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

July 20, 2015

Commission File Number 000-12033

 

 

LM ERICSSON TELEPHONE COMPANY

(Translation of registrant’s name into English)

 

 

Torshamnsgatan 21, Kista

SE-164 83, Stockholm, Sweden

(Address of principal executive offices)

 

 

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

Form 20-F  x             Form 40-F  ¨

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

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

THIS REPORT ON FORM 6-K SHALL BE DEEMED TO BE INCORPORATED BY REFERENCE IN THE REGISTRATION STATEMENTS ON FORM F-3 (NO. 333-203977) AND ON FORM S-8 (Nos. 333-196453, 333-161683 AND 333-161684 ) OF TELEFONAKTIEBOLAGET LM ERICSSON (PUBL.) AND TO BE A PART THEREOF FROM THE DATE ON WHICH THIS REPORT IS FURNISHED TO THE SECURITIES AND EXCHANGE COMMISSION, TO THE EXTENT NOT SUPERSEDED BY DOCUMENTS OR REPORTS SUBSEQUENTLY FILED WITH OR FURNISHED TO THE SECURITIES AND EXCHANGE COMMISSION.

 

 

 


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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: July 20, 2015


Table of Contents

LOGO

SECOND QUARTER

REPORT 2015, as adjusted for incorporation by reference.

Stockholm, July 17, 2015

 

   Read more
SECOND QUARTER HIGHLIGHTS (page)
>

Reported sales increased by 11% YoY.

 

3

 

>

The mobile broadband business in North America stabilized in the quarter, but remained at a lower level than a year ago.

 

3

 

>

Professional Services continued to deliver strong sales growth YoY.

 

7

 

>

Sales in segment Networks recovered and showed a growth QoQ of 18%.

 

6

 

>

Gross margin decreased YoY to 33.2% (36.4%). Excluding restructuring charges, gross margin was 35.1% (36.6%) due to lower capacity business in North America and continued 4G coverage deployments in Mainland China, lower IPR revenues and higher share of services sales.

 

3
>

The global cost and efficiency program is progressing according to plan and restructuring charges in the quarter were SEK 2.7 (0.2) b., mainly related to the reductions in Sweden.

 

3

 

>

Operating income, excluding restructuring charges, improved in all segments YoY to SEK 6.3 (4.2) b. and segment Networks operating margin recovered from last quarter.

 

4

 

>

Cash flow from operating activities recovered to SEK 3.1 (2.1) b., after a weak first quarter.

 

9

 

 

                                                                                                        
   Q2   Q2   YoY   Q1   QoQ   Six months   Six months  
SEK b. 2015   2014   change   2015   change   2015   2014  
Net sales   60.7      54.8      11%      53.5      13%      114.2      102.4   
Gross margin   33.2%      36.4%      -      35.4%      -      34.2%      36.4%   

Operating margin excluding restructuring charges

  10.4%      7.7%      -      5.1%      -      7.9%      6.8%   
Operating income   3.6      4.0      -11%      2.1      67%      5.7      6.6   

Operating income excluding restructuring charges

  6.3      4.2      49%      2.7      129%      9.1      7.0   
Operating margin   5.9%      7.3%      -      4.0%      -      5.0%      6.5%   

Gross margin excluding restructuring charges

  35.1%      36.6%      -      36.3%      -      35.7%      36.6%   
Net income   2.1      2.7      -20%      1.5      46%      3.6      4.4   
EPS diluted, SEK   0.64      0.79      -19%      0.40      60%      1.04      1.44   
Cash flow from operating activities   3.1      2.1      50%      -5.9      -152%      -2.8      11.5   
Net cash, end of period 1)   3.5      32.5      -89%      15.6      -78%      3.5      32.5   
1) Reconciliation of non-IFRS financial measures to the most directly comparable IFRS financial measures can be found on page 28.

 

1       Ericsson  |  Second Quarter Report 2015


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CEO COMMENTS

 

Reported sales increased by 11%. Profitability improved sequentially, driven by a strong development in segment Networks.

Business

The mobile broadband business in North America stabilized in the quarter, but remained at a lower level than a year ago. The YoY decline in North America was partly offset by an increased pace of 4G deployments in Mainland China. Sales growth was strong in the Middle East, India and South East Asia, while it continued to be weak in Japan. Professional Services sales increased YoY with continued strong global demand and growth in all ten regions.

The OSS & BSS business had a favorable development YoY, contributing to sales both in Professional Services and segment Support Solutions.

Segment Networks sales increased by 18% sequentially, supported by the stabilized mobile broadband sales in North America.

Profitability

Operating income, excluding restructuring charges, increased YoY by almost 50%, with improvements in all segments. After a weak first quarter, segment Networks profitability recovered, driven by increased sales and a positive currency hedge effect.

IPR revenues

Reported IPR revenues were slightly down YoY despite a positive currency effect as a majority of the licenses contracts are in USD. The decline was primarily due to the ongoing dispute with a major customer.

Cost and efficiency program

The global cost and efficiency program is progressing according to plan. The target, to achieve savings of approximately SEK 9 b. during 2017 relative to 2014, remains. During the quarter, numerous activities were implemented globally including a reduction of 2,100 positions in Sweden, resulting in higher than normal restructuring charges. Savings related to the activities will start to impact results towards the end of this year.

Cash flow

After a weak first quarter, cash flow from operating activities was positive in the quarter. As cash flow is volatile between quarters it should be viewed on a full-year basis. Our full-year cash conversion target of more than 70% remains.

Targeted growth areas

Our growth strategy builds on a combination of excelling in our core business and establishing leadership in targeted growth areas. We see good progress in the targeted areas and sales continued its strong development from the first quarter. This was mainly driven by a solid sales development in OSS & BSS.

The consolidation in the industry continues, both among vendors and customers, creating opportunities and challenges. Therefore we have, during the first half of 2015, accelerated our transformation journey towards becoming a true ICT company. With our ongoing strategic initiatives we are well positioned to continue to create value for our customers in a transforming market.

