investment in ST-Ericsson (IFRS);


SEK m.	March 31, 2012		June 30, 2012		Sept 30, 2012
Investment in ST-Ericsson		1,982		767		195
Loans to ST-Ericsson		3,241		4,311		4,538
Total		5,223		5,078		4,733

Though their path to success is challenging, ST-Ericsson continues to focus on securing the successful execution and delivery of its NovaThor ModAp platforms and Thor modems to customers while executing a company transformation aiming at lowering its break-even point. The parent companies are continuously reviewing the strategy and business case. As a result, we may consider additional actions to solidify and accelerate ST-Ericsson’s path to profitability. In such an event, or in case of a significant worsening of business prospects, the value of ST-Ericsson for Ericsson could decrease to a value significantly lower than the current carrying amount of ST-Ericsson on our books and we may be required to take an impairment charge.


Ericsson Third Quarter Report 2012		7

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Ericsson accounts for ST-Ericsson in accordance with the equity method which means that Ericsson’s share of income after tax in ST-Ericsson increases or decreases the carrying investment amount.

Regional sales Overview


	Third quarter 2012								*Growth*
SEK b.	Net-works		Global Services		Support Solutions		Total		*YoY*			*QoQ*
North America		7.6		5.9		0.6		14.0		16	%		8	%
Latin America		2.5		2.3		0.6		5.4		–10	%		3	%
Northern Europe and Central Asia		1.5		1.1		0.1		2.7		–24	%		–20	%
Western and Central Europe		0.9		2.5		0.2		3.6		–21	%		–11	%
Mediterranean		2.0		3.2		0.2		5.4		3	%		–13	%
Middle East		1.4		1.8		0.4		3.6		0	%		–2	%
Sub-Saharan Africa		1.6		0.9		0.3		2.8		11	%		0	%
India		1.1		0.6		0.1		1.7		–24	%		2	%
China and North East Asia		4.5		3.7		0.1		8.4		–13	%		–1	%
South East Asia and Oceania		1.7		1.6		0.1		3.5		–6	%		–5	%
Other¹⁾		2.1		0.5		0.7		3.3		49	%		6	%

Total		26.9		24.3		3.3		54.6		–2	%		–1	%

¹⁾

In Segment Networks “Other” includes licensing revenues, sales of cables, power modules and other businesses. Revenue from the acquired Telcordia business operation, consolidated January 2012, is reported 50/50 between segments Global Services and Support Solutions. In the regional dimension, all of the Telcordia sales are reported in the Support Solution segment except for North America where it is split 50/50 between Global Services and Support Solutions. The acquired Technicolor Broadcast Service Division is reported in segment Global Services region “Other”. Multimedia brokering (IPX) was previously reported in each region in segment Support Solution. As of Q112 it is part of region “Other” in segment Support Solutions. Multimedia brokering (IPX) was divested end Q312.

North America. Network and Global Services sales both grew YoY and QoQ driven by continued high activity levels in won coverage projects. CDMA sales continued its expected decline. New LTE devices will drive data traffic and increase focus from operators on both coverage and capacity.

Latin America. Networks YoY business was slow pending operators’ decision for LTE investments. Networks sales increased QoQ driven by 3G/HSPA sales. Lately Latin America started LTE rollouts and after executing awarded contracts Ericsson will have a footprint of more than 50%, substantially higher than the 3G market share in the region. The region has also won substantial business in OSS/BSS and IPTV which contributed positively to Support Solutions.

Northern Europe and Central Asia. The continued YoY decline in Networks sales is mainly related to lower sales in Russia. However, Global Services continued its growth thanks to network rollout projects as well as new managed services contracts.

Western and Central Europe. Networks sales were negatively affected by the transition from previous contracts to network modernization contracts. This transition also impacted sales of Network Rollout in Global Services. Managed services, OSS/BSS and systems integration continued to show positive momentum.

Mediterranean. The YoY growth is driven by rollout of modernization projects. LTE is starting to gain traction in the region with deployment in a few countries.


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Middle East. Both Global Services and Support Solutions developed favorably in the quarter. Demand is especially good for managed services and systems integrations as operators seek network performance quality, operational efficiencies as well as transformation of their OSS/BSS environments. Networks sales were weak, impacted by political unrest in parts of the region, partly offset by continued LTE deployments.

Sub-Saharan Africa. The sales increase YoY is driven by 3G rollouts and upgrades across the region. However, 2G rollouts still represent the largest share of Global Services as well as Networks revenues. Subscriber and data growth continues, although data grows from a low level.

India. The QoQ improvement in Networks is driven by operator investments in areas where data traffic is growing. However, investments continued at low levels which are highlighted by the YoY comparison where Q311 saw large initial 3G rollouts.

China and North East Asia. The YoY decline in Networks was impacted by the same driver as in previous quarter, i.e. lower sales of GSM in China. Although the transition to LTE continues, Korea declined YoY compared with the large 3G investments in Q311. Services sales also showed same driver as in Q212, i.e. a strong development mainly driven by turnkey projects in Japan.

