FOURTH QUARTER REPORT 2007 - Ericsson › ... › 2007 › 12month07-ceo-slides.pdfRegional 2007 comments Asia Pacific FY: +14% 0 2 000 4 000 6 000 8 000 10 000 12 000 14 000 16 000

FOURTH QUARTER REPORT2007

FOURTH QUARTER REPORT2007HENRY STÉNSON

Senior Vice President Communications

FOURTH QUARTER REPORT2007This 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 REPORT2007CARL-HENRIC SVANBERG

President and CEO

2008-02-015© Copyright Telefon AB LM Ericsson 2008. All rights reserved FOURTH QUARTER REPORT 2007

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2003 2004 2005 2006 2007

SEK b

Ericsson in 2007

Sales of SEK 187.8 (179.8) b– 8% organic growth in constant currencies

Significant market share gains– Disappointing margin decline - shift in business mix

Operating income SEK 30.6 (35.8) bCash flow of SEK 19.2 (18.5) b

Sales 2003-2007

CAGR 12%


The networks market in 2007

Mobile infrastructure market tougher Started at mid single digit growth but ended flattishOperator consolidation, political unrest in some emerging marketsChange in competitive landscape continues

Fundamentals have not changed3.3 b subscriptions, up 50 m/month180 m WCDMA subscriptions, up 6.5 m/month - dramatic data growth320 m fixed broadband connections by Q3, up 4.5 m/month


Q4 in shortContinued effects from business mix and technology shift

Sales SEK 54.5 (54.2) bOperating income SEK 7.6 (12.2) b – operating margin 14% (23%)Cash flow SEK 12.0 (11.0) b Slower networks market in parts of Europe and some emerging markets


Long-term business ambitions

Best in class margins

Growth

Profitability

Cash flow Cash conversion> 70%

Grow faster than market


Our planning assumptions for 2008

Planning for flattish mobile infrastructure marketContinued good growth for the professional services market

Industry fundamentals and consumer behavior support more positive longer-term outlook

This slide contains forward looking statements


Cost reductions of SEK 4 b Accelerated operational excellence in all areas

Savings of SEK 4 b to safeguard our competitive positionAll areas affected

– SG&A, sourcing, supply, service delivery main focus areas

Reduction of some 1,000 employees in Sweden – Through voluntary programs as far as possible

Full effects in 2009SEK ~4 b in charges

– Recognized as each activity is decided

FOURTH QUARTER REPORT2007HANS VESTBERG

Executive Vice President and CFO


Q4 financial highlights

Full year organic sales growth in constant currencies 8%Margins affected by business mix and slower sales in certain marketsQ4 opex SEK 15.2 b. – seasonality and newly acquired companies

41.7%39.3%42.2%35.6%36.1%Gross margin

16.7%12.5%18.3%9.0%9.8%Operating margin ex Sony Ericsson

19.9%16.3%22.5%12.9%14.0%Operating margin

35.830.612.25.67.6Operating income

-4%--0%Sales growth (YoY)

179.8187.854.243.554.5Net sales

20062007Q4Q3Q4SEK b.

Full year20062007


Q4 financial highlights

Strong cash flow in Q4– Improved working capital– SEK 1.6 b in payment from 3 UK

Cash conversion for full year of 66% (57%)– Still room for improvement

*Attributable to stockholders of the parent company, excluding minority interest.

18.519.211.0-1.612.0Cash flow from operating activities

1.651.370.610.250.35EPS, SEK *

26.321.89.74.05.6Net income*

36.030.712.25.67.6Income after financial items

20062007Q4Q3Q4SEK b.

Full year20062007


Networks

17%13%21%8%10%Operating margin

22%19%26%13%15%EBITDA margin

-1%---4%Sales growth (YoY)127.7129.039.028.537.5Net sales

20062007Q4Q3Q4SEK b.

Full year20062007

Significantly increased market share in increasingly challenging marketSales affected by weakening USDMarket and product mix continues to affect sales and marginsLTE gaining momentum - Verizon, Vodafone, DoCoMo, etc


Professional Services

Professional services up 19% in constant currenciesManaged services and systems integration show fastest growth

– 185 million subscribers in managed networks– Acquisition of HyC – IPTV systems integration company

3 UK contract renegotiated due to network sharing– Scope decreased, will affect sales but not margins

14%15%15%15%15%Operating margin16%16%16%17%16%EBITDA margin

-16%--15%Sales growth (YoY)9.512.22.53.43.3

Of which managed Services

36.842.910.611.012.1Net sales

20062007Q4Q3Q4SEK b.Full year20062007


Multimedia

Mix of existing sound businesses and new investment areas– Sales and margins vary over quarters

Building positions IPTV and IMSAcquisitions developing well

– LHS, Mobeon, Drutt and TandbergWeak quarter but full year more representative

5%-1%12%1%-9%Operating margin

6%4%13%6%-3%EBITDA margin

-14%--7%Sales growth (YoY)13.915.94.54.04.9Net sales

20062007Q4Q3Q4SEK b.Full year20062007


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Regional 2007 comments

Asia PacificFY: +14%

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Central Europe, Middle Eastand AfricaFY: +5%

Western EuropeFY: -1%

North AmericaFY: -15%Latin

AmericaFY: +12%

CAGR -5%

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CAGR 8%

CAGR 24%

CAGR 10%

CAGR 13%

Year over year growth


Regional Q4 comments

Effects from operator consolidation, UK, ItalyFocus shifted to 3G

Good services momentum

Network buildouts and expansionsMiddle East slower 3G taking off in Central Europe

China ended strong Pakistan, Bangladesh and Thailand affected by unrestAustralia down after major rollouts 2006

Continued 2G expansions Accelerated 3G buildouts

Verizon going for LTEStrong ending after slower year

Asia PacificQ: -2%FY: +14%

Central Europe, Middle Eastand AfricaQ:-1%FY: +5%

Western EuropeQ: -10%FY: -1%

North AmericaQ: +9%FY: -15%Latin

AmericaQ: +41%FY: +12%


Sony Ericsson 2007 highlights

103 million units, up 38% year-on-year – market share of >9%Margins remain strong when company shift to broader portfolioLeadership position in music - 145 million music enabled phones


Summary

Good year but disappointing second half– Significantly strengthened market share– Network margins affected by mix shift

Planning for flattish mobile networks market 2008– Actions to safeguard competitive position– Competitive landscape continues to evolve

Fundamentals support more positive longer-term outlook

Proposed unchanged dividend of SEK 0.50 per share


FOURTH QUARTER REPORT2007Q & A


Documents

FOURTH QUARTER REPORT 2007 - Ericsson › ... › 2007 › 12month07-ceo-slides.pdfRegional 2007 comments Asia Pacific FY: +14% 0 2 000 4 000 6 000 8 000 10 000 12 000 14 000 16 000