Ericsson Fourth Quarter Report 2010 · Sony Ericsson earnings, less restructuring 2010: Net income SEK 11.2 (4.1) b, EPS diluted SEK 3.46 (1.14) Sony Ericsson earnings, less restructuring

25 january 2011

FOURTH QUARTER 2010

HENRY STÉNSONSENIOR VICE PRESIDENT COMMUNICATIONS

THIS PRESENTATION CONTAINS FORWARD-LOOKING STATEMENTS. SUCH STATEMENTS ARE BASED ON OUR CURRENT EXPECTATIONS AND ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES THAT COULD NEGATIVELY AFFECT OUR BUSINESS. PLEASE READ OUR EARNINGS REPORTS AND OUR MOST RECENT ANNUAL REPORT FOR A BETTER UNDERSTANDING OF THESE RISKS AND UNCERTAINTIES.

FOURTH QUARTER 2010

HANS VESTBERGPRESIDENT AND CEO

© Telefonaktiebolaget LM Ericsson 2010 | FOURTH QUARTER REPORT 2010 | January 25, 2011

Q4 in Summary

Net income SEK 4.4 (0.7) b - Improved Sony Ericsson earnings, less restructuring

Adjusted cash flow SEK 16.2 (13.6) b - Good collections- Cash conversion of 112%

Sales SEK 62.8 (58.3) b- Driven by demand for mobile broadband


NET SALES

› Sales +8% YoY– Increased demand for mobile

broadband– 2G expansions in China

SEK b

Comparable units and adj for net FX/hedge2009/2010 -7%Q409/Q410 +7%

Net sales2010Y/YQ410Y/YQ/Q

SEK 203.3 b-2%

SEK 62.8 b+8%

+32%

› Organic growth FX adjusted +7% YoY› Multimedia sales recovered


profitability

SEK b SEK

Net income

EPS, diluted

› Improved gross margin› Improved Sony Ericsson earnings› Less restructuring

Net income2010Y/YQ410Y/YQ/Q

SEK 11.2 b+172%

SEK 4.4504%

23%

REGIONAL COMMENTS


Q4 Regional sales split

SEK62.8 b

North America22%

10% Latin America

8% Northern Europe and Central Asia

India 5%

Sub-Saharan Africa 3%

7%Middle East

11%Mediterranean

9%Western and

Central Europe

China andNorth East Asia

15%

Other3%

South East Asia and Oceania

6%


Latin America

• Mobile broadband uptake

• Managed services

Regional sales

North America

• 4G/LTE commercially launched

• Sprint contract

Northern Europe & Central Asia

• Russia strong• 2 4G contracts signed

Western and Central Europe

• LTE and network modernization

• 4G for Vodafone Germany

China and North East Asia

• Mobile broadband demand in Japan

• 2G capacityexpansions in China

South East Asia and Oceania

• Mobile data services• New managed services agreements

Mediterranean

• Network modernization• Italy strong, Spain weak

Middle East

• 2G and mobile broadband

• 4G trials

Sub-Saharan Africa

• Increased 3G sales• Operator consolidation

India

• 3G rollouts started• Managed services

2010Y/YQ410Y/YQ/Q

SEK 49.5 b+107%

SEK 14.1 b+49%9%+

2010Y/YQ410Y/YQ/Q

SEK 17.9 b-11%

SEK 6.1 b+3%

+65%

2010Y/YQ410Y/YQ/Q

SEK 12.2 b+2%

SEK 4.8 b+38%

+104%

2010Y/YQ410Y/YQ/Q

SEK 19.9 b-12%

SEK 5.9 b-4%

+38%

2010Y/YQ410Y/YQ/Q

SEK 22.6 b-10%

SEK 6.9 b-2%

+38%

2010Y/YQ410Y/YQ/Q

SEK 15.1 b-17%

SEK 4.6 b-8%

+70%

2010Y/YQ410Y/YQ/Q

SEK 9.2 b-40%

SEK 2.0 b-47%+13%

2010Y/YQ410Y/YQ/Q

SEK 8.6 b-43%

SEK 2.8 b-17%+34%

2010Y/YQ410Y/YQ/Q

SEK 26.0 b0%

SEK 9.5 b+28%+36%

2010Y/YQ410Y/YQ/Q

SEK 14.9 b-29%

SEK 3.9 b-24%+3%


North america

› Data traffic continues to grow– CDMA/HSPA/LTE

› 4G/LTE commercially launched› In 2010 Ericsson became the

leading vendor in North America– Supplier to all major operators– Key partner to Sprint in their