South East Asia and Oceania. Operator focus on network performance and quality has a positive impact on Global services sales. Networks sales decreased YoY reflecting lower activity levels in certain countries. LTE deployment is ongoing in parts of the region.

Other. The YoY improvement is due to the acquired Technicolor Broadcast Service Division that was consolidated in the quarter as well as Multimedia brokering (IPX) which was previously reported in each region, but from Q112 it is part of “Other”, under Support Solutions. Multimedia Brokering (IPX) was divested end Q312. Licensing revenues continued to show a stable development YoY. Also sales of cables, power modules and other businesses are included in “Other”.

Market data

GROWTH RATES ARE BASED ON ERICSSON AND MARKET ESTIMATES


	Q3 2012		Q3 2011					FULL YEAR						Ericsson forecast
	Q3 2012		Q3 2011		Change			2009		2010		2011		2012
Mobile subscriptions, billion		6.4		5.9		9	%		4.6		5.3		6.0		6.6
Net additions, million		105		180		–40	%		650		710		670		630

Mobile broadband, million ¹⁾		1,400		900		55	%		300		600		1,000		1,500
Net additions, million		125		105		20	%		150		270		400		500

¹⁾

Mobile broadband includes handsets, tablets and mobile PCs for the following technologies: HSPA, LTE, CDMA2000 EV-DO, TD-SCDMA and WiMAX. Note: due to continuous improvements in reported data from operators, historical subscriptions figures might have changed compared to previously reported, affecting comparison of net additions and total figures. All figures are approximates.


Ericsson Third Quarter Report 2012		9

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Parent Company Information

Income after financial items was SEK 10.5 (6.1) b. Major changes in the Parent Company’s financial position for the nine month period; decreased cash, cash equivalents and short-term investments of SEK 9.8 b., and increased current and non-current receivables from subsidiaries of SEK 8.4 b. At the end of the quarter, cash, cash equivalents and short-term investments amounted to SEK 46.3 (56.1) b. By the end of the quarter, ST-Ericsson had utilized USD 695 million of a short-term credit facility.

In accordance with the conditions of the long-term variable compensation program (LTV) for Ericsson employees, 2,478,565 shares from treasury stock were sold or distributed to employees during the third quarter. The holding of treasury stock at September 30, 2012, was 87,217,391 Class B shares.

Ericsson annual general meeting

The Annual General Meeting of shareholders will be held on April 9, 2013, 15.00 (CET) at Kistamässan in Kista, Stockholm, Sweden.

ANNUAL REPORT

The annual report will be made available on our website www.ericsson.com and at the Ericsson headquarters, Torshamnsgatan 23, Stockholm, Sweden, first weeks of March.

Other Information

DIVESTMENT OF IPX

On September 30, 2012, Ericsson divested its Multimedia brokering platform (IPX) to French listed company Gemalto, with the exception of operations in the US. About 100 employees were part of the transaction.

ACQUISITION OF CANADIAN CONCEPTWAVE

On September 25, 2012, Ericsson announced the acquisition of 100% of the shares of ConceptWave in an all cash transaction. ConceptWave is headquartered in Toronto, Canada, with 170 employees and complements Ericsson’s portfolio in operations and business support systems with order management and product catalog solutions. The transaction closed at signing.

DIVESTMENT OF EDA 1500 GPON PORTFOLIO

On August 22, 2012, Ericsson announced the sale of its EDA 1500 GPON portfolio to US-based Calix Inc. (NYSE:CLAX) including the transfer of about 60 employees. The negative impact on operating income of estimated SEK 400 million in Q412 will be equally split between cost of sales and operating expenses without any significant cash impact. The companies have signed a global re-seller agreement.

CLOSING TECHNICOLOR BROADCAST SERVICE DIVISION ACQUISITION

On July 3, 2012, Ericsson announced the closing of the acquisition of Technicolor’s Broadcast Services Division. The acquisition brings leading broadcast customers, approximately 900 highly skilled professionals and play-out services in France, UK and Netherlands. Purchase price amounted to EUR 19 million and a potential earn-out based on 2015 revenues of the Broadcast Services activity up to EUR 9 million.

SIGNING OF LOAN AGREEMENT WITH NORDIC INVESTMENT BANK

On July 20, 2012, Ericsson announced the signing of a loan agreement with the Nordic Investment Bank (NIB). The loan amounts to EUR 0.15 b. (or the equivalent in USD), and is divided into two equal tranches with respective seven- and nine-year maturity. The loan supports Ericsson’s R&D activity in Sweden and Finland to further develop the next generation mobile broadband technology. Investment period runs 2012 through 2014. The loan will refinance maturing debt, extend the debt maturity profile and further diversify funding sources.


Ericsson Third Quarter Report 2012		10

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ASSESSMENT OF RISK ENVIRONMENT

Ericsson’s operational and financial risk factors and uncertainties along with our strategies and tactics to mitigate risk exposures or limit unfavorable outcomes are described in our Annual Report 2011. Compared to the risks described in the Annual Report 2011, no material, new or changed risk factors or uncertainties have been identified in the quarter.

