6-K
Table of Contents

 

 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 6-K

 

 

REPORT OF FOREIGN ISSUER

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

the Securities Exchange Act of 1934

October 24, 2013

 

 

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 24, 2013 regarding “Ericsson reports third quarter results 2013”

 

 

 


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SIGNATURES

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

 

TELEFONAKTIEBOLAGET LM ERICSSON (publ)
By:  

 /S/ NINA MACPHERSON

  Nina Macpherson
  Senior Vice President and
  General Counsel
By:  

 /S/ HELENA NORRMAN

  Helena Norrman
  Senior Vice President
  Corporate Communications

Date: October 24, 2013


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    LOGO

ERICSSON

third QUARTER

REPORT 2013


Table of Contents

Ericsson third quarter report 2013

OCTOBER 24, 2013

 

THIRD QUARTER HIGHLIGHTS

 

    Sales amounted to SEK 53.0 b, down -3% YoY.

 

    For comparable units and adjusted for FX, sales increased 3%YoY.

 

    Operating income incl. JV was SEK 4.2(3.1) b. with an operating margin of 8.0% (5.7%).

 

    Net income was SEK3.0 (2.2) b.

 

    EPS diluted was SEK 0.90 (0.67). EPS Non-IFRS was SEK 1.31 (1.04).

 

    Cash flow from operating activities was SEK1.5(7.0) b.
   CONTENTS

6

   Financial highlights

8

   Segment results

12

   Regional sales overview

14

   Parent Company information

15

   Other information

16

   Assessment of risk environment

17

   Auditors’ review report

18

   Editor’s note

19

   Safe harbor statement

20

   Financial statements and additional information

 

 

 

SEK b.

   Q3
2013
    Q3
2012
    YoY
Change
    Q2
2013
    QoQ
Change
    9 months
2013
    9 months
20122)
 

Net sales

     53.0        54.6        -3     55.3        -4     160.3        160.8   

Of which Networks

     26.7        26.9        -1     28.1        -5     82.9        82.0   

Of which Global Services

     24.0        24.3        -1     24.9        -4     70.3        69.0   

Of which Support Solutions

     2.4        3.3        -29     2.3        1     7.1        9.8   

Gross margin

     32.0     30.4     —          32.4     —          32.1     31.9
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income excl JV

     4.3        3.7        17     2.5        71     8.9        17.4   

Operating margin excl JV

     8.1     6.7     —          4.5     —          5.6     10.8

Networks

     10     5     —          5     —          7     5

Global Services

     8     8     —          6     —          6     6

Support Solutions

     -5     14     —          -12     —          -6     9
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income incl JV

     4.2        3.1        36     2.5        71     8.8        14.3   

Operating margin incl JV

     8.0     5.7     —          4.5     —          5.5     8.9

Net income

     3.0        2.2        38     1.5        99     5.7        12.2   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

EPS diluted, SEK

     0.90        0.67        34     0.45        100     1.72        3.77   

EPS (Non-IFRS), SEK1)

     1.31        1.04        26     0.88        49     3.19        4.96   

Cash flow from operating activities

     1.5        7.0        -79     4.3        -66     2.8        6.3   

Net cash, end of period

     24.7        29.0        -15     27.4        -10     24.7        29.0   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

1)  EPS, diluted, excl. restructuring, amortizations and write-downs of acquired intangible assets
2)  Including gain from divestment of Sony Ericsson of SEK 7.7 b

 

Ericsson Third Quarter Report 2013    4


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Comments from Hans vestberg, President and ceo

 

“Sales for comparable units, adjusted for FX, grew 3%. Reported sales were slightly down YoY, primarily due to continued currency headwind,” said Hans Vestberg, President and CEO of Ericsson (NASDAQ:ERIC).

“We are currently seeing sales coming under some pressure. In addition to FX, the major drivers for this development are the two large mobile broadband coverage projects, which peaked in North America in the first half of 2013. We also saw impact from reduced activity in Japan where we are getting closer to completion of a major project.

The 4G/LTE tenders in China continue and so far two of the major operators have made their choices. Despite having insignificant market share for 3G, Ericsson has been named technology partner for both these operators and we will now build on this initial footprint.

The pace is picking up in the European market with continued WCDMA/LTE investments and a major investment announcement by one of the large operators. Ericsson now sees growth in several European markets and margins are also improving as the network modernization projects gradually come to an end and we engage more in new capacity and LTE business.

The momentum for Professional Services continued with stable earnings and 59 signed managed services contracts year to date. As a result of our continuous work to implement global processes, methods and tools to increase efficiency, Global Services margins improved during the quarter.

Profitability for the group continued to improve YoY, partly offset by currency headwind. The improvement was driven by higher gross margin due to less dilutive impact from European network modernization and somewhat improved business mix.

During the quarter Ericsson has continued to strengthen its market leadership. In September we launched a small-cell product, the Ericsson Radio Dot System, for indoor coverage. The new product opens up new revenue opportunities for operators and initial customer response has been very positive. In addition, we closed the acquisition of Mediaroom which places Ericsson as the world’s largest IPTV player, by market share.

The macroeconomic climate has stabilized in many OECD markets. However, uncertainty still remains in certain parts of the world. The long-term fundamentals in the industry remain attractive and we are well positioned to continue to support our customers in a transforming ICT market,” concludes Vestberg.

 

 

Ericsson Third Quarter Report 2013    5


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Financial highlights – Third quarter

INCOME STATEMENT

 

LOGO

 

Sales for comparable units, adjusted for FX, increased 3% YoY and declined -2% QoQ. Reported sales decreased YoY, mainly driven by lower sales in North East Asia and India. Segments Networks and Global Services showed slightly lower reported sales YoY, while Support Solutions saw a more significant decline in volumes. CDMA sales in North America, as well as GSM sales in China, continued to decline.

Reported sales declined QoQ, mainly due to lower project activity in North America and North East Asia. Segments Networks and Global Services showed a decline in reported sales QoQ, while Support Solutions increased slightly.

Restructuring charges for Ericsson amounted to SEK 0.7 (0.6) b.

Gross margin increased YoY to 32.0% (30.4%), supported by lower share of network modernization projects in Europe and somewhat improved business mix. The gross margin declined slightly QoQ. The share of services sales was unchanged YoY and QoQ at 45%.

Total operating expenses increased slightly YoY by SEK 0.2 b. to SEK 13.5 (13.3) b. Excluding restructuring charges, operating expenses year-to-date were down -3% YoY. R&D expenses amounted to SEK 7.7 (7.5) b. and selling, general and administrative expenses (SG&A) amounted to SEK 5.8 (5.8) b.

 

 

Ericsson Third Quarter Report 2013    6


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Other operating income and expenses amounted to SEK 0.8 (0.3) b. due to a positive re-evaluation effect of SEK 0.8 b for new hedges taken in 2013. For these new hedges we do not apply hedge accounting (see Accounting Policies). The main part of this positive re-evaluation effect derives from our hedge contract balance in USD, which has increased in value as the SEK has strengthened towards USD between June 30 and September 30, 2013. Ericsson’s USD closing rate on September 30, 2013, was SEK 6.42 (6.73 on June 30). In Q213 we had a negative re-evaluation effect for new hedges of SEK -0.2 b.

Ericsson’s share in ST-Ericsson’s income before tax was SEK 0.0 (-0.6) b.

Operating income, including JV, increased to SEK 4.2 (3.1) b. Operating margin, including JV, was 8.0% (5.7%).

Operating income and operating margin were positively impacted by improved gross margin and no negative effects from ST-Ericsson. Currency had an overall negative impact on operating margin YoY, despite positive re-evaluation effect of new hedges.

Financial net amounted to SEK 0.1 (0.1) b. and improved QoQ from SEK -0.3 b. due to positive currency exchange re-evaluation effects on financial investments and liabilities. Tax costs were SEK -1.3 (-1.0) b.

Net income increased to SEK 3.0 (2.2) b.

EPS diluted was SEK 0.90 (0.67). EPS Non-IFRS was SEK 1.31 (1.04).

 

 

BALANCE SHEET AND OTHER PERFORMANCE INDICATORS – THIRD QUARTER

 

LOGO

 

All comparisons relating to balance sheet items are QoQ.

Trade receivables increased to SEK 64.9 (63.1) b. Inventory decreased to SEK 28.1 (29.7) b. Trade payables decreased to 19.2 (20.8) b.

Cash, cash equivalents and short-term investments amounted to SEK 60.7 (64.8) b. The net cash position decreased by SEK -2.7 b. to SEK 24.7 (27.4) b., primarily due to increased working capital and acquisitions.

During the quarter, approximately SEK 1.5 b. of provisions were utilized, of which SEK 0.5 b. were related to restructuring. Additions of SEK 0.7 b. were made, of which SEK 0.2 b. related to restructuring. Reversals of SEK 0.2 b. were made. Cash outlays of SEK 1.4 b. remain to be made from the restructuring provision.

Cash flow from operating activities was SEK 1.5 b. Cash conversion year-to-date is 29%.

The total number of employees increased QoQ to 113,989 (111,805) primarily due to transfer of former ST-Ericsson employees to Ericsson and the closing of the Mediaroom acquisition.

 

 

Ericsson Third Quarter Report 2013    7


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Segment results

NETWORKS

 

LOGO

 

SEK b.