network evolution strategy

SalesSEK b

MULTIMEDIA GLOBAL SERVICES NETWORKS

SalesFull year: SEK 49.5 b, 107% Y/YQ410: SEK 14.1 bY/Y: +49%Q/Q: +9%



INDIA

› Strong 3G footprint– 3G rollouts started– Impact on Group gross margin

› Security clearance – Impacted sales first half 2010– Interim security clearance with all

operators for all technologies

SalesSEK b

SalesFull year: SEK 8.6 b, -43% Y/YQ410: SEK 2.8 bY/Y: -17%Q/Q: +34%



CHINA AND NORTH EAST ASIA

› Strong mobile broadband demand in Japan

› Strong 2G sales in China› Added sales from LG-Ericsson

SalesSEK b

SalesFull year: SEK 26.0 b, 0% Y/YQ410: SEK 9.5 bY/Y: +28%Q/Q: +36%

SEGMENTS


networks

EBITA marginQ410 18%Q409 19%Q310 21%

› +14% YoY sales growth driven by increased demand mobile broadband› Organic growth and positive impact from acquired Nortel businesses › Continued slow voice sales› Strong 2G sales in China

› Component supply normalized› Still not fully meeting increased demand on certain mobile broadband products

› Margins› Positive volume effects offset by shift towards more projects› Initial 3G rollouts in India and network modernization projects

Networks EBITA

Networks sales

SEK b

All numbers excl. restructuring charges

Sales2010Y/YQ410Y/YQ/Q

SEK 112.7 b-1%

SEK 36.4 b+14%+40%


global services

› Professional Services sales +5% YoY in local currencies› Managed Services +5% YoY – tough comparison› 2010: 54 new managed services contracts of which 26 extensions or

expansions

› Network rollout sales -8% YoY› Delayed project implementations due to earlier component shortage

› Margin› Good margin performance in 2010

All numbers excl. restructuring charges

Global ServicesEBITA marginQ410 +13%Q409 +10%Q310 +12%

Network Rollout

Managed Services

Professional Services excl. Managed Services

Global Services EBITA

Professional Services EBITA

SEK b


SEK 80.1 b+1%

SEK 22.9 b-1%

+20%


multimedia

› Recovery in the quarter › Increased revenue management sales

› TV business developing favorably› Strong margin improvement

SEK b

EBITA margin

Q410 16%

Q409 17%Q310 0%

Multimedia EBITA

Multimedia sales

All numbers excl. restructuring charges and adjusted for divestment of mobile platforms and PBX business in 2008Fourth quarter 2008 excl. capital gain of SEK 0.8 b. for divestment of Symbian shares


SEK 10.5 b-21%

SEK 3.5 b+3%

+50%


Ericsson share in JV earningsQ4: SEK -0.3 (-0.4) b

Sony Ericsson SEK 0.2 (-0.2) bST-Ericsson SEK -0.4 (-0.2) b

2010: SEK -0.7 (-6.1) b Sony Ericsson SEK 0.9 (-4.8) bST-Ericsson SEK -1.5 (-1.3) b

Q4 joint ventures

ST-EricssonIncreased loss due to seasonality and FX Cost savings completed, company on right track

SalesMUSD

SalesMEUR

Sony EricssonFourth consecutive quarter of profitSuccessful shift to Android

SEK b

Excl. Restructuring charges

JAN FRYKHAMMARCFO AND EXECUTIVE VICE PRESIDENT


Profitability

Operating expenses

Negative impact from integration of Nortel businesses and LG-Ericsson, higher R&D expenses, including amortizations of acquired intangible assets.