Risk factors and uncertainties in focus short-term for the Parent Company and the Ericsson Group include:

•

Potential negative effects on operators’ willingness to invest in network development due to uncertainty in the financial markets and a weak economic business environment, or reduced consumer telecom spending, or increased pressure on us to provide financing;

•

Uncertainty regarding the financial stability of suppliers, for example due to lack of financing;

•

Effects on gross margins and/or working capital of the product mix in the Networks segment between sales of upgrades and expansions (mainly software) and new build-outs of coverage (mainly hardware);

•

Effects on gross margins of the product mix in the Global Services segment including proportion of new network build-outs and share of new managed services deals with initial transition costs;

•

A continued volatile sales pattern in the Support Solutions segment or variability in our overall sales seasonality could make it more difficult to forecast future sales;

•

Effects of the ongoing industry consolidation among our customers as well as between our largest competitors, e.g. with postponed investments and intensified price competition as a consequence;

•

Execution of the business plan and related capital need of our joint venture ST-Ericsson;

•

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

•

Political unrest or instability in certain markets;

•

Effects on production and sales from restrictions with respect to timely and adequate supply of materials, components and production capacity and other vital services on competitive terms;

•

Natural disasters and other events, affecting business, production, supply and transportation.

Ericsson stringently monitors the compliance with all relevant trade regulations and trade embargos applicable to dealings with customers operating in countries where there are trade restrictions or trade restrictions are discussed. Moreover, Ericsson operates globally in accordance with Group policies and directives for business ethics and conduct.

Stockholm, October 26, 2012

Telefonaktiebolaget LM Ericsson (publ)

Hans Vestberg, President and CEO

Org. Nr. 556016-0680

Date for next report: January 31, 2013


Ericsson Third Quarter Report 2012		11

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Auditors’ Review Report

We have reviewed this report for the period January 1, 2012, to September 30, 2012, for Telefonaktiebolaget LM Ericsson (publ). The board of directors and the CEO are responsible for the preparation and presentation of this financial information in accordance with IAS 34 and the Swedish Annual Accounts Act. Our responsibility is to express a conclusion on this financial information based on our review.

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

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 26, 2012

PricewaterhouseCoopers AB


Peter Nyllinge				Johan Engstam

Authorized Public Accountant				Authorized Public Accountant
Auditor in Charge


Ericsson Third Quarter Report 2012		12

LOGO

Editor’s Note

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

www.ericsson.com/res/investors/docs/q-reports/2012/9month12-en.pdf

Ericsson invites media, investors and analysts to a press conference at the Ericsson Studio, Grönlandsgången 4, Stockholm, at 09.00 (CET), October 26, 2012. An analysts, investors and media conference call will begin at 14.00 (CET).

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

Video material will be published during the day on www.ericsson.com/press

FOR FURTHER INFORMATION, PLEASE CONTACT

Helena Norrman, Senior Vice President, Communications

Phone: +46 10 719 3472

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


INVESTORS		MEDIA

Åse Lindskog, Vice President, Head of Investor and Analyst Relations Phone: +46 10 719 9725 +46 730 244 872 E-mail: investor.relations@ericsson.com Stefan Jelvin, Director, Investor Relations Phone: +46 10 714 2039 +46 709 860 227 E-mail: investor.relations@ericsson.com Åsa Konnbjer, Director, Investor Relations Phone: +46 10 713 3928 +46 730 825 928 E-mail: investor.relations@ericsson.com Rikard Tunedal, Director, Investor Relations Phone: +46 10 714 5400 +46 761 005 400 E-mail: investor.relations@ericsson.com		Ola Rembe, Vice President, Head of Corporate Public & Media Relations Phone: +46 10 719 9727 +46 730 244 873 E-mail: media.relations@ericsson.com Corporate Public & Media Relations Phone: +46 10 719 69 92 E-mail: media.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 2012		13

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

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

In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. These forward-looking statements speak only as of the date hereof and are based upon the information available to us at this time. Such information is subject to change, and we will not necessarily inform you of such changes. These statements are not guarantees of future performance and are subject to risks, uncertainties and assumptions that are difficult to predict. Therefore, our actual results could differ materially and adversely from those expressed in any forward-looking statements as a result of various factors. Important factors that may cause such a difference for Ericsson include, but are not limited to: (i) material adverse changes in the markets in which we operate or in global economic conditions; (ii) increased product and price competition; (iii) reductions in capital expenditure by network operators; (iv) the cost of technological innovation and increased expenditure to improve quality of service; (v) significant changes in market share for our principal products and services; (vi) foreign exchange rate or interest rate fluctuations; and (vii) the successful implementation of our business and operational initiatives.