   Q3
2013
    Q3
2012
    YoY
Change
    Q2
2013
    QoQ
Change
    9 months
2013
    9 months
2012
 

Network sales

     26.7        26.9        -1     28.1        -5     82.9        82.0   

Operating income

     2.6        1.3        91     1.3        92     5.5        4.2   

Operating margin

     10     5     —          5     —          7     5

 

Sales for comparable units, adjusted for FX, increased 4% YoY. The growth was driven by mobile broadband business in Europe and Latin America. Growth was partly offset by slightly lower sales in North America where two large mobile broadband coverage projects peaked in first half of 2013. In North East Asia GSM investments continued to decline in China, while the market transitions to 4G. Japan continued to be negatively impacted by currency as well as reduced activity as we are getting closer to completion of a major project. Networks sales were down QoQ.

CDMA-related sales amounted to SEK 0.9 b. and declined by -42% YoY and was flat QoQ. Sales related to circuit-switched core continued to decline.

The interest for our Smart Services Router (SSR 8000) continues and in the quarter we signed 12 new contracts, of which four were for fixed networks.

The launch of the innovative indoor wireless solution – the Ericsson Radio Dot System – marks the latest step in Ericsson’s network strategy. It is ultra-small but can scale to literally unlimited capacity, it is easy to install and 100% integrated with existing mobile networks. Since the launch Ericsson is engaging with nearly every tier-one operator worldwide. The new product will be commercially available second half 2014.

Operators in most markets now have LTE plans in place. In parallel, demand for HSPA is showing growth in seven out of our 10 regions.

Operating income increased YoY due to less dilutive effects from the network modernization projects in Europe, improved commercial excellence, optimization of the portfolio as well as continued operational efficiency gains. Operating income increased QoQ. Currency had an overall negative impact on operating margin YoY, despite a positive unrealized hedge effect. Restructuring charges amounted to SEK 0.3 (0.1) b. in the quarter.

 

 

Ericsson Third Quarter Report 2013    8


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GLOBAL SERVICES

 

LOGO

 

SEK b.

   Q3
2013
    Q3
2012
    YoY
Change
    Q2
2013
    QoQ
Change
    9 months
2013
    9 months
2012
 

Global Services sales

     24.0        24.3        -1     24.9        -4     70.3        69.0   

Of which Professional Services

     16.2        16.4        -1     16.8        -3     47.6        48.2   

Of which Managed Services

     6.3        6.3        -1     6.8        -7     18.9        18.5   

Of which Network Rollout

     7.7        7.9        -2     8.1        -4     22.6        20.8   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     1.8        1.8        -1     1.6        16     4.1        4.5   

Of which Professional Services

     2.3        2.3        -1     2.3        0     6.4        6.3   

Of which Network Rollout

     -0.5        -0.5        -3     -0.7        35     -2.3        -1.9   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating margin

     8     8     —          6     —          6     6

Professional Services

     14     14     —          14     —          13     13

Network Rollout

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

 

Sales for comparable units, adjusted for FX, increased 3% YoY. The growth was driven by high activity in North America. Both Professional Services and Network Rollout grew adjusted for FX, however with a slower growth in Network Rollout compared to first half 2013.

The momentum in Professional Services continued with 59 managed services contracts signed YTD of which 19 in the quarter. The industry trend is that operators shift focus from technology-driven managed services to more customer-centric. We see an increasing demand for managed services in the IT area as well as in the emerging Broadcast Services business.

Global Services operating margin improved QoQ with reduced losses in Network Rollout partly as an effect of a more favorable project mix, with a reduced impact of the network modernization projects in Europe. Professional Services margin was stable at 14%.

Restructuring charges amounted to SEK 0.4(0.4) b. in the quarter.

We have closed two acquisitions in the Consulting and System Integration area in the quarter: TeleOss acquisition in Thailand and the TelcoCell acquisition in Canada, adding OSS and BSS capabilities.

 

 

Other information

   Q3
2013
     Q2
2013
     Q1
2013
     Full year
2012
 

Number of signed Managed Services contracts

     19         19         21         52   

Of which expansions/extensions

     8         5         8         19   

Number of signed significant consulting & systems integration contracts1)

     6         8         8         24   

Number of subscribers in networks managed by Ericsson, end of period 2)

     1 b.         1 b.         ~ 950 m.         ~ 950 m.   

Of which in network operations contracts

     600 m.         600 m.         550 m.         550 m.   

Number of Ericsson services professionals, end of period

     64,000         64,000         61,000         60,000   

 

1)  In the areas of OSS and 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 2013    9


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SUPPORT SOLUTIONS

 

LOGO

 

SEK b.

   Q3
2013
    Q3
2012
    YoY
Change
    Q2
2013
    QoQ
Change
    9 months
2013
    9 months
2012
 

Support Solutions sales

     2.4        3.3        -29     2.3        1     7.1        9.8   

Operating income

     -0.1        0.5        —          -0.3        60     -0.4        0.9   

Operating margin

     -5     14     —          -12     —          -6     9

 

The YoYdecline in sales was primarily driven by divestments as well as portfolio changes and somewhat lower sales of compression technology. OSS sales continued to grow both YoY and QoQ.

Sales for comparable units, adjusted for FX and the divestments of IPX and ACS, were down-15% YoY and grew 3% QoQ. IPX sales amounted to SEK 0.4 b. in Q312.

We see an increasing interest from customers to partner with selected vendors that can address a larger part of the OSS and BSS domain, as growth in mobile broadband increases the need for improved consumer experience. Ericsson is well positioned to take on such a responsibility with our OSS and BSS software portfolio.

Pay TV service providers continue to grow as the primary source of premium TV content provided to consumers. Consumers increasingly want their TV service on all devices, and flexibility of access to content packages and bundles. This is part of what drives the sharp increase in video traffic in the networks. As a consequence, service providers and network owners require solutions to make networks video centric and efficient for video delivery.

During the quarter we closed the acquisition of Microsoft’s TV solution business Mediaroom, further strengthening our position in the growing media management market and adding to Ericsson sales from Q413.

Operating margin was negatively impacted by lower sales YoY.

The number of subscriptions served by Ericsson’s charging and billing solutions was 2 billion at end of the period.

 

 

Ericsson Third Quarter Report 2013    10


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ST-ERICSSON/MODEMS

 

On August 5, 2013 Ericsson and STMicroelectronics announced the closing of the transaction for the split up of ST-Ericsson. This follows the announcement the companies made on March 18, 2013 on the chosen strategic option for the future of the joint venture. Effective August 2, 2013 Ericsson has taken on the design, development and sales of the LTE multimode thin modem solutions, including 2G, 3G and 4G interoperability. In total, approximately 1,800 employees and contractors have joined Ericsson.

The LTE multimode thin modems are an important part for Ericsson vision of 50 billion connected devices in the Networked Society. The market potential is there and Ericsson will now focus on bringing the best modems to the market and work closely with customers to integrate them into their products. Ericsson now has a highly focused thin-modem operation with industry-leading technology and intellectual property. The LTE multimode thin-modems are targeted for smartphones and tablets as well as other connected devices.

In Q412, Ericsson made a provision of SEK 3.3 b., which provides for Ericsson’s share of obligations for the wind-down of ST-Ericsson. With current plans and visibility the provision is expected to cover the cost for the complete wind-down of ST-Ericsson and integration of the LTE multimode thin modems operations into Ericsson.

Ericsson’s share in ST-Ericsson’s income before tax was SEK 0.0 (-0.6) b. From October 1, 2013, the multimode thin modem business has been consolidated into Ericsson and the operation will continue to be reported as a separate segment. Our current best estimate is that the Modem segment will generate operating losses of approximately SEK -0.5 b. in Q413, primarily related to R&D expenses.

 

 

Ericsson Third Quarter Report 2013    11


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Regional sales overview

REGIONAL SALES

 

     Third quarter 2013      Change  

SEK b.

   Networks      Global
Services
     Support
Solutions
     Total      YoY     QoQ  

North America

     6.6         7.3         0.6         14.5         3     -6

Latin America

     2.8         2.3         0.2         5.3         -2     -5

Northern Europe and Central Asia

     2.0         0.9         0.1         2.9         9     9

Western and Central Europe

     1.7         2.5         0.1         4.4         21     -3

Mediterranean

     2.6         3.0         0.1         5.7         5     -8

Middle East

     2.3         1.8         0.3         4.4         21     10

Sub-Saharan Africa

     1.4         1.1         0.2         2.7         -4     2

India

     0.6         0.7         0.0         1.3         -26     0

North East Asia

     3.5         2.5         0.1         6.1         -28     -9

South East Asia and Oceania

     1.9         1.6         0.1         3.6         3     -4

Other1)

     1.4         0.4         0.5         2.2         -34     -19
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total

     26.7         24.0         2.4         53.0         -3     -4
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

 

1)  Region “Other” includes licensing revenues, sales of telecom cables, broadcast services, power modules and other businesses. The acquired Technicolor Broadcast Service Division is reported in region “Other”. Multimedia brokering (IPX) was part of region “Other” and divested end Q312. The power cable business was divested in Q313.

 

North America

Sales for Networks continued to decline QoQ as a result of the two large mobile broadband coverage projects which peaked in first half of 2013. Smartphone penetration, increased mobile broadband consumption and 4G device lineup remain drivers for network expansion. Network evolution and professional services remain a growth theme in North America while CDMA sales continue to decline.

Latin America

3G network quality and initial LTE rollouts continued to dominate operator investments. Macroeconomic development in Brazil and Mexico slowed down and currency impacted business negatively.

Northern Europe and Central Asia

Sales grew both YoY and QoQ. In Russia, there is slow recovery based on 3G investments, but also deployments of LTE. Operators showed an increased interest in OSS and BSS solutions. Managed Services business continued to show good development.