Hans Vestberg

President and CEO

 

 

2       Ericsson  |  Second Quarter Report 2015


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FINANCIAL HIGHLIGHTS

 

                                                                                                                      
   Q2   Q2   YoY   Q1   QoQ   6 months   6 months  
SEK b. 2015   2014   change   2015   change   2015   2014  
Net sales   60.7      54.8      11%      53.5      13%      114.2      102.4   

Of which Networks

  31.2      29.0      8%      26.4      18%      57.6      53.3   

Of which Global Services

  26.4      23.1      14%      23.9      10%      50.3      43.4   

Of which Support Solutions

  3.1      2.8      9%      3.1      1%      6.2      5.6   

Of which Modems

  0.0      0.0      -      0.1      -      0.1      0.0   
Gross income   20.1      19.9      1%      19.0      6%      39.1      37.3   
Gross margin (%)   33.2%      36.4%      -      35.4%      -      34.2%      36.4%   
Research and development expenses   -9.9      -9.1      9%      -8.5      17%      -18.4      -17.4   
Selling and administrative expenses   -7.8      -6.5      19%      -7.1      9%      -14.9      -13.0   
Other operating income and expenses   1.1      -0.2      -      -1.2      -      -0.2      -0.2   
Operating income   3.6      4.0      -11%      2.1      67%      5.7      6.6   
Operating margin   5.9%      7.3%      -      4.0%      -      5.0%      6.5%   

for Networks

  8%      12%      -      2%      -      5%      11%   

for Global Services

  6%      6%      -      7%      -      7%      6%   

for Support Solutions

  -8%      -13%      -      3%      -      -3%      -7%   

for Modems

  -      -      -      0%      -      -      -   
Financial net   -0.5      -0.2      168%      -0.1      -      -0.6      -0.4   
Taxes   -0.9      -1.1      -20%      -0.6      46%      -1.5      -1.9   
Net income   2.1      2.7      -20%      1.5      46%      3.6      4.4   

Restructuring charges

  -2.7      -0.2      -      -0.6      -      -3.4      -0.4   

 

Net sales

Reported sales increased by 11% YoY. Significant currency effects impacted sales positively, mainly due to a strengthened USD towards the SEK.

The mobile broadband business in North America stabilized in the second quarter. However, sales in North America are still at a lower level than a year ago. In addition, sales declined in Japan, parts of Latin America and Russia. This was partly offset by a continued fast pace of 4G deployments in Mainland China. Sales growth was also strong in regions Middle East, India and South East Asia. Professional Services sales increased YoY driven by Consulting and Systems Integration and Managed Services.

Sequentially, reported sales increased by 13%. As the second quarter progressed mobile broadband business in North Amer-ica stabilized. The large scale 4G deployments in Mainland China continued at high pace and the activity level in region Middle East also remained high. This was partly offset by lower sales in Japan.

Reported IPR revenues were down both YoY and QoQ. The majority of the licenses contracts are in USD and the stronger USD supported the YoY comparison. The decline YoY was primarily due to the ongoing dispute with a major customer.

Gross margin

Gross margin decreased YoY mainly due to increased restructuring charges. Excluding restructuring charges, gross margin declined to 35.1% (36.6%) due to lower capacity business in North America and continued 4G coverage deployments in Mainland China.

In addition lower IPR revenues and higher share of services sales impacted gross margin negatively.

The gross margin decreased sequentially due to lower IPR revenues and increased share of hardware sales driven by mobile broadband coverage deployments.

Restructuring charges and cost and efficiency program

The global cost and efficiency program is progressing according to plan. The target, to achieve savings of approximately SEK 9 b. during 2017 relative to 2014, remains. During the quarter, numerous activities were implemented globally, including a reduction of 2,100 positions in Sweden, with approximately 1,700 employees leaving the company. Savings related to the activities will start to impact results towards the end of this year. The total restructuring charges increased YoY and QoQ following the implementation of the cost and efficiency program.

Efforts to identify and implement efficiency gains are progressing and total restructuring charges for full-year 2015 are expected to be SEK 4-5 b. The increase, compared with previous estimate of SEK 3-4 b., is a consequence of a somewhat higher implementation pace.

Operating expenses

Restructuring charges impacted operating expenses negatively by SEK 1.6 (0.1) b. Total operating expenses, excluding restructuring charges, were SEK 16.1 (15.5) b. The increase was due to negative currency effects.

 

 

3       Ericsson  |  Second Quarter Report 2015


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Other operating income and expenses

Other operating income and expenses improved YoY following a positive currency hedge contracts effect and a capital gain of SEK 0.3 b. related to a real estate divestment in the US.

The revaluation and realization effects from currency hedge contracts were SEK 0.6 b. This is to be compared with hedge contract effects of SEK -1.4 b. in Q1 2015 and SEK -0.5 b. in Q2 2014.

The positive effect derives mainly from the hedge contract balance in USD. The SEK has strengthened towards the USD between March 31, 2015 (SEK/USD rate 8.64) and June 30, 2015 (SEK/USD rate 8.24).

Operating income

Operating income decreased YoY due to higher restructuring charges of SEK 2.7 (0.2) b. Operating income, excluding restructuring charges, improved to SEK 6.3 (4.2)  b. with an operating margin of 10.4% (7.7%). The improvement was driven by higher sales and positive currency hedge effects, partly offset by a lower gross margin.

Despite higher restructuring charges, operating income increased QoQ driven by higher sales and positive other operating income and expenses.

Financial net

The negative financial net increased YoY and QoQ, mainly related to a lower cash position and negative interest revaluation effects.

Net income and EPS

Net income and EPS diluted decreased YoY following the lower operating income. Net income and EPS increased QoQ.

Employees

The number of employees on June 30, 2015 was 117,183 compared with 118,706 on March 31, 2015. The decrease is mainly related to implementation of the global cost and efficiency program outside Sweden. Effects from headcount reductions in Sweden will start impacting number of employees during the third quarter. The number of Ericsson services professionals on June 30, 2015 was 65,000 (66,000 March 31, 2015).

 

 

 

 

MODEMS

Net Sales

The discontinuation of the modems business is now almost completed. Net sales in the quarter was SEK 0.0 b.

Operating income

Operating income for the modems business was SEK 0.0 b.