Ericsson Third Quarter Report 2012		14

LOGO

Financial Statements and Additional Information


Financial statements			Page
Consolidated income statement			16
Statement of comprehensive income			16
Consolidated balance sheet			17
Consolidated statement of cash flows			18
Consolidated statement of changes in equity			19
Consolidated income statement - isolated quarters			20
Consolidated statement of cash flows - isolated quarters			21
Parent Company income statement			22
Parent Company balance sheet			22

Additional information			Page
Accounting policies			23
Net sales by segment by quarter			24
Sales growth for comparable units, adjusted for currency effects and hedging			24
Operating income by segment by quarter			25
Operating margin by segment by quarter			25
EBITA by segment by quarter			26
EBITA margin by segment by quarter			26
Net sales by region by quarter			27
Net sales by region by quarter (cont.)			28
Top 5 countries in sales			28
Net sales by region by segment			29
Provisions			30
Number of employees			30
Information on investments in assets subject to depreciation, amortization and impairment and write-downs			30
Other information			31
Ericsson planning assumptions for year 2012			31
Restructuring charges by function			32
Restructuring charges by segment			32


Ericsson Third Quarter Report 2012		15

CONSOLIDATED INCOME STATEMENT


	Jul - Sep									Jan - Sep
SEK million	2011			2012			Change			2011			2012			Change

Net sales		55,518			54,550			–2	%		163,254			160,843			–1	%
Cost of sales		–36,095			–37,970			5	%		–102,737			–109,566			7	%

Gross income		19,423			16,580			–15	%		60,517			51,277			–15	%
Gross margin (%)		35.0	%		30.4	%					37.1	%		31.9	%

Research and development expenses		–7,824			–7,473			–4	%		–23,923			–23,586			–1	%
Selling and administrative expenses		–5,664			–5,797			2	%		–19,846			–18,884			–5	%

Operating expenses		–13,488			–13,270			–2	%		–43,769			–42,470			–3	%

Other operating income and expenses ¹⁾		366			341						875			8,620


Operating income before shares in earnings of JV and associated companies		6,301			3,651			–42	%		17,623			17,427			–1	%
Operating margin before shares in earnings of JV and associated companies (%)		11.3	%		6.7	%					10.8	%		10.8	%

Shares in earnings of JV and associated companies		–640			–555			–13	%		–1,879			–3,166			68	%

Operating income		5,661			3,096			–45	%		15,744			14,261			–9	%

Financial income		1,198			390						2,477			1,270			–49	%
Financial expenses		–987			–275						–1,929			–1,472			–24	%

Income after financial items		5,872			3,211			–45	%		16,292			14,059			–14	%

Taxes		–2,090			–1,027						–5,214			–1,866
Net income		3,782			2,184			–42	%		11,078			12,193			10	%


Net income attributable to:
- Stockholders of the Parent Company		3,821			2,177						11,040			12,237
- Non-controlling interests		–39			7						38			–44

Other information
Average number of shares, basic (million)		3,207			3,217						3,204			3,215
Earnings per share, basic (SEK) ²⁾		1.19			0.68						3.45			3.81
Earnings per share, diluted (SEK) ²⁾		1.18			0.67						3.42			3.77

STATEMENT OF COMPREHENSIVE INCOME

Jul - Sep

Jan - Sep

SEK million

2011

2012

2011

2012

Net income

3,782

2,184

11,078

12,193

Other comprehensive income

Actuarial gains and losses, and the effect of the asset ceiling, related to pensions

–5,825

–486

–7,174

–1,251

Revaluation of other investments in shares and participations

Fair value remeasurement

–1

Cash flow hedges

Gains/losses arising during the period

–882

867

880

1,066

Reclassification adjustments for gains/losses included in profit or loss

–264

–72

–2,383

–215

Adjustments for amounts transferred to initial carrying amount of hedged items

—

Changes in cumulative translation adjustments

1,848

–3,409

–426

–4,090

Share of other comprehensive income on JV and associated companies

439

–5

–177

–23

Tax on items relating to components of other comprehensive income

1,619

–27

2,063

126

Total other comprehensive income

–3,066

–3,131

–7,218

–4,293

Total comprehensive income

716

–947

3,860

7,900

Total comprehensive income attributable to:

Stockholders of the Parent Company

682

–879

3,799

8,000

Non-controlling interests

–68

–100

¹⁾	Includes gain on sale of Sony Ericsson SEK 7.7 b. in Q1 2012

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


Ericsson Third Quarter Report 2012		16

CONSOLIDATED BALANCE SHEET


SEK million	Dec 31 2011		Jun 30 2012		Sep 30 2012

ASSETS
Non-current assets
Intangible assets
Capitalized development expenses		3,523		3,795		3,964
Goodwill		27,438		31,342		30,319
Intellectual property rights, brands and other intangible assets		13,083		17,616		16,125

Property, plant and equipment		10,788		11,435		11,559

Financial assets
Equity in JV and associated companies		5,965		2,110		1,526
Other investments in shares and participations		2,199		2,207		2,010
Customer financing, non-current		1,400		1,340		1,331
Other financial assets, non-current		4,117		4,932		3,704

Deferred tax assets		13,020		14,164		13,506

		81,533		88,941		84,044

Current assets
Inventories		33,070		33,118		32,424

Trade receivables		64,522		67,320		61,562
Customer financing, current		2,845		2,581		2,703
Other current receivables		17,837		19,337		23,417