Western and Central Europe

Sales grew YoY driven by network modernization in certain markets. Capacity discussions have been initiated with operators who recently have modernized their networks.

Mediterranean

YoY growth was driven by continued 3G rollout in Northwest Africa and modernization projects in France. YoY sales were negatively impacted by lower investments in Italy.

Middle East

Sales grew both YoY and QoQ. LTE is being deployed in the region but still represents a small share of Network sales. There is continued demand for Professional Services, both System Integration and Managed Services, as operators seek network performance quality and operational efficiencies. Political unrest prevails in several countries and is still impacting sales.

 

 

Ericsson Third Quarter Report 2013    12


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Sub-Saharan Africa

Sales declined YoY despite continued growth in services mainly fuelled by Managed Services. Operators continue to build out capacity on 2G and 3G networks to improve quality of service. Initial LTE deployments are on-going but are still a small share of sales.

India

Sales declined YoY as investments continue to be slow, in spite of signs of improvements in the regulatory environment. Services sales grew, mainly driven by managed services business.

North East Asia

Sales declined YoY. Japan continued to be negatively impacted by currency and reduced activity as we are getting closer to completion of a major project. GSM investments in China continued to structurally decline.

The spectrum auction in South Korea was concluded but business activity remained low during the quarter.

South East Asia and Oceania

Sales in the region grew slightly YoY. Lower business activities in Indonesia in the quarter were offset by projects in Thailand. The business in several countries started to be impacted by currency depreciations towards the end of the quarter.

Other

IPX was divested at the end of Q312 impacting Support Solutions sales YoY comparison. Licence revenue showed a slight decline in the quarter but are progressing well on a YTD basis. Sales of broadcast services, telecom cables, power modules and other businesses are also included in “Other”. Power cables were divested in the beginning of Q313.

 

 

Ericsson Third Quarter Report 2013    13


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Parent company information

 

Income after financial items was SEK 4.2 (10.5) b. The Parent Company’s financial position had the following major changes during the year; decreased cash, cash equivalents and short-term investments of SEK 14.1 b. and decreased current and non-current receivables from subsidiaries of SEK 6.1 b. At the end of the quarter, cash, cash equivalents and short-term investments amounted to SEK 43.4 (57.4) b.

In accordance with the conditions of the long-term variable remuneration program (LTV) for Ericsson employees, 2,800,951 shares from treasury stock were sold or distributed to employees during the third quarter. The holding of treasury stock on September 30, 2013, was 76,943,129 Class B shares.

 

 

Ericsson Third Quarter Report 2013    14


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Other information

 

Samsung litigation

On November 27, 2012, Ericsson filed two patent infringement lawsuits in the US District Court for the Eastern District of Texas against Samsung. Ericsson seeks damages and an injunction. Ericsson also asked the Court to adjudge that Samsung breached its commitment to license any standard-essential patents it owns on fair, reasonable, and non-discriminatory terms and to declare Samsung’s allegedly standard essential patents to be unenforceable. On March 18, 2013, Samsung filed its answers and counterclaims in the Ericsson suits (above) in Texas, USA.

No trials are scheduled in the district court litigation until late 2015.

On November 30, 2012, Ericsson filed a complaint with the US International Trade Commission (ITC) seeking an exclusion order blocking Samsung from importing certain products into the US. On December 21, 2012, Samsung filed a complaint with the ITC seeking an exclusion order blocking Ericsson from import of certain products into the US.

Ericsson closes acquisition of Microsoft Mediaroom

On September 5, 2013 Ericsson completed the acquisition of Microsoft’s TV solution business Mediaroom.

Ericsson announced on April 8, 2013 that it had reached an agreement with Microsoft to acquire its TV solution business Mediaroom. With the acquisition, Ericsson is now a leading provider of IPTV and multi screen solutions with a market share of around 25%. The former Mediaroom business unit, including approximately 400 employees, is now integrated into Business Unit Support Solutions and is called Ericsson Mediaroom.

Ericsson acquires Airvana’s EVDO business

Ericsson announced on September 6, 2013 that it has acquired Airvana Network Solutions’ EVDO business. Airvana Network Solutions is a Massachusetts-based company and supplier of EVDO software to Ericsson.

The lawsuit filed by Airvana in February 2012, against Ericsson in the Supreme Court of the State of New York, USA, has been dismissed.

Acquisition of Red Bee Media

Ericsson announced on July 1, 2013 its intention to acquire Red Bee Media from an entity controlled by Macquarie Advanced Investment Partners, L.P. The acquisition supports Ericsson’s strategy to grow in the broadcast services market. It will bring 1,500 employees, as well as media services and operations facilities in the UK, France, Germany, Spain and Australia.

On September 30, 2013 The Office of Fair Trading (OFT) in the UK decided to refer Ericsson’s acquisition of Red Bee Media to the Competition Commission. Ericsson will be working to address the OFT’s concerns before the Competition Commission in order to progress with the acquisition of Red Bee Media.

Head of Business Unit Support Solutions based in Silicon Valley, USA

On July 18, 2013 Ericsson announced that Head of Business Unit Support Solutions, and member of the company’s Executive Leadership Team, Per Borgklint, will be based in Silicon Valley.

POST-CLOSING EVENTS

On new positions

Effective October 1, 2013, a new unit called Group Function (GF) Business Excellence & Common Functions was formed. Effective the same date, Anders Thulin was appointed Head of GF Business Excellence & Common Functions and Chief Information Officer (CIO), reporting to President and CEO, Hans Vestberg, and a member of the Executive Leadership Team.

 

 

Ericsson Third Quarter Report 2013    15


Table of Contents

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 2012. Compared to the risks described in the Annual Report 2012, 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 buildouts of coverage (mainly hardware);

 

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

 

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

 

    Effects of the ongoing industry consolidation among our customers as well as between our largest competitors, e.g. with postponed investments and intensified price competition as a consequence;
    Changes in foreign exchange rates, in particular USD, JPY and EUR;

 

    Political unrest or instability in certain markets;

 

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

 

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

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

Stockholm, October 24, 2013

Telefonaktiebolaget LM Ericsson (publ)

Hans Vestberg, President and CEO

Org. Nr. 556016-0680

Date for next report: January 30, 2014

 

 

Ericsson Third Quarter Report 2013    16


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Auditors’ Review report

 

Introduction

We have reviewed this report for the period January 1, 2013, to September 30, 2013, 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 Swedish Annual Accounts Act. Our responsibility is to express a conclusion on this interim report based on our review.

Scope of review

We conducted our review in accordance with the 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.

Conclusion

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

Stockholm, October 24, 2013

PricewaterhouseCoopers AB

Peter Nyllinge

Authorized Public Accountant

Auditor in Charge

 

 

Ericsson Third Quarter Report 2013    17


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Editor’s note

 

Ericsson invites media, investors and analysts to a press conference at the Ericsson Studio, Grönlandsgången 4, Stockholm, at 09.00 (CET), October 24, 2013. 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

Telefonaktiebolaget LM Ericsson (publ)

Org. number: 556016-0680

Torshamnsgatan 23

SE-164 83 Stockholm

Phone: +46 10 719 0000

www.ericsson.com

Investors

Peter Nyquist, Vice President,

Investor Relations

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

E-mail: peter.nyquist@ericsson.com

Stefan Jelvin, Director,

Investor Relations

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

E-mail: stefan.jelvin@ericsson.com

Åsa Konnbjer, Director,

Investor Relations

Phone: +46 10 713 39 28, +46 73 082 5928

E-mail: asa.konnbjer@ericsson.com

Rikard Tunedal, Director,

Investor Relations

Phone: +46 10 714 5400, +46 761 005 400

E-mail: rikard.tunedal@ericsson.com

Media

Ola Rembe, Vice President,

External Communications

Phone: +46 10 719 97 27, +46 73 024 4873

E-mail: media.relations@ericsson.com

Corporate Communications

Phone: +46 10 719 69 92

E-mail: media.relations@ericsson.com

 

 

Ericsson Third Quarter Report 2013    18


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Safe harbor statement

 

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

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

 

 

Ericsson Third Quarter Report 2013    19


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Financial statements and additional information

 

Financial statements
21    Consolidated income statement
21    Statement of comprehensive income
22    Consolidated balance sheet
23    Consolidated statement of cash flows
24    Consolidated statement of changes in equity
25    Consolidated income statement—isolated quarters
26    Consolidated statement of cash flows—isolated quarters
27    Parent Company income statement
27    Parent Company balance sheet
Additional information
28    Accounting policies
29    Accounting policies (continued)
30    Net sales by segment by quarter
30    Sales growth for comparable units, adjusted for currency effects and hedging
31    Operating income by segment by quarter
31    Operating margin by segment by quarter
32    EBITA by segment by quarter
32    EBITA margin by segment by quarter
33    Net sales by region by quarter
34    Net sales by region by quarter (cont.)
34    Top 5 countries in sales
35    Net sales by region by segment
36    Provisions
36    Information on investments in assets subject to depreciation, amortizations, impairment and write-downs
36    Reconciliation table, non-IFRS measurements
37    Other information
37    Number of employees
38    Restructuring charges by function
38    Restructuring charges by segment
 

 

Ericsson Third Quarter Report 2013    20


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CONSOLIDATED INCOME STATEMENT

 

     Jul – Sep     Jan - Sep  

SEK million

   2012     2013     Change     2012     2013     Change  

Net sales

     54,550        52,981        -3     160,843        160,344        0

Cost of sales

     -37,970        -36,028        -5     -109,566        -108,834        -1
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross income