 

 

4       Ericsson  |  Second Quarter Report 2015


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REGIONAL SALES

 

  

 

Second quarter 2015

    

 

Change

 
SEK b.             Networks   Global
            Services
  Support    
            Solutions     
              Total                  YoY               QoQ  

North America

  6.7      7.1      0.8          14.6        -4%      19%   

Latin America

  2.3      2.6      0.2          5.1        -6%      11%   

Northern Europe and Central Asia

  1.5      0.9      0.1          2.6        -6%      -6%   

Western and Central Europe

  1.9      3.1      0.1          5.1        12%      8%   

Mediterranean

  2.4      3.3      0.2          5.9        7%      18%   

Middle East

  4.0      2.1      0.3          6.5        44%      44%   

Sub-Saharan Africa

  1.2      1.3      0.2          2.7        41%      23%   

India

  1.8      1.1      0.2          3.0        85%      -14%   

North East Asia

  4.8      2.0      0.2          6.9        8%      15%   

South East Asia and Oceania

  2.5      2.3      0.1          4.9        34%      15%   

Other 1)

  2.0      0.7      0.7          3.4        1%      -10%   

Total

  31.2      26.4      3.1          60.7        11%      13%   

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

 

North America

Mobile broadband sales in the quarter stabilized, driven by data traffic growth, while operators remained focused on cash flow optimization and consolidation. Business related to ICT transformation continued to develop favorably in the quarter.

Latin America

Sales decreased slightly YoY. Business in Professional Services showed a strong development driven by BSS transformation and Systems Integration projects. Currency restrictions and lower capex levels impacted mobile broadband investments in some parts of the region.

Northern Europe and Central Asia

Sales declined YoY, primarily driven by slower mobile broadband investments in Russia. Professional Services showed good momentum and Support Solutions continued to develop favorably, both TV & Media and OSS & BSS.

Western and Central Europe

Sales increased YoY driven by Global Services, as operators seek network quality and operational efficiencies. Mobile broadband deployments and investments in network quality continued.

Mediterranean

Sales growth YoY was mainly driven by Global Services, where Managed Services was the major contributor. Quality and capacity projects related to 3G and 4G contributed positively to Networks sales.

Middle East

Sales growth YoY was driven by continued high investments in mobile broadband. Support Solutions sales showed strong growth, especially in OSS.

Sub-Saharan Africa

Continued growth YoY in most markets, compared to a weak first half 2014, driven by strong data growth as well as positive development of managed services across the region.

India

Sales increased YoY, mainly due to continued mobile broadband investments, driven by growth in mobile data traffic. Global Services sales continued to show a strong development.

North East Asia

Sales growth continued, driven by 4G contracts in Mainland China, partly offset by lower operator investments in Japan.

South East Asia and Oceania

Sales increased YoY, primarily driven by continued mobile broadband projects. Important 4G contracts were signed in Indonesia in the quarter. Professional Services continued to show good momentum.

Other

Reported IPR revenues were slightly down YoY despite a positive currency effect, as a majority of the licenses contracts are in USD. The decline was primarily due to the ongoing dispute with a major customer.

Broadcast services sales continued to show good growth.

 

 

5       Ericsson  |  Second Quarter Report 2015


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SEGMENT RESULTS

NETWORKS

 

 

 

SEK b.

Q2

        2015

 

Q2

        2014

 

YoY

        change

 

Q1

        2015

 

QoQ

        change

    6 months
2015
    6 months
2014
 
Net sales   31.2      29.0      8%      26.4      18%      57.6      53.3   
Operating income   2.4      3.6      -32%      0.6      313%      3.0      6.1   

Operating income excluding restructuring charges

  4.3      3.7      16%      0.8      460%      5.0      6.3   
Operating margin   8%      12%      -      2%      -      5%      11%   

Operating margin excluding restructuring charges

  14%      13%      -      3%      -      9%      12%   

Restructuring charges

  -1.8      -0.1      -      -0.2      -      -2.0      -0.2   

 

Net sales

Reported sales increased by 8% YoY. Sales growth related to mobile broadband deployments in Mainland China, the Middle East and India contributed positively.

Sales increased QoQ following stabilized mobile broadband business in North America. Increased sales in Mainland China and the Middle East also contributed positively in the quarter.

Operating income and margin

The operating income and margin recovered in the quarter. Excluding restructuring charges, operating income improved YoY, positively impacted by higher sales and positive currency effects. This was partly offset by a business mix with continued high share of coverage business in Mainland China and low share of capacity business in North America. Somewhat increased operating expenses and lower IPR revenues also had a negative impact on operating margin.

Reported operating income declined YoY due to restructuring charges of SEK 1.8 (0.1) b. Most of the charges are related to implementation of the global cost and efficiency program in Sweden. The effect from currency hedge contracts was positive at SEK 0.5 (-0.2) b.

Operating income and margin improved sequentially following higher sales, improved business mix with higher share of capacity business from North America and a positive effect from currency hedge contracts. Higher restructuring charges and lower IPR revenues impacted operating income negatively.

 

 

6       Ericsson  |  Second Quarter Report 2015


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GLOBAL SERVICES

 

 

 

   Q2   Q2   YoY   Q1   QoQ   6 months   6 months  
SEK b.         2015   2014   change   2015   change   2015   2014  
Net sales   26.4      23.1      14%      23.9      10%      50.3      43.4   

Of which Professional Services

  20.0      16.6      21%      18.1      10%      38.1      31.7   

Of which Managed Services

  8.2      6.5      26%      7.5      9%      15.7      12.2   

Of which Network Rollout

  6.4      6.5      -2%      5.8      11%      12.2      11.8   
Operating income   1.6      1.5      10%      1.7      -2%      3.3      2.5   

Of which Professional Services

  2.4      2.1      15%      2.1      14%      4.5      4.0   

Of which Network Rollout

  -0.8      -0.6      25%      -0.4      78%      -1.2      -1.5   
Operating margin   6%      6%           7%           7%      6%   

for Professional Services

  12%      13%           12%           12%      13%   

for Network Rollout

  -12%      -9%           -7%           -10%      -12%   

Operating income excluding restructuring charges

  2.3      1.6      49%      2.1      11%      4.4      2.6   

Operating margin excluding restructuring charges

  9%      7%      -      9%      -      9%      6%   

Restructuring charges

  -0.7      -0.1           -0.4           -1.1      -0.1   

 

Net sales

Reported sales increased by 14% YoY. The good momentum in Professional Services continued, with growth in all ten regions.

Operating income and margin

Operating income improved in Global Services YoY. Operating margin, excluding restructuring charges, was 9% (7%), driven by increased sales in Professional Services and reduced losses in Network Rollout.

The effect from currency hedge contracts was SEK 0.1 (-0.2) b.

Operating margin in Professional Services declined slightly YoY due to increased restructuring charges and strong growth in Managed Services.

The work to return the Network Rollout business to profitability continues with good progress and operating margin, excluding restructuring charges, improved YoY to -4% (-9%).