Short-term investments ¹⁾		41,866		37,674		35,976
Cash and cash equivalents		38,676		28,707		32,845

		198,816		188,737		188,927

Total assets		280,349		277,678		272,971


EQUITY AND LIABILITIES
Equity
Stockholders’ equity		143,105		143,827		143,079
Non-controlling interest in equity of subsidiaries		2,165		1,920		1,463

		145,270		145,747		144,542

Non-current liabilities
Post-employment benefits		10,016		9,859		9,732
Provisions, non-current		280		205		196
Deferred tax liabilities		2,250		3,732		3,604
Borrowings, non-current		23,256		23,033		22,910
Other non-current liabilities		2,248		2,534		2,513

		38,050		39,363		38,955

Current liabilities
Provisions, current		5,985		5,113		5,047
Borrowings, current		7,765		7,583		7,196
Trade payables		25,309		24,410		21,968
Other current liabilities		57,970		55,462		55,263

		97,029		92,568		89,474

Total equity and liabilities		280,349		277,678		272,971


Of which interest-bearing liabilities and post-employment benefits		41,037		40,475		39,838

Of which net cash		39,505		25,906		28,983

Assets pledged as collateral		452		530		538
Contingent liabilities		609		518		548

¹⁾	Including loan to ST-Ericsson of SEK 4,538 million as of September 30, 2012

(SEK 4,311 million as of June 30, 2012, SEK 2,759 million as of December 31, 2011)


Ericsson Third Quarter Report 2012		17

CONSOLIDATED STATEMENT OF CASH FLOWS


	Jul - Sep				Jan - Sep				Jan - Dec
SEK million	2011		2012		2011		2012		2011

Operating activities
Net income		3,782		2,184		11,078		12,193		12,569
Adjustments to reconcile net income to cash
Taxes		550		–886		1,242		–3,189		1,994
Earnings/dividends in JV and associated companies		658		579		1,893		3,062		3,710
Depreciation, amortization and impairment losses		2,227		2,394		6,608		7,110		9,036
Other		–291		413		–2,599		–7,075		–2,127

		6,926		4,684		18,222		12,101		25,182

Changes in operating net assets
Inventories		–2,619		–650		–8,451		–666		–3,243
Customer financing, current and non-current		–607		–164		–216		118		74
Trade receivables		–2,769		2,882		–2,265		1,177		–1,700
Trade payables		–805		–1,455		–1,894		–2,451		–1,648
Provisions and post-employment benefits		–2,180		–175		–3,417		–2,299		–5,695
Other operating assets and liabilities, net		3,694		1,851		2,536		–1,640		–2,988

		–5,286		2,289		–13,707		–5,761		–15,200

Cash flow from operating activities		1,640		6,973		4,515		6,340		9,982

Investing activities
Investments in property, plant and equipment		–1,294		–1,461		–3,470		–4,103		–4,994
Sales of property, plant and equipment		59		17		214		316		386
Acquisitions/divestments of subsidiaries and other operations, net ¹⁾		–1,931		–357		–2,893		–2,197		–3,128
Product development		–257		–435		–955		–1,211		–1,515
Other investing activities		–769		1,652		–690		1,327		–900
Short-term investments		9,323		–938		16,225		3,196		14,692

Cash flow from investing activities		5,131		–1,522		8,431		–2,672		4,541

Cash flow before financing activities		6,771		5,451		12,946		3,668		14,523

Financing activities
Dividends paid		–241		–381		–7,450		–8,633		–7,455
Other financing activities		–10		1,062		133		856		961

Cash flow from financing activities		–251		681		–7,317		–7,777		–6,494

Effect of exchange rate changes on cash		278		–1,994		–231		–1,722		–217

Net change in cash		6,798		4,138		5,398		–5,831		7,812

Cash and cash equivalents, beginning of period		29,464		28,707		30,864		38,676		30,864

Cash and cash equivalents, end of period		36,262		32,845		36,262		32,845		38,676

¹⁾	Includes payment of external loan of SEK -6.2 b. attributable to the acquisition of Telcordia in Q1 2012


Ericsson Third Quarter Report 2012		18

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

SEK million

Jan - Sep
2011

Jan - Sep
2012

Jan - Dec
2011

Opening balance

146,785

145,270

146,785

Total comprehensive income

3,860

7,900

5,506

Stock issue

—

159

—

Sale/Repurchase of own shares

–109

Stock Purchase Plan

320

333

413

Dividends paid

–7,450

–8,633

–7,455

Transactions with non-controlling interests

–79

–377

–71

Closing balance

143,504

144,543

145,270


Ericsson Third Quarter Report 2012		19

CONSOLIDATED INCOME STATEMENT – ISOLATED QUARTERS


	2011												2012
Isolated quarters, SEK million	Q1			Q2			Q3			Q4			Q1			Q2			Q3

Net sales		52,966			54,770			55,518			63,667			50,974			55,319			54,550
Cost of sales		–32,578			–34,064			–36,095			–44,463			–33,985			–37,611			–37,970