     16,580        16,953        2     51,277        51,510        0

Gross margin (%)

     30.4     32.0       31.9     32.1  

Research and development expenses

     -7,473        -7,710        3     -23,586        -23,334        -1

Selling and administrative expenses

     -5,797        -5,778        0     -18,884        -19,050        1
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses

     -13,270        -13,488        2     -42,470        -42,384        0

Other operating income and expenses

     341        805          8,620 1)      -215     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income before shares in earnings of JV and associated companies

     3,651        4,270        17     17,427        8,911        -49

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

     6.7     8.1       10.8     5.6  

Shares in earnings of JV and associated companies

     -555        -51        -91     -3,166        -121        -96
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     3,096        4,219        36     14,261        8,790        -38

Financial income

     390        678          1,270        1,162     

Financial expenses

     -275        -595          -1,472        -1,766     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income after financial items

     3,211        4,302        34     14,059        8,186        -42

Taxes

     -1,027        -1,292          -1,866        -2,456     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     2,184        3,010        38     12,193        5,730        -53
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to:

            

- Stockholders of the Parent Company

     2,177        2,921          12,237        5,595     

- Non-controlling interests

     7        89          -44        135     

Other information

            

Average number of shares, basic (million)

     3,217        3,227          3,215        3,225     

Earnings per share, basic (SEK) 2)

     0.68        0.91          3.81        1.74     

Earnings per share, diluted (SEK) 2)

     0.67        0.90          3.77        1.72     

STATEMENT OF COMPREHENSIVE INCOME

 

     Jul - Sep      Jan - Sep  

SEK million

   2012      2013      2012      2013  

Net income

     2,184         3,010         12,193         5,730   

Other comprehensive income

           

Items that will not be reclassified to profit or loss

           

Remeasurements of defined benefits pension plans incl. asset ceiling

     -486         458         -1,251         2,231   

Revaluation of other investments in shares and participations

           

Fair value remeasurement

     1         1         2         70   

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

     —           -152         —           -873   

Items that may be reclassified to profit or loss

           

Cash flow hedges

           

Gains/losses arising during the period

     867         127         1,066         265   

Reclassification adjustments for gains/losses included in profit or loss

     -72         -185         -215         -948   

Adjustments for amounts transferred to initial carrying amount of hedged items

     —           —           92         —     

Changes in cumulative translation adjustments

     -3,409         -3,150         -4,090         -2,464   

Share of other comprehensive income on JV and associated companies

     -5         -150         -23         -46   

Tax on items that may be reclassified to profit or loss

     -27         11         126         153   

Total other comprehensive income

     -3,131         -3,040         -4,293         -1,612   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total comprehensive income

     -947         -30         7,900         4,118   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total comprehensive income attributable to:

           

Stockholders of the Parent Company

     -879         -79         8,000         4,008   

Non-controlling interests

     -68         49         -100         110   

 

1)  Includes gain on sale of Sony Ericsson SEK 7.7 billion in Q1 2012
2)  Based on Net income attributable to stockholders of the Parent Company

 

Ericsson Third Quarter Report 2013    21


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CONSOLIDATED BALANCE SHEET

 

     Dec 31      Jun 30      Sep 30  

SEK million

   2012      2013      2013  

ASSETS

        

Non-current assets

        

Intangible assets

        

Capitalized development expenses

     3,840         3,691         3,540   

Goodwill

     30,404         30,855         31,611   

Intellectual property rights, brands and other intangible assets

     15,202         13,405         13,319   

Property, plant and equipment

     11,493         11,766         11,230   

Financial assets

        

Equity in JV and associated companies

     2,842         2,883         2,675   

Other investments in shares and participations

     386         495         520   

Customer finance, non-current

     1,290         1,109         1,052   

Other financial assets, non-current

     3,964         4,807         4,586   

Deferred tax assets

     12,321         12,299         11,074   
  

 

 

    

 

 

    

 

 

 
     81,742         81,310         79,607   

Current assets

        

Inventories

     28,802         29,685         28,089   

Trade receivables

     63,660         63,084         64,905   

Customer finance, current

     4,019         2,998         2,191   

Other current receivables

     20,065         19,552         20,198   

Short-term investments 1)

     32,026         26,335         25,505   

Cash and cash equivalents

     44,682         38,479         35,163   
  

 

 

    

 

 

    

 

 

 
     193,254         180,133         176,051   

Total assets

     274,996         261,443         255,658   
  

 

 

    

 

 

    

 

 

 

EQUITY AND LIABILITIES

        

Equity

        

Stockholders’ equity

     136,883         132,326         132,382   

Non-controlling interest in equity of subsidiaries

     1,600         1,540         1,568   
  

 

 

    

 

 

    

 

 

 
     138,483         133,866         133,950   

Non-current liabilities

        

Post-employment benefits 2)

     9,503         10,907         10,385   

Provisions, non-current

     211         281         268   

Deferred tax liabilities

     3,120         3,326         3,050   

Borrowings, non-current

     23,898         22,471         21,745   

Other non-current liabilities

     2,377         2,330         2,204   
  

 

 

    

 

 

    

 

 

 
     39,109         39,315         37,652   

Current liabilities

        

Provisions, current

     8,427         7,435         6,146   

Borrowings, current

     4,769         4,018         3,849   

Trade payables

     23,100         20,760         19,237   

Other current liabilities 2)

     61,108         56,049         54,824   
  

 

 

    

 

 

    

 

 

 
     97,404         88,262         84,056   

Total equity and liabilities

     274,996         261,443         255,658   
  

 

 

    

 

 

    

 

 

 

Of which interest-bearing liabilities and post-employment benefits

     38,170         37,396         35,979   

Of which net cash

     38,538         27,418         24,689   

Assets pledged as collateral

     520         2,587         2,552   

Contingent liabilities

     613         586         606   

 

1) Including loan to ST-Ericsson of SEK 0 million as of September 30, 2013 (SEK 982 million as of June 30, 2013, SEK 0 million as of December 31, 2012)
2)  The provision for the Swedish special payroll taxes, amounting to SEK 1.8 (1.8) billion, which was previously included in Other current liabilities, has been re-classified as pension liability in line with the implementation of IAS19R on January 1, 2013

 

Ericsson Third Quarter Report 2013    22


Table of Contents

CONSOLIDATED STATEMENT OF CASH FLOWS

 

     Jul – Sep      Jan – Sep      Jan – Dec  

SEK million

   2012      2013      2012     2013      2012  

Operating activities

             

Net income

     2,184         3,010         12,193        5,730         5,938   

Adjustments to reconcile net income to cash

             

Taxes

     -886         -881         -3,189        -3,419         -1,140   

Earnings/dividends in JV and associated companies

     579         50         3,062        120         11,769   

Depreciation, amortization and impairment losses

     2,394         2,546         7,110        7,393         9,889   

Other

     413         -327         -7,075        -345         -7,441   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 
     4,684         4,398         12,101        9,479         19,015   

Changes in operating net assets

             

Inventories

     -650         357         -666        -469         2,752   

Customer finance, current and non-current

     -164         800         118        1,972         -1,259   

Trade receivables

     2,882         -4,744         1,177        -3,594         -1,103   

Trade payables

     -1,455         -588         -2,451        -3,018         -1,311   

Provisions and post-employment benefits

     -175         -970         -2,299        -1,567         -1,920   

Other operating assets and liabilities, net

     1,851         2,206         -1,640        -23         5,857   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 
     2,289         -2,939         -5,761        -6,699         3,016   

Cash flow from operating activities

     6,973         1,459         6,340        2,780         22,031   

Investing activities

             

Investments in property, plant and equipment

     -1,461         -778         -4,103        -3,252         -5,429   

Sales of property, plant and equipment

     17         97         316        199         568   

Acquisitions/divestments of subsidiaries and other operations, net

     -357         -1,794         -2,197 1)      -1,969         -2,077 1) 

Product development

     -435         -237         -1,211        -733         -1,641   

Other investing activities

     1,652         -230         1,327        -135         1,540   

Short-term investments

     -938         -144         3,196        6,205         2,151   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Cash flow from investing activities

     -1,522         -3,086         -2,672        315         -4,888   

Cash flow before financing activities

     5,451         -1,627         3,668        3,095         17,143   

Financing activities

             

Dividends paid

     -381         -21         -8,633        -8,945         -8,632   

Other financing activities

     1,062         43         856        -4,101         -753   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Cash flow from financing activities

     681         22         -7,777        -13,046         -9,385   

Effect of exchange rate changes on cash

     -1,994         -1,711         -1,722        432         -1,752   

Net change in cash

     4,138         -3,316         -5,831        -9,519         6,006   

Cash and cash equivalents, beginning of period

     28,707         38,479         38,676        44,682         38,676   

Cash and cash equivalents, end of period

     32,845         35,163         32,845        35,163         44,682   

 

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

 

Ericsson Third Quarter Report 2013    23


Table of Contents

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

 

     Jan – Sep      Jan – Sep      Jan – Dec  

SEK million

   2012      2013      2012  

Opening balance

     145,270         138,483         145,270   

Total comprehensive income

     7,900         4,118         1,830   

Sale/repurchase of own shares

     159         63         -93   

Stock issue

     -109         —           159   

Stock purchase plan

     333         297         405   

Dividends paid

     -8,633         -8,945         -8,632   

Transactions with non-controlling interests

     -377         -66         -456   
  

 

 

    

 

 

    

 

 

 