SG&A decreased in relation to sales both in the quarter and in 2010

2011 R&D expenses estimated to SEK 31-33 b, including restructuring and depreciations of acquired intangible assets.

* All numbers, excl. EPS and Net income excl restructuring

R&D SG&A

SEK b

Gross margin Q4: 37% (35%)Positive: cost reductions, lower proportion servicesNegative: sequential decrease due to higher proportion of hardware sales related to increased rollout projects, including initial 3G rollouts in India and network modernization projects

Gross margin 2010: 38% (36%)Positive: higher proportion upgrades and expansions, cost reductions

Q4: SEK 15.2 (14.0) b2010: SEK 55.2 (52.9) b


Profitability

* All numbers, excl. EPS and Net income excl restructuring

SEKSEK b

Net income EPS

SEK b

EBITA margin excl JVs, excl restr

Operating margin excl JVs, excl restr

Operating income

Q4: Net income SEK 4.4 (0.7) b, EPS diluted SEK 1.34 (0.10)Sony Ericsson earnings, less restructuring

2010: Net income SEK 11.2 (4.1) b, EPS diluted SEK 3.46 (1.14)Sony Ericsson earnings, less restructuringBoard of Directors proposes dividend of SEK 2.25 (2.00)

Q4: Operating margin excl JVs 13% (13%)

2010: Operating margin excl JVs 12% (12%)Positive: gross margin development, decreased SG&A relative to salesNegative: Increased investments in LTE and added R&D expenses, added Nortel and LG-Ericsson businesses


Restructuring charges

› Restructuring charges– Q4 charges of SEK 1.7 b, SEK 6.8 b full year

– Cash outlays Q4 SEK 1.0 b, SEK 3.3 b full year

– SEK 3.2 b remain to be paid

› Efficiency high on agenda– Activities primarily in service delivery, product development and

administration

› Restructuring charges of approx SEK 2 b estimated in 2011– From 2011 and onwards the company will comment on results

including restructuring charges

Please note that not all restructuring charges lead to cash out


Balance sheet ratios

Days

DSO Inventory days Payables days

› DSO target achieved due to good collections› Inventory days decreased due to higher business activity› Capital efficiency remains top of agenda

DSO target <90 daysInventory daystarget <65 daysPayable days target >60 days


Change in Gross Cash Q4 2010

SEK b

Change in gross cash SEK 11.0 b

87.2

76.2Adjusted cash flow SEK 16.2

Operating cash flow 15.2 b

Investing(excl short term investments) -2.8 b

Financing-1.7 b

FX on cash0.2 b

Change in net cash +15.6 b (from 35.7 to 51.3)


Change in Gross Cash FY 2010

SEK b

Change in gross cash SEK 10.4 b

87.2

76.7Adjusted cash flow SEK 29.8

Operating cash flow 26.6 b

Investing(excl short term investments) -10.2 b

Financing (incl dividend) -5.7 b

FX on cash-0.3 b

Change in net cash +15.2 b (from 36.1 to 51.3)


2010 summary

Growth in 2H2010- Economic uncertainty impacted investments during 1H2010- Portfolio momentum on mobile broadband and services- Component shortage during parts of the year- Long-term footprint gains from 3G and modernization

Improved efficiency- Improved cash flow and margins, cost reduction program completed- Joint ventures – Sony Ericsson turnaround, ST-Ericsson in transition- Successful introduction of multi-standard radio base station (RBS 6000)

Transforming for the new decade- Strategic acquisitions adding market presence and capabilities- New go-to-market and 10 new regions- Continued focus on cost efficiency


Market trends 2011

MORE CONNECTED DEVICES & AFFORDABLE SMARTPHONES

GOING MOBILE: VIDEO, CLOUD SERVICES, INTERNET & M2M

TIERED PRICING & NEW BUSINESS MODELS FOR MOBILE BROADBAND

MODERNIZATION OF NETWORKS, OSS/BSS & OPERATIONS

FOCUS ON HIGH PERFORMANCE BROADBAND NETWORKS


FOCUS AREAS

GROW FASTER THAN THE MARKET

BEST IN CLASS MARGINS

STRONG CASH CONVERSION

GROWTH IN JV EARNINGS

25 january 2011

FOURTH QUARTER 2010


Mobile world congress 2011

› Monday February 14 - Press Conference– Analysts welcome– Hall 6, 8:30-9:30 am (breakfast from 8 am)– Speaker: Hans Vestberg– RSVP: [email protected]

› Tuesday February 15 – Keynote (GSMA program) - ”The power of applications”

– Hall 5, 11:15 am -1:15 pm

› GSMA’s media registration already available at – www.mobileworldcongress.com

Documents

Ericsson Fourth Quarter Report 2010 · Sony Ericsson earnings, less restructuring 2010: Net income SEK 11.2 (4.1) b, EPS diluted SEK 3.46 (1.14) Sony Ericsson earnings, less restructuring