Global Services operating income decreased slightly QoQ due to increased restructuring charges. Professional Services margin was flat QoQ.

 

 

   Q2   Q1   Full year  
SEK b.         2015   2015   2014  
Number of signed Managed Services contracts   30      27      71   
Number of signed significant consulting & systems integration contracts 1)   16      13      56   

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

 

7       Ericsson  |  Second Quarter Report 2015


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SUPPORT SOLUTIONS

 

 

 

   Q2   Q2   YoY   Q1   QoQ   6 months   6 months  
SEK b.       2015   2014   change   2015   change   2015   2014  
Net sales   3.1      2.8      9%      3.1      1%      6.2      5.6   
Operating income   -0.2      -0.4      -37%      0.1      -        -0.2      -0.4   

Operating income excluding restructuring charges

  0.0      -0.3      -87%      0.1      -        0.1      -0.3   
Operating margin   -8%      -13%      -      3%      -        -3%      -7%   

Operating margin excluding restructuring charges

  -2%      -12%      -      3%      -        1%      -6%   

Restructuring charges

  -0.2      0.0      -      0.0      -        -0.2      0.0   

 

Net sales

Reported sales increased by 9% YoY. Sales of OSS & BSS continued to show strong growth while the TV & Media business declined due to lower software licensing sales.

.

Operating income and margin

Operating income and margin improved YoY. Operating margin excluding restructuring charges was -2% (-12%), driven primarily by sales growth in OSS & BSS. This was partly offset by lower IPR revenues.

Operating Income declined QoQ due to increased restructuring charges and lower IPR revenues.

 

 

8       Ericsson  |  Second Quarter Report 2015


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CASH FLOW

 

                                                                 
SEK b. Q2
2015
  Q2
2014
  Q1
2015
 

Net income reconciled to cash

  3.4      5.9      3.1   

Changes in operating net assets

  -0.3      -3.8      -9.0   
Cash flow from operating activities   3.1      2.1      -5.9   
Cash flow from investing activities   7.0      3.7      -2.1   
Cash flow from financing activities   -10.6      -12.2      0.9   

Net change in cash and cash equivalents

  -2.3      -5.0      -5.7   
Cash conversion (%) 1)   90%      35%      -188%   

 

Cash flow from operating activities recovered in the quarter after a weak first quarter. Working capital was benefiting from good collection of receivables and improved net income.

Investing activities in the quarter was impacted by the continued construction of new ICT centers in Sweden and Canada, with a total investment of approximately SEK 7 b., 2014-2018. This was more than offset by decreased short-term investments of SEK 9.7 b. and real estate divestment in the US generated a positive cash flow effect of SEK 0.8 b.

Cash flow from financing activities was negatively impacted by payments of dividends of SEK 11.0 b. in the quarter.

Payments related to restructuring charges already provisioned for, amounted to approximately SEK 0.5 b. in the quarter.

 
                                                                                                             
Working capital KPIs, number of days Jan-Jun
2015
  Jan-Mar
2015
  Jan-Dec
2014
  Jan-Sep
2014
  Jan-Jun
2014
 
Sales outstanding   112      125      105      111      113   
Inventory   74      82      64      69      70   
Payable   57      64      56      57      61   

 

Days sales outstanding decreased as a result of good collection. Inventory days is trending down but is still on a high level due to the high share of coverage business in Mainland China. Payable days decreased after a seasonally strong Q1. Efforts, in order to reduce working capital through a better order-to-cash process, continue.

 

 

1) Reconciliation of non-IFRS financial measures to the most directly comparable IFRS financial measures can be found on page 28.

 

9       Ericsson  |  Second Quarter Report 2015


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FINANCIAL POSITION

 

                                                        
SEK b. Jun 30
2015
  Jun 30
2014
  Mar 31
2015
 
+ Short-term investments   20.8      35.3      30.8   
+ Cash and cash equivalents   33.0      33.1      35.3   

Gross cash

  53.8      68.4      66.1   
– Interest bearing liabilities and post-employment benefits   50.3      35.9      50.5   

Net cash 1)

  3.5      32.5      15.6   
Equity   136.7      138.0      149.1   
Total assets   278.9      265.5      303.0   
Capital turnover (times)   1.3      1.2      1.1   
Equity ratio (%)   49%      52.0%      49.2%   

 

Net cash decreased in the quarter as a result of the dividend payout and capex related to the construction of three global ICT centers in Sweden and Canada. This was partly offset by the positive cash flow from operating activities.

The net cash position, excluding post-employment benefits, was SEK 28.0 b.

The average maturity of long-term borrowings as of June 30, 2015, was 5.3 years, compared to 6.2 years 12 months earlier.

In the quarter a revolving Credit Facility of USD 2.0 b. was renewed. The new facility expires in 2020.

Debt maturity profile, Parent Company

 

 

LOGO

 

 

1) Reconciliation of non-IFRS financial measures to the most directly comparable IFRS financial measures can be found on page 28.

 

10       Ericsson  |  Second Quarter Report 2015


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OTHER INFORMATION

 

Ericsson’s Nomination Committee appointed

On May 25, 2015, Ericsson announced that the Nomination Committee for the Annual General Meeting (AGM) 2016 has been appointed in accordance with the Instruction for the Nomination Committee, resolved by the Annual General Meeting 2012.

The Nomination Committee consists of: Petra Hedengran, Investor AB; Bengt Kjell, AB Industrivärden and Handelsbankens Pensionsstiftelse; Johan Held, AFA Försäkring; Marianne Nilsson, Swedbank Robur Fonder; and Leif Johansson, the Chairman of the Board of Director. Petra Hedengran is the Chairman of the Nomination Committee.

Apple litigations

A past global patent license agreement between Ericsson and Apple expired in January 2015 and Apple declined to take a new license on offered FRAND terms. Ericsson negotiated a renewal agreement with Apple for more than two years. During the negotiations, the companies were not able to reach an agreement on licensing of Ericsson’s patents that enable Apple’s mobile devices to connect with the world and power many of their applications.

On January 12, 2015, Apple initiated litigation with Ericsson by filing a lawsuit in the United States District Court for the Northern District of California, seeking a ruling that Apple does not infringe seven of Ericsson’s patents. Two days later, on January 14, 2015, Ericsson filed a complaint in the United States District Court for the Eastern District of Texas requesting a ruling that its proposed global licensing terms with Apple were fair and reasonable.