Closing balance

     144,543         133,950         138,483   
  

 

 

    

 

 

    

 

 

 

 

Ericsson Third Quarter Report 2013    24


Table of Contents

CONSOLIDATED INCOME STATEMENT – ISOLATED QUARTERS

 

     2012     2013  

Isolated quarters, SEK million

   Q1     Q2     Q3     Q4     Q1     Q2     Q3  

Net sales

     50,974        55,319        54,550        66,936        52,032        55,331        52,981   

Cost of sales

     -33,985        -37,611        -37,970        -46,133        -35,394        -37,412        -36,028   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross income

     16,989        17,708        16,580        20,803        16,638        17,919        16,953   

Gross margin (%)

     33.3     32.0     30.4     31.1     32.0     32.4     32.0

Research and development expenses

     -8,016        -8,097        -7,473        -9,247        -7,877        -7,747        -7,710   

Selling and administrative expenses

     -6,232        -6,855        -5,797        -7,139        -6,643        -6,629        -5,778   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses

     -14,248        -14,952        -13,270        -16,386        -14,520        -14,376        -13,488   

Other operating income and expenses

     7,749 1)      530        341        345        20        -1,040        805   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income before shares in earnings of JV and associated companies

     10,490        3,286        3,651        4,762        2,138        2,503        4,270   

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

     20.6     5.9     6.7     7.1     4.1     4.5     8.1

Shares in earnings of JV and associated companies

     -1,403        -1,208        -555        -8,565 2)      -32        -38        -51   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     9,087        2,078        3,096        -3,803        2,106        2,465        4,219   

Financial income

     262        618        390        438        180        304        678   

Financial expenses

     -273        -924        -275        -512        -565        -606        -595   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income after financial items

     9,076        1,772        3,211        -3,877        1,721        2,163        4,302   

Taxes

     -272        -567        -1,027        -2,378        -517        -647        -1,292   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     8,804        1,205        2,184        -6,255        1,204        1,516        3,010   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to:

              

– Stockholders of the Parent Company

     8,950        1,110        2,177        -6,462        1,205        1,469        2,921   

– Non-controlling interests

     -146        95        7        207        -1        47        89   

Other information

              

Average number of shares, basic (million)

     3,212        3,215        3,217        3,219        3,222        3,224        3,227   

Earnings per share, basic (SEK) 3)

     2.79        0.35        0.68        -2.01        0.37        0.46        0.91   

Earnings per share, diluted (SEK) 3)

     2.76        0.34        0.67        -1.99        0.37        0.45        0.90   

 

1) Includes gain on sale of Sony Ericsson SEK 7.7 billion in Q1 2012
2)  Negatively impacted by a non-cash charge related to ST-Ericsson of SEK -8.0 billion in Q4 2012
3)  Based on Net income attributable to stockholders of the Parent Company

 

Ericsson Third Quarter Report 2013    25


Table of Contents

CONSOLIDATED STATEMENT OF CASH FLOWS – ISOLATED QUARTERS

 

     2012      2013  

Isolated quarters, SEK million

   Q1     Q2      Q3      Q4      Q1      Q2      Q3  

Operating activities

                   

Net income

     8,804        1,205         2,184         -6,255         1,204         1,516         3,010   

Adjustments to reconcile net income to cash

                   

Taxes

     -1,118        -1,185         -886         2,049         -1,849         -689         -881   

Earnings/dividends in JV and associated companies

     1,290        1,193         579         8,707         33         37         50   

Depreciation, amortization and impairment losses

     2,315        2,401         2,394         2,779         2,411         2,436         2,546   

Other

     -7,022        -466         413         -366         -201         183         -327   
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     4,269        3,148         4,684         6,914         1,598         3,483         4,398   

Changes in operating net assets

                   

Inventories

     -59        43         -650         3,418         -1,426         600         357   

Customer finance, current and non-current

     282        —           -164         -1,377         260         912         800   

Trade receivables

     3,722        -5,427         2,882         -2,280         -1,934         3,084         -4,744   

Trade payables

     -2,713        1,717         -1,455         1,140         -2,948         518         -588   

Provisions and post-employment benefits

     -1,771        -353         -175         379         1,155         -1,752         -970   

Other operating assets and liabilities, net

     -2,999        -492         1,851         7,497         325         -2,554         2,206   
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     -3,538        -4,512         2,289         8,777         -4,568         808         -2,939   

Cash flow from operating activities

     731        -1,364         6,973         15,691         -2,970         4,291         1,459   

Investing activities

                   

Investments in property, plant and equipment

     -1,648        -994         -1,461         -1,326         -1,196         -1,278         -778   

Sales of property, plant and equipment

     309        -10         17         252         91         11         97   

Acquisitions/divestments of subsidiaries and other operations, net

     -1,730 1)      -110         -357         120         -136         -39         -1,794   

Product development

     -251        -525         -435         -430         -282         -214         -237   

Other investing activities

     195        -520         1,652         213         298         -203         -230   

Short-term investments

     -3,999        8,133         -938         -1,045         -2,860         9,209         -144   
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Cash flow from investing activities

     -7,124        5,974         -1,522         -2,216         -4,085         7,486         -3,086   

Cash flow before financing activities

     -6,393        4,610         5,451         13,475         -7,055         11,777         -1,627   

Financing activities

                   

Dividends paid

     —          -8,252         -381         1         -61         -8,863         -21   

Other financing activities

     -1,318        1,112         1,062         -1,609         92         -4,236         43   
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Cash flow from financing activities

     -1,318        -7,140         681         -1,608         31         -13,099         22   

Effect of exchange rate changes on cash

     -327        599         -1,994         -30         -214         2,357         -1,711   

Net change in cash

     -8,038        -1,931         4,138         11,837         -7,238         1,035         -3,316   

Cash and cash equivalents, beginning of period

     38,676        30,638         28,707         32,845         44,682         37,444         38,479   

Cash and cash equivalents, end of period

     30,638        28,707         32,845         44,682         37,444         38,479         35,163   

 

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

 

Ericsson Third Quarter Report 2013    26


Table of Contents

PARENT COMPANY INCOME STATEMENT

 

     Jul – Sep      Jan – Sep  

SEK million

   2012      2013      2012      2013  

Net sales

     —              —        

Cost of sales

     —              —        
  

 

 

    

 

 

    

 

 

    

 

 

 

Gross income

     —              —        

Operating expenses

     -103         -300         -556         -886   

Other operating income and expenses

     637         621         1,864         1,972   
  

 

 

    

 

 

    

 

 

    

 

 

 

Operating income

     534         321         1,308         1,086   

Financial net

     2,960         1,152         9,224         3,121   
  

 

 

    

 

 

    

 

 

    

 

 

 

Income after financial items

     3,494         1,473         10,532         4,207   

Transfers to (-) / from untaxed reserves

           

Taxes

     -247         18         -570         -211   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net income

     3,247         1,491         9,962         3,996   
  

 

 

    

 

 

    

 

 

    

 

 

 

STATEMENT OF COMPREHENSIVE INCOME

 

     Jul – Sep      Jan – Sep  

SEK million

   2012      2013      2012      2013  

Net income

     3,247         1,491         9,962         3,996   

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

     3,247         1,491         9,759         3,996   
  

 

 

    

 

 

    

 

 

    

 

 

 

PARENT COMPANY BALANCE SHEET

 

     Dec 31      Sep 30  

SEK million

   2012      2013  

ASSETS

     

Fixed assets

     

Intangible assets

     849         701   

Tangible assets

     535         524   

Financial assets

     99,530         93,304   
  

 

 

    

 

 

 
     100,914         94,529   

Current assets

     

Inventories

     55         4   

Receivables

     21,694         19,648   

Short-term investments

     31,491         25,048   

Cash and cash equivalents

     25,946         18,324   
  

 

 

    

 

 

 
     79,186         63,024   

Total assets

     180,100         157,553   
  

 

 

    

 

 

 

STOCKHOLDERS’ EQUITY, PROVISIONS AND LIABILITIES

     

Equity

     

Restricted equity

     48,018         48,018   

Non-restricted equity

     25,624         20,894   
  

 

 

    

 

 

 
     73,642         68,912   

Untaxed reserves

     288         288   

Provisions

     4,095         2,652   

Non-current liabilities

     48,763         43,886   

Current liabilities

     53,312         41,815   

Total stockholders’ equity, provisions and liabilities

     180,100         157,553   
  

 

 

    

 

 

 

Assets pledged as collateral

     520         549   

Contingent liabilities

     16,719         16,346   

 

Ericsson Third Quarter Report 2013    27


Table of Contents

Accounting policies

The Group

This interim report is prepared in accordance with IAS 34. The term “IFRS” used in this document refers to the application of IAS and IFRS as well as interpretations of these standards as issued by IASB’s Standards Interpretation Committee (SIC) and IFRS Interpretations Committee (IFRIC). The accounting policies adopted are consistent with those of the annual report for the year ended December 31, 2012, and should be read in conjunction with that annual report.

Change of hedge accounting

Due to cost efficiency reasons Ericsson has changed the hedge accounting.

Ericsson hedges highly probable forecast transactions related to sales and purchases with the purpose to limit the impact related to currency fluctuations on these forecasted transactions. This will not be changed.

Ericsson has, however, decided to discontinue hedge accounting for this type of hedges. Until 2012 Ericsson applied cash flow hedge accounting for highly probable forecast transactions. Revaluation of these hedges (incepted prior to January 1, 2013) are prior to release reported under “Other comprehensive income” (OCI) and is at release recycled to sales, cost of sales and R&D expenses respectively.