Gross income		20,388			20,706			19,423			19,204			16,989			17,708			16,580
Gross margin (%)		38.5	%		37.8	%		35.0	%		30.2	%		33.3	%		32.0	%		30.4	%

Research and development expenses		–7,991			–8,108			–7,824			–8,715			–8,016			–8,097			–7,473
Selling and administrative expenses		–6,441			–7,741			–5,664			–6,837			–6,232			–6,855			–5,797

Operating expenses		–14,432			–15,849			–13,488			–15,552			–14,248			–14,952			–13,270

Other operating income and expenses ¹⁾		343			166			366			403			7,749			530			341

Operating income before shares in earnings of JV and associated companies		6,299			5,023			6,301			4,055			10,490			3,286			3,651

Operating margin before shares in earnings of JV and associated companies (%)		11.9	%		9.2	%		11.3	%		6.4	%		20.6	%		5.9	%		6.7	%

Shares in earnings of JV and associated companies		–468			–771			–640			–1,899			–1,403			–1,208			–555

Operating income		5,831			4,252			5,661			2,156			9,087			2,078			3,096

Financial income		302			977			1,198			405			262			618			390
Financial expenses		–306			–636			–987			–732			–273			–924			–275

Income after financial items		5,827			4,593			5,872			1,829			9,076			1,772			3,211

Taxes		–1,747			–1,377			–2,090			–338			–272			–567			–1,027

Net income		4,080			3,216			3,782			1,491			8,804			1,205			2,184


Net income attributable to:
- Stockholders of the Parent Company		4,103			3,116			3,821			1,154			8,950			1,110			2,177
- Non-controlling interests		–23			100			–39			337			–146			95			7

Other information
Average number of shares, basic (million)		3,202			3,204			3,207			3,209			3,212			3,215			3,217
Earnings per share, basic (SEK) ²⁾		1.28			0.97			1.19			0.36			2.79			0.35			0.68
Earnings per share, diluted (SEK) ²⁾		1.27			0.96			1.18			0.36			2.76			0.34			0.67

¹⁾	Includes gain on sale of Sony Ericsson SEK 7.7 b. in Q1 2012

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


Ericsson Third Quarter Report 2012		20

CONSOLIDATED STATEMENT OF CASH FLOWS – ISOLATED QUARTERS


	2011								2012
Isolated quarters, SEK million	Q1		Q2		Q3		Q4		Q1		Q2		Q3

Operating activities
Net income		4,080		3,216		3,782		1,491		8,804		1,205		2,184
Adjustments to reconcile net income to cash
Taxes		721		–29		550		752		–1,118		–1,185		–886
Earnings/dividends in JV and associated companies		452		783		658		1,817		1,290		1,193		579
Depreciation, amortization and impairment losses		2,209		2,172		2,227		2,428		2,315		2,401		2,394
Other		–1,201		–1,107		–291		472		–7,022		–466		413

		6,261		5,035		6,926		6,960		4,269		3,148		4,684

Changes in operating net assets
Inventories		–3,462		–2,370		–2,619		5,208		–59		43		–650
Customer financing, current and non-current		196		195		–607		290		282		—		–164
Trade receivables		–1,610		2,114		–2,769		565		3,722		–5,427		2,882
Trade payables		–255		–834		–805		246		–2,713		1,717		–1,455
Provisions and post-employment benefits		–752		–485		–2,180		–2,278		–1,771		–353		–175
Other operating assets and liabilities, net		–3,284		2,126		3,694		–5,524		–2,999		–492		1,851

		–9,167		746		–5,286		–1,493		–3,538		–4,512		2,289

Cash flow from operating activities		–2,906		5,781		1,640		5,467		731		–1,364		6,973

Investing activities
Investments in property, plant and equipment		–980		–1,196		–1,294		–1,524		–1,648		–994		–1,461
Sales of property, plant and equipment		97		58		59		172		309		–10		17
Acquisitions/divestments of subsidiaries and other operations, net ¹⁾		–455		–507		–1,931		–235		–1,730		–110		–357
Product development		–269		–429		–257		–560		–251		–525		–435
Other investing activities		179		–100		–769		–210		195		–520		1,652
Short-term investments		3,706		3,196		9,323		–1,533		–3,999		8,133		–938

Cash flow from investing activities		2,278		1,022		5,131		–3,890		–7,124		5,974		–1,522

Cash flow before financing activities		–628		6,803		6,771		1,577		–6,393		4,610		5,451

Financing activities
Dividends paid		—		–7,209		–241		–5		—		–8,252		–381
Other financing activities		1,240		–1,097		–10		828		–1,318		1,112		1,062

Cash flow from financing activities		1,240		–8,306		–251		823		–1,318		–7,140		681

Effect of exchange rate changes on cash		–720		211		278		14		–327		599		–1,994

Net change in cash		–108		–1,292		6,798		2,414		–8,038		–1,931		4,138

Cash and cash equivalents, beginning of period		30,864		30,756		29,464		36,262		38,676		30,638		28,707

Cash and cash equivalents, end of period		30,756		29,464		36,262		38,676		30,638		28,707		32,845