On February 26, 2015, after Apple refused Ericsson’s offer to have a court determine fair licensing terms by which both companies would be bound, Ericsson filed two complaints with the International Trade Commission (ITC) and seven complaints in the United States District Court for the Eastern District of Texas against Apple, asserting infringement of 41 additional Ericsson patents. Ericsson subsequently amended its complaints to assert two additional patents in the US. Ericsson seeks exclusion orders in the ITC proceedings and damages and injunctions in the District Court actions.

On May 8, 2015, Ericsson further announced that it has filed patent infringement suits against Apple in Germany, the United Kingdom and the Netherlands, seeking damages and injunctions. Ericsson has asserted both standard-essential patents related to the 2G and 4G/LTE standards and other patents that are critical to features and functionality of Apple devices, such as the design of semiconductor components, user interface software, location services and applications, as well as the iOS operating system.

Hearings and trials in the various cases are scheduled to begin in December 2015 and continue into 2016. Ericsson expects that the first court rulings will be issued by a German court in the first quarter of 2016.

Implementation of cost and efficiency program in Sweden

On June 24, 2015, Ericsson completed the redundancy process in Sweden, announced on March 11, 2015. The reduction of approximately 2,100 positions in Sweden, with some 1,700 employees leaving the company, is part of the global cost and efficiency program.

Adaptix litigations

In 2013, Adaptix Inc. (“Adaptix”), a US company, filed two lawsuits against Ericsson, AT&T, AT&T Mobility and MetroPCS Communications in the US District Court for Eastern District of Texas alleging that certain Ericsson products infringe five US patents purportedly assigned to Adaptix. Adaptix seeks damages and an injunction. The trial is scheduled for August 2015.

On May 20, 2014, Adaptix filed three patent infringement lawsuits against Ericsson, T-Mobile, Verizon and Sprint in the same court regarding three US patents. One of these lawsuits accuses Ericsson’s LTE products and Sprint’s use thereof of infringement, one accuses Ericsson’s LTE products and Verizon’s use thereof of infringement, and one accuses Ericsson’s LTE products and T-Mobile’s use thereof of infringement. In January 2015, Adaptix filed one more lawsuit in the same court alleging that Ericsson’s LTE products, and Sprint and Verizon’s use thereof, infringe another U.S. Patent.

In addition to a complaint filed in 2013 with the Tokyo District Court, Adaptix filed another lawsuit in Japan in September 2014 alleging that Ericsson’s LTE products infringe another Japanese patent. In the lawsuits in Japan, Adaptix is also seeking damages and an injunction.

WiLAN litigations

In 2012, Wi-LAN Inc., a Canadian patent licensing company, filed a complaint against Ericsson in the US District Court for the Southern District of Florida alleging that Ericsson’s LTE products infringe three of Wi-LAN’s US patents.

In June 2013, Ericsson’s motion for summary judgment was granted and in August 2014, the decision was reversed by the United States Court of Appeals for the Federal Circuit.

On May 22, the Florida Court granted a Motion for Summary Judgment in favor of Ericsson. WiLAN may still file a notice to appeal the decision.

DISCLOSURE PURSUANT TO SECTION 219 OF THE IRAN THREAT REDUCTION ANS SYRIA HUMAN RIGHTS ACT OF 2012 (ITRA)

During the second quarter of 2015, Ericsson made sales of telecommunications infrastructure related products and services in Iran to MTNIrancell and to Mobile Communication Company of Iran, which generated gross revenues (reported as net sales) of approximately SEK 744 million. Ericsson does not normally allocate quarterly net profit (reported as net income) on a country-by-country or activity-by-activity basis, other than as set forth in Ericsson’s consolidated financial statements prepared in accordance with IFRS as issued by the IASB. However, Ericsson has estimated that its operating income (income before taxes and financial net) from such sales, after internal cost allocation, during the second quarter of 2015 would be substantially lower than such gross revenues. During the second quarter of 2015 Ericsson and Sherkat e Khadamate Jame Avai e Ertbatat e Novin Khavar Mianeh (“HiWEB”) has had discussions relating to potential future sales by Ericsson of telecommunications infrastructure related products and services to HiWEB.

 

 

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RISK FACTORS

 

Ericsson’s operational and financial risk factors and uncertainties along with our strategies and tactics to mitigate risk exposures or limit unfavorable outcomes are described in our Annual Report 2014. Compared to the risks described in the Annual Report 2014, no material, new or changed risk factors or uncertainties have been identified in the year.

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

>   Potential negative effects on operators’ willingness to invest in network development due to uncertainty in the financial markets and a weak economic business environment, or reduced consumer telecom spending, or increased pressure on us to provide financing, or delayed auctions of spectrums;
>   Uncertainty regarding the financial stability of suppliers, for example due to lack of financing;
>   Effects on gross margins and/or working capital of the business mix in the Networks segment between capacity sales and new coverage build-outs;
>   Effects on gross margins of the business mix in the Global Services segment including proportion of new network build-outs and share of new managed services deals with initial transition costs;
>   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;
>   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;
>   No guarantees that specific restructuring or cost-savings initiatives will be sufficient, successful or executed in time to deliver any improvements in short-term earnings.

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, Erics-son operates globally in accordance with Group policies and directives for business ethics and conduct.

This report has not been reviewed by Telefonaktiebolaget LM Ericsson’s auditors.

Date for next report: October 23, 2015

 

 

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EDITOR’S NOTE

 

For further information, please contact:

Helena Norrman, Senior Vice President, Marketing and Communications

Phone: +46 10 719 34 72

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

Telefonaktiebolaget LM Ericsson

Org. number: 556016-0680

Torshamnsgatan 21

SE-164 83 Stockholm

Phone: +46 10 719 00 00

www.ericsson.com

Investors

Peter Nyquist, Vice President,

Investor Relations

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

E-mail:   peter.nyquist@ericsson.com

Stefan Jelvin, Director,

Investor Relations

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

E-mail:    stefan.jelvin@ericsson.com

Åsa Konnbjer, Director,

Investor Relations

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

E-mail:   asa.konnbjer@ericsson.com

Rikard Tunedal, Director,

Investor Relations

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

E-mail:   rikard.tunedal@ericsson.com

Media

Ola Rembe, Vice President,

Head of External Communications

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

E-mail:   media.relations@ericsson.com

Corporate Communications

Phone:    +46 10 719 69 92

E-mail:   media.relations@ericsson.com

 