As from 2013, revaluation of new hedges (inception as from January 1, 2013) are reported under “Other operating income and expenses” in the Income statement.

As from January 1, 2013, the Company has applied the following new or amended IFRSs and IFRICs:

Amendment to IAS 1, “Financial statement presentation” regarding Other comprehensive income. The main change resulting from this amendment is a requirement for entities to group items presented in “other comprehensive income” (OCI) on the basis of whether they are potentially recycled to profit or loss subsequently (reclassification adjustments). The amendment does not address which items are presented in OCI.

Amendment to IAS 19, “Employee benefits” eliminates the corridor approach and calculates finance costs on a net funding basis. The Company implemented the immediate and full recognition of actuarial gains/losses in other “Other comprehensive income” (OCI) in 2006, meaning that the corridor method has not been applied by the Company as from that date and therefore the transition to the revised IAS 19 has not had an effect on the present obligation. The main issue to address is the implementation of the net interest cost/gain, which integrates the interest cost and expected return on assets to be based on a common discount rate. An analysis of fiscal year 2012 in relation to this amendment indicated an impact on pension costs for 2012 with an increase of approximately SEK 0.4 (–0.1) billion. The Company also needs to address the taxes to be incorporated into the defined benefit obligation. This amendment relates to the Swedish special payroll taxes to be reclassified from “Other current liabilities” to “Post-employment benefits” with an estimated amount of SEK 1.8 (1.8) billion as per December 31, 2012 *. The amendment also includes additional disclosure requirements on yearly financial and demographic assumptions, sensitivity analysis, duration and multi-employer plans.

Amendment to IFRS 7, “Financial instruments: Disclosures’ on asset and liability offsetting”. This amendment requires disclosure of gross amounts related to financial instruments for which offset has been made.

 

* See also footnote under the balance sheet.

 

Ericsson Third Quarter Report 2013    28


Table of Contents

Accounting policies (continued)

IFRS 10, “Consolidated financial statements”. The objective of IFRS 10 is to establish principles for the presentation and preparation of consolidated financial statements when an entity controls one or more other entities to present consolidated financial statements. It defines the principle of control, and establishes control as the basis for consolidation. It sets out how to apply the principle of control to identify whether an investor controls an investee and therefore must consolidate the investee. An entity controls an investee if the entity has power over the investee, has the ability to use the power and is exposed to variable returns. It also sets out the accounting requirements for the preparation of consolidated financial statements.

IFRS 11, “Joint arrangements” is a more realistic reflection of joint arrangements by focusing on the rights and obligations of the arrangement rather than its legal form. There are two types of joint arrangement: joint operations and joint ventures. Proportional consolidation of joint ventures is no longer allowed. The Company did not apply the proportionate consolidation method prior to 2013.

IFRS 12, “Disclosures of interests in other entities” includes the disclosure requirements for all forms of interests in other entities, including joint arrangements, associates, structured entities and other off balance sheet vehicles.

IFRS 13, “Fair value measurement” does not extend the use of fair value accounting but provide guidance on how it should be applied where its use is already required or permitted by other standards within IFRS. This standard has also added disclosure requirements in IAS 34, Interim Financial Reporting regarding the disclosure for financial instruments.

IAS 27 (revised 2011), “Separate financial statements” includes the provisions on separate financial statements that are left after the control provisions of IAS 27 have been included in the new IFRS 10.

IAS 28 (revised 2011), “Associates and joint ventures” includes the requirements for joint ventures, as well as associates, to be equity accounted following the issue of IFRS 11.

None of the new or amended standards and interpretations has had any significant impact on the financial result or position of the Company. There is no significant difference between IFRS effective as per September 30, 2013 and IFRS as endorsed by the EU.

Disclosures required by the IASB on an interim basis as from 2013

Financial instruments carried at fair value

The fair value of the Company’s financial instruments, recognized at fair value, is determined based on quoted market prices or rates. Financial instruments, measured according to the category “Fair value through profit or loss” showed a net fair value measurement positive effect of SEK 1.7 billion. The amount is recognized in the balance sheet as per September 30, 2013.

Financial instruments carried at other than fair value

Book value for “Notes and bond loans” amounts to SEK 14.3 billion and fair value to SEK 14.3 billion. Fair values of “Current part of non-current borrowings”, “Other borrowings non-current” as well as “Other financial instruments” are not estimated to materially differ from book values.

For further information about valuation principles, please see Note C1, “Significant accounting policies” in the Annual Report of 2012.

 

Ericsson Third Quarter Report 2013    29


Table of Contents

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.

 

     2012     2013  

Isolated quarters, SEK million

   Q1     Q2     Q3     Q4     Q1     Q2     Q3  

Networks

     27,314        27,766        26,939        35,266        28,133        28,142        26,655   

Global Services

     20,631        24,074        24,296        28,042        21,452        24,851        23,974   

Of which Professional Services

     14,884        16,947        16,388        18,873        14,626        16,773        16,229   

Of which Managed Services

     5,708        6,468        6,306        6,752        5,888        6,754        6,264   

Of which Network Rollout

     5,747        7,127        7,908        9,169        6,826        8,078        7,745   

Support Solutions

     3,029        3,479        3,315        3,628        2,447        2,338        2,352   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     50,974        55,319        54,550        66,936        52,032        55,331        52,981   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     2012     2013  

Sequential change, percent

   Q1     Q2     Q3     Q4     Q1     Q2     Q3  

Networks

     -18     2     -3     31     -20     0     -5

Global Services

     -24     17     1     15     -24     16     -4

Of which Professional Services

     -18     14     -3     15     -23     15     -3

Of which Managed Services

     -6     13     -3     7     -13     15     -7

Of which Network Rollout

     -35     24     11     16     -26     18     -4

Support Solutions

     -11     15     -5     9     -33     -4     1
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     -20     9     -1     23     -22     6     -4
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     2012     2013  

Year over year change, percent

   Q1     Q2     Q3     Q4     Q1     Q2     Q3  

Networks

     -18     -17     -17     6     3     1     -1

Global Services

     18     26     19     4     4     3     -1

Of which Professional Services

     18     26     11     4     -2     -1     -1

Of which Managed Services

     16     37     19     12     3     4     -1

Of which Network Rollout

     18     28     38     3     19     13     -2

Support Solutions

     33     47     29     6     -19     -33     -29
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     -4     1     -2     5     2     0     -3
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     2012     2013  

Year to date, SEK million

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

Networks

     27,314        55,080        82,019        117,285        28,133        56,275        82,930   

Global Services

     20,631        44,705        69,001        97,043        21,452        46,303        70,277   

Of which Professional Services

     14,884        31,830        48,219        67,092        14,626        31,399        47,628   

Of which Managed Services

     5,708        12,176        18,482        25,234        5,888        12,642        18,906   

Of which Network Rollout

     5,747        12,875        20,782        29,951        6,826        14,904        22,649   

Support Solutions

     3,029        6,508        9,823        13,451        2,447        4,785        7,137   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     50,974        106,293        160,843        227,779        52,032        107,363        160,344   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
Year to date,    2012     2013  

year over year change, percent

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

Networks

     -18     -17     -17     -11     3     2     1

Global Services

     18     23     21     16     4     4     2

Of which Professional Services

     18     22     18     14     -2     -1     -1

Of which Managed Services

     16     26     24     20     3     4     2

Of which Network Rollout

     18     23     29     20     19     16     9

Support Solutions

     33     40     36     26     -19     -26     -27
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     -4     -1     -1     0     2     1     0
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

SALES GROWTH FOR COMPARABLE UNITS, ADJUSTED FOR CURRENCY EFFECTS

 

     2012     2013  

Sequential change, percent

   Q1     Q2     Q3     Q4     Q1     Q2     Q3  

Networks

     -19     -1     0     33     -17     0     -3

Global Services

     -25     15     3     16     -20     17     -2

Support Solutions

     -25     13     -3     21     -30     -5     3
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     -22     6     1     24     -19     6     -2
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
Isolated quarter,    2012     2013  

Year over year change, percent

   Q1     Q2     Q3     Q4     Q1     Q2     Q3  

Networks

     -18     -20     -17     9     7     8     4

Global Services

     14     18     16     4     9     9     3

Support Solutions

     12     16     4     4     -3     -19     -15
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     -6     -6     -4     5     7     7     3
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
Year to date,    2012     2013  

year over year change, percent

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

Networks

     -18     -19     -18     -12     7     7     6

Global Services

     14     16     16     12     9     9     7

Support Solutions

     12     14     10     9     -3     -12     -13
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     -6     -6     -5     -2     7     7     5
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

Ericsson Third Quarter Report 2013    30


Table of Contents

OPERATING INCOME BY SEGMENT BY QUARTER

 

     2012     2013  

Isolated quarters, SEK million

   Q1     Q2      Q3      Q4     Q1      Q2      Q3  

Networks

     1,649        1,255         1,341         2,812        1,565         1,335         2,557   

Global Services

     1,267        1,362         1,835         1,762        726         1,564         1,808   

Of which Professional Services

     1,908        2,142         2,293         2,768        1,837         2,285         2,279   

Of which Network Rollout

     -641        -780         -458         -1,006        -1,111         -721         -471   

Support Solutions

     -28        420         480         278        -29         -283         -113   

Unallocated 1)

     -97        -43         6         -133        -156         -151         -33   
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Subtotal Segments excluding Sony Ericsson and ST-Ericsson

     2,791        2,994         3,662         4,719        2,106         2,465         4,219   