¹⁾	Includes payment of external loan of SEK -6.2 b. attributable to the acquisition of Telcordia in Q1 2012


Ericsson Third Quarter Report 2012		21

PARENT COMPANY INCOME STATEMENT


	Jul - Sep				Jan - Sep
SEK million	2011		2012		2011		2012

Net sales		—		—		—		—
Cost of sales		—		—		—		—

Gross income		—		—		—		—

Operating expenses		–465		–103		–1,451		–556
Other operating income and expenses		746		637		2,085		1,864

Operating income		281		534		634		1,308

Financial net		1,052		2,960		5,435		9,224

Income after financial items		1,333		3,494		6,069		10,532

Transfers to (-) / from untaxed reserves
Taxes		–239		–247		–552		–570

Net income		1,094		3,247		5,517		9,962

STATEMENT OF COMPREHENSIVE INCOME


	Jul - Sep				Jan - Sep
SEK million	2011		2012		2011		2012

Net income		1,094		3,247		5,517		9,962

Cash flow hedges
Gains/losses arising during the period		—		—		—		–64
Adjustments for amounts transferred to initial carrying amount of hegded items		—		—		—		–139
Tax on items reported directly in or transferred from equity		—		—		—		—

Other comprehensive income		—		—		—		–203

Total comprehensive income		1,094		3,247		5,517		9,759

PARENT COMPANY BALANCE SHEET


SEK million	Dec 31 2011		Sep 30 2012

ASSETS
Fixed assets
Intangible assets		1,088		910
Tangible assets		491		498
Financial assets		103,663		108,641

		105,242		110,049

Current assets
Inventories		61		45
Receivables ¹⁾		23,327		28,329
Short-term investments		38,852		31,112
Cash and cash equivalents		17,288		15,210

		79,528		74,696

Total assets		184,770		184,745


STOCKHOLDERS’ EQUITY, PROVISIONS AND LIABILITIES
Equity
Restricted equity		47,859		48,018
Non-restricted equity		40,720		42,344

		88,579		90,362

Untaxed reserves		676		676

Provisions		651		745

Non-current liabilities		48,373		47,478

Current liabilities		46,491		45,484

Total stockholders’ equity, provisions and liabilities		184,770		184,745


Assets pledged as collateral		452		538
Contingent liabilities		18,518		16,783

1)	Including loan to ST-Ericsson of SEK 4,538 million as of September 30, 2012 (SEK 2,759 million as of December 31, 2011)


Ericsson Third Quarter Report 2012		22

Accounting Policies

The Group

This interim report is prepared in accordance with IAS 34. The term “IFRS” used in this document refers to the application of IAS and IFRS as well as interpretations of these standards as issued by IASB’s Standards Interpretation Committee (SIC) and IFRS Interpretations Committee, (IFRIC). The accounting policies adopted are consistent with those of the annual report for the year ended December 31, 2011, and should be read in conjunction with that annual report.

As from January 1, 2012, the Company has applied the following new or amended IFRSs and IFRICs:

•

Amendment to IAS 12, income taxes: deferred tax: recovery of underlying assets (not yet endorsed by the EU)

•

Amendments to IFRS 7, Financial instruments Disclosures: Transfers of Financial Assets

None of the new or amended standards and interpretations has had any significant impact on the financial result or position of the Company. There is no difference between IFRS effective as per September 30, 2012 and IFRS as endorsed by the EU, except for IAS 12 above.


Ericsson Third Quarter Report 2012		23

NET SALES BY SEGMENT BY QUARTER

Segments Sony Ericsson and ST-Ericsson are reported in accordance with the equity method, thus their sales are not included.


	2011												2012
Isolated quarters, SEK million	Q1			Q2			Q3			Q4			Q1			Q2			Q3
Networks		33,249			33,360			32,506			33,280			27,314			27,766			26,939
Global Services		17,435			19,036			20,438			26,975			20,631			24,074			24,296
Of which Professional Services		12,571			13,463			14,719			18,081			14,884			16,947			16,388
Of which Managed Services		4,924			4,724			5,304			6,046			5,708			6,468			6,306
Of which Network Rollout		4,864			5,573			5,719			8,894			5,747			7,127			7,908
Support Solutions		2,282			2,374			2,574			3,412			3,029			3,479			3,315

Total		52,966			54,770			55,518			63,667			50,974			55,319			54,550


	2011												2012
Sequential change, percent	Q1			Q2			Q3			Q4			Q1			Q2			Q3
Networks		–9	%		0	%		–3	%		2	%		–18	%		2	%		–3	%
Global Services		–24	%		9	%		7	%		32	%		–24	%		17	%		1	%
Of which Professional Services		–25	%		7	%		9	%		23	%		–18	%		14	%		–3	%
Of which Managed Services		–8	%		–4	%		12	%		14	%		–6	%		13	%		–3	%
Of which Network Rollout		–21	%		15	%		3	%		56	%		–35	%		24	%		11	%
Support Solutions		–34	%		4	%		8	%		33	%		–11	%		15	%		–5	%