 

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SAFE HARBOR STATEMENT

 

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

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

 

 

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FINANCIAL STATEMENTS AND

ADDITIONAL INFORMATION

 

       
    Contents       
        
   
    Financial statements       
    Consolidated income statement      16       
    Statement of comprehensive income      16       
    Consolidated balance sheet      17       
    Consolidated statement of cash flows      18       
    Consolidated statement of changes in equity      19       
    Consolidated income statement – isolated quarters      19       
    Consolidated statement of cash flows – isolated quarters      20       
   
    Additional information       
    Accounting policies      21       
    Net sales by segment by quarter      22       
    Operating income by segment by quarter      23       
    Operating margin by segment by quarter      23       
    Net sales by region by quarter      24       
    Net sales by region by quarter (cont.)      25       
    Top 5 countries in sales      25       
    Net sales by region by segment      26       
    Provisions      27       
    Information on investments      27       
    Reconciliation table, non-IFRS measurements      28       
    Net cash – end of period      28       
    Other information      29       
    Number of employees      29       
    Restructuring charges by function      30       
    Restructuring charges by segment      30       
                  
 

 

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CONSOLIDATED INCOME STATEMENT

 

   Apr–Jun      Jan–Jun  
SEK million 2015   2014   Change      2015   2014   Change  
Net sales             60,671                54,849                    11%                114,191              102,354                    12%   
Cost of sales   –40,536      –34,910      16%        –75,092      –65,094      15%   

Gross income

  20,135      19,939      1%        39,099      37,260      5%   
Gross margin (%)   33.2%      36.4%              34.2%      36.4%         
Research and development expenses   –9,896      –9,084      9%        –18,383      –17,359      6%   
Selling and administrative expenses   –7,765      –6,541      19%        –14,896      –12,993      15%   

Operating expenses

  –17,661      –15,625      13%        –33,279      –30,352      10%   
Other operating income and expenses   1,059      –206              –181      –185         
Shares in earnings of JV and associated companies   27      –109              54      –94         

Operating income

  3,560      3,999      –11%        5,693      6,629      –14%   
Financial income   –238      268              446      669         
Financial expenses   –290      –465              –1,030      –1,077         
Income after financial items   3,032      3,802      –20%        5,109      6,221      –18%   
Taxes   –909      –1,140              –1,532      –1,867         
Net income   2,123      2,662      –20%        3,577      4,354      –18%   
Net income attributable to:                                      

Stockholders of the Parent Company

  2,094      2,579              3,413      4,699         

Non–controlling interests

  29      83              164      –345         
Other information                                      

Average number of shares, basic (million)

  3,247      3,235              3,246      3,234         

Earnings per share, basic (SEK) 1)

  0.64      0.80              1.05      1.45         

Earnings per share, diluted (SEK) 1)

  0.64      0.79              1.04      1.44         

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

STATEMENT OF COMPREHENSIVE INCOME

 

   Apr–Jun      Jan–Jun  
SEK million 2015   2014      2015   2014  

Net income

              2,123                  2,662                    3,577                  4,354   

Other comprehensive income

                         

Items that will not be reclassified to profit or loss

                         
Remeasurements of defined benefits pension plans incl. asset ceiling   –1,562      –574        –4,773      –2,196   
Tax on items that will not be reclassified to profit or loss   610      114        1,304      443   

Items that may be reclassified to profit or loss

                         
Cash flow hedges                          

Gains/losses arising during the period

                     

Reclassification adjustments for gains/losses included in profit or loss

                     
Revaluation of other investments in shares and participations                          

Fair value remeasurement

              181        
Changes in cumulative translation adjustments   –2,626      2,619        1,783      3,020   
Share of other comprehensive income on JV and associated companies   –92      117        –96      128   
Tax on items that may be reclassified to profit or loss                      

Total other comprehensive income, net of tax

  –3,670      2,276        –1,601      1,395   

Total comprehensive income

  –1,547      4,938        1,976      5,749   
Total comprehensive income attributable to:                          

Stockholders of the Parent Company

  –1,515      4,792        1,790      6,032   

Non–controlling interest

  –32      146        186      –283   

 

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CONSOLIDATED BALANCE SHEET

 

SEK million

Jun 30

2015

 

Mar 31

2015

 

Dec 31

2014

 

ASSETS

                 

Non–current assets

                 
Intangible assets                  

Capitalized development expenses

  4,032      3,522      3,570   

Goodwill

  39,872      41,140      38,330   

Intellectual property rights, brands and other intangible assets

  10,739      12,238      12,534   
Property, plant and equipment   15,309      14,947      13,341   
Financial assets                  

Equity in JV and associated companies

  1,627      1,783      2,793   

Other investments in shares and participations

  855      836      591   

Customer finance, non–current

  1,919      2,311      1,932   

Other financial assets, non–current

  5,010      6,505      5,900   
Deferred tax assets   14,054      14,274      12,778   
    93,417      97,556      91,769   

Current assets

                 
Inventories   32,327      33,657      28,175   
Trade receivables   73,932      80,334      77,893   
Customer finance, current   2,552      2,633      2,289   
Other current receivables   22,919      22,700      21,273   
Short–term investments   20,807      30,776      31,171   
Cash and cash equivalents   32,962      35,311      40,988   
    185,499      205,411      201,789   
                            

Total assets

          278,916              302,967              293,558   

EQUITY AND LIABILITIES

                 

Equity

                 
Stockholders’ equity   135,565      147,855      144,306   
Non–controlling interest in equity of subsidiaries   1,160      1,196      1,003   
    136,725      149,051      145,309   

Non–current liabilities

                 
Post–employment benefits   24,530      24,163      20,385   
Provisions, non–current   139      198      202   
Deferred tax liabilities   3,010      3,156      3,177   
Borrowings, non–current   22,551      23,496      21,864   
Other non–current liabilities   1,939      1,815      1,797   
    52,169      52,828      47,425   

Current liabilities

                 
Provisions, current   5,215      3,858      4,225   
Borrowings, current   3,199      2,847      2,281   
Trade payables   22,147      24,266      24,473   
Other current liabilities   59,461      70,117      69,845   
    90,022      101,088      100,824   
                            

Total equity and liabilities

  278,916      302,967      293,558   

Of which interest–bearing liabilities and post–employment benefits

  50,280      50,506      44,530   

Of which net cash 1)

  3,489      15,581      27,629   
Assets pledged as collateral   2,608      2,590      2,525   
Contingent liabilities   693      721      737   
1)  Reconciliation of non-IFRS financial measures to the most directly comparable IFRS financial measures can be found on page 28.