Sony Ericsson

     7,691 2)      347         -1         -11        —           —           —     

ST-Ericsson

     -1,395        -1,263         -565         -8,511 3)      —           —           —     
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Subtotal Sony Ericsson and ST-Ericsson

     6,296        -916         -566         -8,522        —           —           —     
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Total

     9,087        2,078         3,096         -3,803        2,106         2,465         4,219   
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 
     2012     2013  

Year to date, SEK million

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

Networks

     1,649        2,904         4,245         7,057        1,565         2,900         5,457   

Global Services

     1,267        2,629         4,464         6,226        726         2,290         4,098   

Of which Professional Services

     1,908        4,050         6,343         9,111        1,837         4,122         6,401   

Of which Network Rollout

     -641        -1,421         -1,879         -2,885        -1,111         -1,832         -2,303   

Support Solutions

     -28        392         872         1,150        -29         -312         -425   

Unallocated 1)

     -97        -140         -134         -267        -156         -307         -340   
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Subtotal Segments excluding Sony Ericsson and ST-Ericsson

     2,791        5,785         9,447         14,166        2,106         4,571      

 

8,790

  

Sony Ericsson

     7,691 2)      8,038         8,037         8,026        —           —           —     

ST-Ericsson

     -1,395        -2,658         -3,223         -11,734 3)      —           —           —     
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Subtotal Sony Ericsson and ST-Ericsson

     6,296        5,380         4,814         -3,708        —           —           —     
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Total

     9,087        11,165         14,261         10,458        2,106         4,571         8,790   
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

OPERATING MARGIN BY SEGMENT BY QUARTER

 

As percentage of net sales,

isolated quarters

   2012     2013  
   Q1     Q2     Q3     Q4     Q1     Q2     Q3  

Networks

     6     5     5     8     6     5     10

Global Services

     6     6     8     6     3     6     8

Of which Professional Services

     13     13     14     15     13     14     14

Of which Network Rollout

     -11     -11     -6     -11     -16     -9     -6

Support Solutions

     -1     12     14     8     -1     -12     -5
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Subtotal excluding Sony Ericsson and ST-Ericsson

     5     5     7     7     4     4     8
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

As percentage of net sales,

Year to date

   2012     2013  
   Jan - Mar     Jan - Jun     Jan - Sep     Jan - Dec     Jan - Mar     Jan - Jun     Jan - Sep  

Networks

     6     5     5     6     6     5     7

Global Services

     6     6     6     6     3     5     6

Of which Professional Services

     13     13     13     14     13     13     13

Of which Network Rollout

     -11     -11     -9     -10     -16     -12     -10

Support Solutions

     -1     6     9     9     -1     -7     -6
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Subtotal excluding Sony Ericsson and ST-Ericsson

     5     5     6     6     4     4     5
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

1)  “Unallocated” consists mainly of costs for corporate staff, non-operational capital gains and losses
2)  Includes gain on sale of Sony Ericsson SEK 7.7 billion in Q1 2012
3)  Negatively impacted by a non-cash charge related to ST-Ericsson of SEK -8.0 billion in Q4 2012

 

Ericsson Third Quarter Report 2013    31


Table of Contents

EBITA BY SEGMENT BY QUARTER

 

    2012     2013  

Isolated quarters, SEK million

  Q1     Q2     Q3     Q4     Q1     Q2     Q3  

Networks

    2,343        1,994        2,075        3,595        2,302        2,074        3,320   

Global Services

    1,464        1,594        2,050        1,974        942        1,783        2,043   

Of which Professional Services

    2,086        2,320        2,438        2,925        2,009        2,443        2,466   

Of which Network Rollout

    -622        -726        -389        -951        -1,067        -660        -423   

Support Solutions

    236        608        624        427        118        -132        38   

Unallocated 1)

    -96        -42        6        -131        -155        -150        -32   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Subtotal Segments excluding Sony Ericsson and ST-Ericsson

    3,947        4,154        4,755        5,865        3,207        3,575        5,369   

Sony Ericsson

    7,691 2)      347        -1        -11        —          —          —     

ST-Ericsson

    -1,395        -1,263        -565        -8,511 3)      —          —          —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Subtotal Sony Ericsson and ST-Ericsson

    6,296        -916        -566        -8,522        —          —          —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

    10,243        3,238        4,189        -2,657        3,207        3,575        5,369   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    2012     2013  

Year to date, SEK million

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

Networks

    2,343        4,337        6,411        10,007        2,302        4,376        7,696   

Global Services

    1,464        3,058        5,108        7,082        942        2,725        4,768   

Of which Professional Services

    2,086        4,406        6,845        9,769        2,009        4,452        6,918   

Of which Network Rollout

    -622        -1,348        -1,736        -2,687        -1,067        -1,727        -2,150   

Support Solutions

    236        844        1,468        1,895        118        -14        24   

Unallocated 1)

    -96        -138        -132        -263        -155        -305        -337   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Subtotal Segments excluding Sony Ericsson and ST-Ericsson

    3,947        8,101        12,856        18,721        3,207        6,782        12,151   

Sony Ericsson

    7,691 2)      8,038        8,037        8,026        —          —          —     

ST-Ericsson

    -1,395        -2,658        -3,223        -11,734 3)      —          —          —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Subtotal Sony Ericsson and ST-Ericsson

    6,296        5,380        4,814        -3,708        —          —          —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

    10,243        13,481        17,670        15,013        3,207        6,782        12,151   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

EBITA MARGIN BY SEGMENT BY QUARTER

 

As percentage of net sales,

isolated quarters

  2012     2013  
  Q1     Q2     Q3     Q4     Q1     Q2     Q3  

Networks

    9     7     8     10     8     7     12

Global Services

    7     7     8     7     4     7     9

Of which Professional Services

    14     14     15     15     14     15     15

Of which Network Rollout

    -11     -10     -5     -10     -16     -8     -5

Support Solutions

    8     17     19     12     5     -6     2
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Subtotal excluding Sony Ericsson and ST-Ericsson

    8     8     9     9     6     6     10
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

As percentage of net sales,

year to date

  2012     2013  
  Jan - Mar     Jan - Jun     Jan - Sep     Jan - Dec     Jan - Mar     Jan - Jun     Jan - Sep  

Networks

    9     8     8     9     8     8     9

Global Services

    7     7     7     7     4     6     7

Of which Professional Services

    14     14     14     15     14     14     15

Of which Network Rollout

    -11     -10     -8     -9     -16     -12     -9

Support Solutions

    8     13     15     14     5     0     0
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Subtotal excluding Sony Ericsson and ST-Ericsson

    8     8     8     8     6     6     8
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

1)  “Unallocated” consists mainly of costs for corporate staff, non-operational capital gains and losses
2)  Includes gain on sale of Sony Ericsson SEK 7.7 billion in Q1 2012
3)  Negatively impacted by a non-cash charge related to ST-Ericsson of SEK -8.0 billion in Q4 2012

 

Ericsson Third Quarter Report 2013    32


Table of Contents

NET SALES BY REGION BY QUARTER

 

     2012     2013  

Isolated quarters, SEK million

   Q1     Q2     Q3     Q4     Q1     Q2     Q3  

North America

     12,775        12,987        14,037        16,950        15,773        15,341        14,453   

Latin America

     4,822        5,243        5,424        6,517        4,374        5,565        5,294   

Northern Europe & Central Asia 1) 2)

     2,292        3,358        2,697        2,998        2,283        2,708        2,949   

Western & Central Europe 2)

     4,306        4,094        3,630        5,448        4,349        4,522        4,399   

Mediterranean 2)

     4,620        6,214        5,401        7,064        5,271        6,159        5,659   

Middle East

     3,157        3,701        3,637        5,061        3,160        3,978        4,386   

Sub Saharan Africa

     2,200        2,791        2,800        3,558        2,131        2,653        2,693   

India

     1,421        1,700        1,737        1,602        1,606        1,279        1,280   

North East Asia

     9,154        8,423        8,373        10,246        6,054        6,642        6,053   

South East Asia & Oceania

     3,374        3,674        3,505        4,515        4,129        3,758        3,617   

Other 1) 2)

     2,853        3,134        3,309        2,977        2,902        2,726        2,198   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     50,974        55,319        54,550        66,936        52,032        55,331        52,981   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

1) Of which in Sweden

     834        1,282        1,649        1,268        1,020        1,276        798   

2) Of which in EU

     9,502        11,201        10,604        12,923        9,782        10,816        10,111   
     2012     2013  

Sequential change, percent

   Q1     Q2     Q3     Q4     Q1     Q2     Q3  

North America

     14     2     8     21     -7     -3     -6

Latin America

     -31     9     3     20     -33     27     -5

Northern Europe & Central Asia 1) 2)

     -39     47     -20     11     -24     19     9

Western & Central Europe 2)

     -18     -5     -11     50     -20     4     -3

Mediterranean 2)

     -44     35     -13     31     -25     17     -8

Middle East

     -39     17     -2     39     -38     26     10

Sub Saharan Africa

     -32     27     0     27     -40     24     2

India

     -7     20     2     -8     0     -20     0

North East Asia

     -16     -8     -1     22     -41     10     -9

South East Asia & Oceania

     -16     9     -5     29     -9     -9     -4

Other 1) 2)

     -14     10     6     -10     -3     -6     -19
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     -20     9     -1     23     -22     6     -4
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