Total		–16	%		3	%		1	%		15	%		–20	%		9	%		–1	%


	2011												2012
Year over year change, percent	Q1			Q2			Q3			Q4			Q1			Q2			Q3
Networks		35	%		31	%		25	%		–9	%		–18	%		–17	%		–17	%
Global Services		–4	%		–5	%		7	%		18	%		18	%		26	%		19	%
Of which Professional Services		–5	%		–9	%		7	%		8	%		18	%		26	%		11	%
Of which Managed Services		1	%		–16	%		1	%		13	%		16	%		37	%		19	%
Of which Network Rollout		0	%		6	%		7	%		44	%		18	%		28	%		38	%
Support Solutions		–1	%		–2	%		11	%		–2	%		33	%		47	%		29	%

Total		17	%		14	%		17	%		1	%		–4	%		1	%		–2	%


	2011												2012
Year to date, SEK million	Jan - Mar			Jan - Jun			Jan - Sep			Jan - Dec			Jan - Mar			Jan - Jun			Jan - Sep
Networks		33,249			66,609			99,115			132,395			27,314			55,080			82,019
Global Services		17,435			36,471			56,909			83,884			20,631			44,705			69,001
Of which Professional Services		12,571			26,034			40,753			58,834			14,884			31,830			48,219
Of which Managed Services		4,924			9,648			14,952			20,998			5,708			12,176			18,482
Of which Network Rollout		4,864			10,437			16,156			25,050			5,747			12,875			20,782
Support Solutions		2,282			4,656			7,230			10,642			3,029			6,508			9,823

Total		52,966			107,736			163,254			226,921			50,974			106,293			160,843


Year to date,	2011												2012
year over year change, percent	Jan - Mar			Jan - Jun			Jan - Sep			Jan - Dec			Jan - Mar			Jan - Jun			Jan - Sep
Networks		35	%		33	%		30	%		17	%		–18	%		–17	%		–17	%
Global Services		–4	%		–4	%		–1	%		5	%		18	%		23	%		21	%
Of which Professional Services		–5	%		–7	%		–3	%		1	%		18	%		22	%		18	%
Of which Managed Services		1	%		–8	%		–5	%		–1	%		16	%		26	%		24	%
Of which Network Rollout		0	%		3	%		5	%		16	%		18	%		23	%		29	%
Support Solutions		–1	%		–2	%		3	%		1	%		33	%		40	%		36	%

Total		17	%		16	%		16	%		12	%		–4	%		–1	%		–1	%

SALES GROWTH FOR COMPARABLE UNITS, ADJUSTED FOR CURRENCY EFFECTS AND HEDGING


	2012
Sequential change, percent	Q1			Q2			Q3
Networks		–19	%		–1	%		0	%
Global Services		–25	%		15	%		3	%
Support Solutions		–25	%		13	%		–3	%

Total		–22	%		6	%		1	%


Isolated quarter,	2012
Year over year change, percent	Q1			Q2			Q3
Networks		–18	%		–20	%		–17	%
Global Services		14	%		18	%		16	%
Support Solutions		12	%		16	%		4	%

Total		–6	%		–6	%		–4	%


Year to date,	2012
year over year change, percent	Jan - Mar			Jan - Jun			Jan - Sep
Networks		–18	%		–19	%		–18	%
Global Services		14	%		16	%		16	%
Support Solutions		12	%		14	%		10	%

Total		–6	%		–6	%		–5	%


Ericsson Third Quarter Report 2012		24

OPERATING INCOME BY SEGMENT BY QUARTER

2011

2012

Isolated quarters, SEK million

Networks

5,744

4,599

4,277

2,675

1,649

1,255

1,341

Global Services

1,146

1,030

1,757

1,611

1,267

1,362

1,835

Of which Professional Services

1,486

1,661

2,023

2,498

1,908

2,142

2,293

Of which Network Rollout

–340

–631

–266

–887

–641

–780

–458

Support Solutions

–338

–267

–28

420

480

Unallocated¹⁾

–228

–204

164

–233

–97

–43

Subtotal Segments excluding Sony Ericsson and ST-Ericsson

6,324

5,158

6,288

4,064

2,791

2,994

3,662

Sony Ericsson ²⁾

–208

–1,137

7,691

347

–1

ST-Ericsson

–564

–698

–702

–771

–1,395

–1,263

–565

Subtotal Sony Ericsson and ST-Ericsson

–493

–906

–627

–1,908

6,296

–916

–566

Total

5,831

4,252

5,661

2,156

9,087

2,078

3,096

2011

2012

Year to date, SEK million

Jan - Mar

Jan - Jun

Jan - Sep

Jan - Dec

Jan - Mar

Jan - Jun

Jan - Sep

Networks

5,744

10,343

14,620

17,295

1,649

2,904

4,245

Global Services

1,146

2,176

3,933

5,544

1,267

2,629

4,464

Of which Professional Services

1,486

3,147

5,170

7,668

1,908

4,050

6,343

Of which Network Rollout

–340

–971

–1,237

–2,124

–641

–1,421

–1,879

Support Solutions

–338

–605

–515

–504

–28

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