 

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CONSOLIDATED STATEMENT

OF CASH FLOWS

 

   Apr–Jun      Jan–Jun      Jan–Dec  
SEK million 2015   2014      2015   2014      2014  

Operating activities

                                 
Net income               2,123                  2,662                    3,577                  4,354                  11,143   
Adjustments to reconcile net income to cash                                  

Taxes

  –1,360      26        –3,281      –1,322        –1,235   

Earnings/dividends in JV and associated companies

  49      356        27      340        305   

Depreciation, amortization and impairment losses

  2,579      2,414        5,260      4,774        9,945   

Other

  22      404        966      953        2,185   
    3,413      5,862        6,549      9,099        22,343   

Changes in operating net assets

                                 
Inventories   383      –1,188        –3,636      –3,287        –2,924   
Customer finance, current and non–current   405      –341        147      217        –710   
Trade receivables   3,630      –892        5,667      7,065        1,182   
Trade payables   –1,400      1,644        –3,068      1,534        1,265   
Provisions and post–employment benefits   1,685      –225        1,519      –689        –859   
Other operating assets and liabilities, net   –5,038      –2,806        –10,000      –2,483        –1,595   
    –335      –3,808        –9,371      2,357        –3,641   

Cash flow from operating activities

  3,078      2,054        –2,822      11,456        18,702   

Investing activities

                                 
Investments in property, plant and equipment   –2,424      –1,320        –4,791      –2,354        –5,322   
Sales of property, plant and equipment   1,075      53        1,150      327        522   
Acquisitions/divestments of subsidiaries and other operations, net   –169      –1,512        –227      –2,361        –4,394   
Product development   –843      –185        –1,137      –382        –1,523   
Other investing activities   –280      –388        –162      –557        –3,392   
Short–term investments   9,678      7,012        10,077      222        6,596   

Cash flow from investing activities

  7,037      3,660        4,910      –5,105        –7,513   

Cash flow before financing activities

  10,115      5,714        2,088      6,351        11,189   

Financing activities

                                 
Dividends paid   –11,035      –9,828        –11,060      –9,828        –9,846   
Other financing activities   431      –2,393        1,330      –7,462        –8,379   

Cash flow from financing activities

  –10,604      –12,221        –9,730      –17,290        –18,225   
Effect of exchange rate changes on cash   –1,860      1,499        –384      1,932        5,929   
                                                        

Net change in cash and cash equivalents

  –2,349      –5,008        –8,026      –9,007        –1,107   
                                                        

Cash and cash equivalents, beginning of period

  35,311      38,096        40,988      42,095        42,095   
                                                        

Cash and cash equivalents, end of period

  32,962      33,088        32,962      33,088        40,988   

 

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CONSOLIDATED STATEMENT

OF CHANGES IN EQUITY

 

SEK million

Jan–Jun

2015

 

Jan–Jun

2014

 

Jan–Dec

2014

 

Opening balance

  145,309      141,623      141,623   
Total comprehensive income   1,976      5,749      12,709   
Sale/repurchase of own shares   88      54      106   
Stock purchase plan   414      360      717   
Dividends paid   –11,060      –9,828      –9,846   
Transactions with non–controlling interests   –2             

Closing balance

          136,725              137,958              145,309   

CONSOLIDATED INCOME STATEMENT

– ISOLATED QUARTERS

 

   2015      2014  
Isolated quarters, SEK million Q2   Q1      Q4   Q3   Q2   Q1  
Net sales   60,671      53,520        67,986      57,643      54,849      47,505   
Cost of sales   –40,536      –34,556        –43,100      –37,362      –34,910      –30,184   

Gross income

  20,135      18,964        24,886      20,281      19,939      17,321   
Gross margin (%)   33.2%      35.4%        36.6%      35.2%      36.4%      36.5%   
Research and development expenses   –9,896      –8,487        –9,668      –9,281      –9,084      –8,275   
Selling and administrative expenses   –7,765      –7,131        –8,107      –6,000      –6,541      –6,452   

Operating expenses

          –17,661              –15,618                –17,775              –15,281              –15,625              –14,727   
Other operating income and expenses   1,059      –1,240        –837      –1,134      –206      21   
Shares in earnings of JV and associated companies   27      27        28      10      –109      15   

Operating income

  3,560      2,133        6,302      3,876      3,999      2,630   
Financial income   –238      684        179      429      268      401   
Financial expenses   –290      –740        –639      –557      –465      –612   

Income after financial items

  3,032      2,077        5,842      3,748      3,802      2,419   
Taxes   –909      –623        –1,677      –1,124      –1,140      –727   

Net income

  2,123      1,454        4,165      2,624      2,662      1,692   
Net income attributable to:                                      

Stockholders of the Parent Company

  2,094      1,319        4,223      2,646      2,579      2,120   

Non–controlling interests

  29      135        –58      –22      83      –428   
Other information                                      

Average number of shares, basic (million)

  3,247      3,244        3,241      3,238      3,235      3,233   

Earnings per share, basic (SEK) 1)

  0.64      0.41        1.30      0.82      0.80      0.66   

Earnings per share, diluted (SEK) 1)

  0.64      0.40        1.29      0.81      0.79      0.65   

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

 

19       Ericsson  |  Second Quarter Report 2015


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CONSOLIDATED STATEMENT

OF CASH FLOWS – ISOLATED QUARTERS

 

   2015      2014  
Isolated quarters, SEK million Q2   Q1      Q4   Q3   Q2   Q1  

Operating activities

                                     
Net income   2,123      1,454        4,165      2,624      2,662      1,692   
Adjustments to reconcile net income to cash                                      

Taxes

  –1,360      –1,921        475      –388      26      –1,348   

Earnings/dividends in JV and associated companies

  49      –22        –25      –10      356      –16   

Depreciation, amortization and impairment losses

  2,579      2,681        2,690      2,481      2,414      2,360   

Other

  22      944        965      267      404      549   
    3,413      3,136        8,270      4,974      5,862      3,237   