1) Of which in Sweden

     -8     54     29     -23     -20     25     -37

2) Of which in EU

     -29     18     -5     22     -24     11     -7
     2012     2013  

Year-over-year change, percent

   Q1     Q2     Q3     Q4     Q1     Q2     Q3  

North America

     -3     5     16     51     23     18     3

Latin America

     20     6     -10     -7     -9     6     -2

Northern Europe & Central Asia 1) 2)

     -32     -26     -24     -21     0     -19     9

Western & Central Europe 2)

     -10     -6     -21     3     1     10     21

Mediterranean 2)

     -4     12     3     -14     14     -1     5

Middle East

     3     4     0     -3     0     7     21

Sub Saharan Africa

     -1     26     11     11     -3     -5     -4

India

     -55     -39     -24     5     13     -25     -26

North East Asia

     6     -7     -13     -6     -34     -21     -28

South East Asia & Oceania

     9     21     -6     13     22     2     3

Other 1) 2)

     9     27     49     -10     2     -13     -34
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     -4     1     -2     5     2     0     -3
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

1) Of which in Sweden

     -10     16     75     40     22     0     -52

2) Of which in EU

     -5     9     4     -4     3     -3     -5

 

Ericsson Third Quarter Report 2013    33


Table of Contents

NET SALES BY REGION BY QUARTER (continued)

 

     2012     2013  

Year to date, SEK million

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

North America

     12,775        25,762        39,799        56,749        15,773        31,114        45,567   

Latin America

     4,822        10,065        15,489        22,006        4,374        9,939        15,233   

Northern Europe & Central Asia 1) 2)

     2,292        5,650        8,347        11,345        2,283        4,991        7,940   

Western & Central Europe 2)

     4,306        8,400        12,030        17,478        4,349        8,871        13,270   

Mediterranean 2)

     4,620        10,834        16,235        23,299        5,271        11,430        17,089   

Middle East

     3,157        6,858        10,495        15,556        3,160        7,138        11,524   

Sub Saharan Africa

     2,200        4,991        7,791        11,349        2,131        4,784        7,477   

India

     1,421        3,121        4,858        6,460        1,606        2,885        4,165   

North East Asia

     9,154        17,577        25,950        36,196        6,054        12,696        18,749   

South East Asia & Oceania

     3,374        7,048        10,553        15,068        4,129        7,887        11,504   

Other 1) 2)

     2,853        5,987        9,296        12,273        2,902        5,628        7,826   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     50,974        106,293        160,843        227,779        52,032        107,363        160,344   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

1)   Of which in Sweden

     834        2,116        3,765        5,033        1,020        2,296        3,094   

2)   Of which in EU

     9,502        20,703        31,307        44,230        9,782        20,598        30,709   
Year to date,    2012     2013  

year-over-year change, percent

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

North America

     -3     1     6     16     23     21     14

Latin America

     20     13     4     0     -9     -1     -2

Northern Europe & Central Asia 1) 2)

     -32     -29     -27     -25     0     -12     -5

Western & Central Europe 2)

     -10     -8     -13     -8     1     6     10

Mediterranean 2)

     -4     5     4     -2     14     6     5

Middle East

     3     4     2     1     0     4     10

Sub Saharan Africa

     -1     13     12     12     -3     -4     -4

India

     -55     -48     -41     -34     13     -8     -14

North East Asia

     6     0     -5     -5     -34     -28     -28

South East Asia & Oceania

     9     15     7     9     22     12     9

Other1) 2)

     9     18     27     15     2     -6     -16
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     -4     -1     -1     0     2     1     0
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

1)   Of which in Sweden

     -10     4     27     30     22     9     -18

2)   Of which in EU

     -5     2     3     1     3     -1     -2

TOP 5 COUNTRIES IN SALES

 

     Q3     Jan - Sep  

Country

   2012     2013     2012     2013  

UNITED STATES

     26     28     24     28

JAPAN

     9     5     8     6

CHINA

     5     5     5     4

ITALY

     4     3     4     3

BRAZIL

     3     3     3     3

 

Ericsson Third Quarter Report 2013    34


Table of Contents

NET SALES BY REGION BY SEGMENT

Revenue from Telcordia is reported 50/50 between segments Global Services and Support Solutions. In the regional dimension, all of Telcordia sales is reported in Support Solutions, except for North America where it is split 50/50. IPX was divested Q3 2012. For the first nine months of 2012, IPX was included in Support Solutions and region Other.

 

     Q3 2013, SEK million     Jan - Sep 2013, SEK million  
     Net-
works
    Global
Services
    Support
Solutions
    Total     Net-
works
    Global
Services
    Support
Solutions
    Total  

North America

     6,597        7,268        588        14,453        23,196        20,808        1,563        45,567   

Latin America

     2,775        2,304        215        5,294        7,762        6,619        852        15,233   

Northern Europe & Central Asia

     1,983        915        51        2,949        4,869        2,897        174        7,940   

Western & Central Europe

     1,730        2,543        126        4,399        5,572        7,318        380        13,270   

Mediterranean

     2,567        2,961        131        5,659        7,932        8,721        436        17,089   

Middle East

     2,255        1,807        324        4,386        5,488        5,270        766        11,524   

Sub Saharan Africa

     1,356        1,118        219        2,693        3,704        3,075        698        7,477   

India

     566        676        38        1,280        1,908        2,022        235        4,165   

North East Asia

     3,539        2,457        57        6,053        10,694        7,853        202        18,749   

South East Asia & Oceania

     1,923        1,565        129        3,617        6,539        4,618        347        11,504   

Other

     1,364        360        474        2,198        5,266        1,076        1,484        7,826   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     26,655        23,974        2,352        52,981        82,930        70,277        7,137        160,344   

Share of Total

     50     45     5     100     52     44     4     100
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

     Q3 2013  

Sequential change, percent

   Net-
works
    Global
Services
    Support
Solutions
    Total  

North America

     -11     -2     20     -6

Latin America

     -7     0     -24     -5

Northern Europe & Central Asia

     22     -11     -14     9

Western & Central Europe

     -11     4     -8     -3

Mediterranean

     -12     -4     -20     -8

Middle East

     24     -9     89     10

Sub Saharan Africa

     9     -1     -19     2

India

     17     -6     -50     0

North East Asia

     -6     -12     -2     -9

South East Asia & Oceania

     -5     -4     17     -4

Other

     -28     18     -9     -19
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

     -5     -4     1     -4
  

 

 

   

 

 

   

 

 

   

 

 

 
     Q3 2013  

Year over year change, percent

   Net-
works
    Global
Services
    Support
Solutions
    Total  

North America

     -13     24     -3     3

Latin America

     10     -1     -62     -2

Northern Europe & Central Asia

     31     -16     -48     9

Western & Central Europe

     85     1     -25     21

Mediterranean

     29     -8     -29     5

Middle East

     60     -1     -20     21

Sub Saharan Africa

     -14     19     -22     -4

India

     -46     11     -51     -26

North East Asia

     -21     -34     -56     -28

South East Asia & Oceania

     10     -3     -7     3

Other

     -36     -29     -29     -34
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

     -1     -1     -29     -3
  

 

 

   

 

 

   

 

 

   

 

 

 
     Jan - Sep 2013  

Year over year change, percent

   Net-
works
    Global
Services
    Support
Solutions
    Total  

North America

     10     24     -19     14

Latin America

     13     -10     -32     -2

Northern Europe & Central Asia

     2     -13     -35     -5

Western & Central Europe

     46     -5     -28     10

Mediterranean

     17     -3     -17     5

Middle East

     28     0     -18     10

Sub Saharan Africa

     -16     15     -4     -4

India

     -28     8     -30     -14

North East Asia

     -33     -18     -48     -28

South East Asia & Oceania

     20     -1     -16     9

Other

     -11     28     -41     -16
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

     1     2     -27     0
  

 

 

   

 

 

   

 

 

   

 

 

 

 

Ericsson Third Quarter Report 2013    35


Table of Contents

PROVISIONS

 

     2012      2013  

Isolated quarters, SEK million

   Q1      Q2      Q3      Q4      Q1      Q2      Q3  

Opening balance

     6,265         5,930         5,318         5,243         8,638         9,499         7,716   

Additions

     1,003         616         810         4,582         1,915         1,215         658   

Utilization/Cash out

     -980         -850         -664         -981         -758         -2,365         -1,534   

Of which restructuring

     -401         -342         -160         -267         -324         -1,001         -457   

Reversal of excess amounts

     -370         -453         -95         -155         -209         -586         -191   

Reclassification, translation difference and other

     12         75         -126         -51         -87         -47         -235   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Closing balance

     5,930         5,318         5,243         8,638         9,499         7,716         6,414   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     2012      2013  

Year to date, SEK million

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

Opening balance

     6,265         6,265         6,265         6,265         8,638         8,638         8,638   

Additions

     1,003         1,619         2,429         7,011         1,915         3,130         3,788   

Utilization/Cash out

     -980         -1,830         -2,494         -3,475         -758         -3,123         -4,657   

Of which restructuring

     -401         -743         -903         -1,170         -324         -1,325         -1,782   

Reversal of excess amounts

     -370         -823         -918         -1,073         -209         -795         -986   

Reclassification, translation difference and other

     12         87         -39         -90         -87         -134         -369   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Closing balance

     5,930         5,318         5,243         8,638         9,499         7,716         6,414   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

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

 

     2012      2013  

Isolated quarters, SEK million

   Q1      Q2      Q3      Q4      Q1      Q2      Q3  

Additions

                    

Property, plant and equipment

     1,648         994         1,461         1,326         1,196         1,278         778   

Capitalized development expenses

     251         525         435         430         282