Changes in operating net assets

                                     
Inventories   383      –4,019        1,203      –840      –1,188      –2,099   
Customer finance, current and non–current   405      –258        174      –1,101      –341      558   
Trade receivables   3,630      2,037        –4,661      –1,222      –892      7,957   
Trade payables   –1,400      –1,668        1,250      –1,519      1,644      –110   
Provisions and post–employment benefits   1,685      –166        –152      –18      –225      –464   
Other operating assets and liabilities, net   –5,038      –4,962        2,512      –1,624      –2,806      323   
    –335      –9,036        326      –6,324      –3,808      6,165   

Cash flow from operating activities

  3,078      –5,900        8,596      –1,350      2,054      9,402   

Investing activities

                                     
Investments in property, plant and equipment   –2,424      –2,367        –1,553      –1,415      –1,320      –1,034   
Sales of property, plant and equipment   1,075      75        56      139      53      274   
Acquisitions/divestments of subsidiaries and other operations, net   –169      –58        –1,747      –286      –1,512      –849   
Product development   –843      –294        –986      –155      –185      –197   
Other investing activities   –280      118        –1,533      –1,302      –388      –169   
Short–term investments   9,678      399        4,066      2,308      7,012      –6,790   

Cash flow from investing activities

  7,037      –2,127        –1,697      –711      3,660      –8,765   

Cash flow before financing activities

  10,115      –8,027        6,899      –2,061      5,714      637   

Financing activities

                                     
Dividends paid   –11,035      –25        –15      –3      –9,828        
Other financing activities   431      899        371      –1,288      –2,393      –5,069   

Cash flow from financing activities

          –10,604      874        356      –1,291              –12,221      –5,069   
Effect of exchange rate changes on cash   –1,860      1,476        1,691      2,306      1,499      433   
                                                            

Net change in cash and cash equivalents

  –2,349      –5,677        8,946      –1,046      –5,008      –3,999   
                                                            

Cash and cash equivalents, beginning of period

  35,311      40,988        32,042      33,088      38,096              42,095   
                                                            

Cash and cash equivalents, end of period

  32,962              35,311                40,988              32,042      33,088      38,096   

 

20       Ericsson  |  Second Quarter Report 2015


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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, 2014, and should be read in conjunction with that annual report.

There is no significant difference between IFRS effective as per June 30, 2015 and IFRS as endorsed by the EU.

 

 

21       Ericsson  |  Second Quarter Report 2015


Table of Contents

NET SALES BY SEGMENT BY QUARTER

 

   2015      2014  
Isolated quarters, SEK million Q2   Q1      Q4   Q3   Q2   Q1  
Networks   31,163      26,436        34,110      30,030      28,964      24,383   
Global Services   26,392      23,901        29,777      24,467      23,059      20,356   

Of which Professional Services

  20,001      18,131        21,405      17,794      16,554      15,078   

  Of which Managed Services

  8,150      7,501        7,741      7,175      6,485      5,754   

Of which Network Rollout

  6,391      5,770        8,372      6,673      6,505      5,278   
Support Solutions   3,092      3,074        4,009      3,057      2,824      2,765   
Modems   24      109        90      89      2      1   

Total

  60,671      53,520        67,986      57,643      54,849      47,505   
   2015      2014  
Sequential change, percent Q2   Q1      Q4   Q3   Q2   Q1  
Networks   18%      –22%        14%      4%      19%      –30%   
Global Services   10%      –20%        22%      6%      13%      –25%   

Of which Professional Services

  10%      –15%        20%      7%      10%      –20%   

  Of which Managed Services

  9%      –3%        8%      11%      13%      –12%   

Of which Network Rollout

  11%      –31%        25%      3%      23%      –37%   
Support Solutions   1%      –23%        31%      8%      2%      –46%   
Modems                                

Total

  13%      –21%        18%      5%      15%      –29%   
   2015      2014  
Year over year change, percent Q2   Q1      Q4   Q3   Q2   Q1  
Networks   8%      8%        –2%      13%      3%      –13%   
Global Services   14%      17%        10%      2%      –7%      –5%   

Of which Professional Services

  21%      20%        14%      10%      –1%      3%   

  Of which Managed Services

  26%      30%        18%      15%      –4%      –2%   

Of which Network Rollout

  –2%      9%        0%      –14%      –19%      –23%   
Support Solutions   9%      11%        –21%      30%      21%      13%   
Modems                                

Total

  11%      13%        1%      9%      –1%      –9%   
                                                            
   2015      2014  
Year to date, SEK million Jan–Jun   Jan–Mar      Jan–Dec   Jan–Sep   Jan–Jun   Jan–Mar  
Networks   57,599      26,436        117,487      83,377      53,347      24,383   
Global Services   50,293      23,901        97,659      67,882      43,415      20,356   

Of which Professional Services

  38,132      18,131        70,831      49,426      31,632      15,078   

  Of which Managed Services

  15,651      7,501        27,155      19,414      12,239      5,754   

Of which Network Rollout

  12,161      5,770        26,828      18,456      11,783      5,278   
Support Solutions   6,166      3,074        12,655      8,646      5,589      2,765   
Modems   133      109        182      92      3      1   

Total

          114,191              53,520                227,983              159,997              102,354              47,505   
   2015      2014  
Year to date, year over year change, percent Jan–Jun   Jan–Mar      Jan–Dec   Jan–Sep   Jan–Jun   Jan–Mar  
Networks   8%      8%        0%      1%      –5%      –13%   
Global Services   16%      17%        0%      –3%      –6%      –5%   

Of which Professional Services

  21%      20%        7%      4%      1%      3%   

  Of which Managed Services

  28%      30%        7%      3%      –3%      –2%   

Of which Network Rollout

  3%      9%        –14%      –19%      –21%      –23%   
Support Solutions   10%      11%        3%      21%      17%      13%   
Modems                                

Total

  12%      13%        0%      0%      –5%      –9%   

 

22       Ericsson  |  Second Quarter Report 2015


Table of Contents

OPERATING INCOME

BY SEGMENT BY QUARTER

 

   2015      2014  
Isolated quarters, SEK million Q2   Q1      Q4   Q3   Q2   Q1  
Networks   2,435      590        4,319      3,175      3,574      2,476   
Global Services   1,640      1,681        1,937      1,607      1,487      1,036   

Of which Professional Services

  2,403      2,109        2,472      2,059      2,095      1,893   

Of which Network Rollout

  –763      –428        –535      –452      –608      –857   
Support Solutions   –240      82        443      –108      –378      12   
Modems   7      0        –85      –739      –456      –745