first quarter report 2008 - ericsson · sek b. q1 q1 change q4 change 2008 2007 2007 1) 1) 1)...

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2008-04-251© Copyright Telefon AB LM Ericsson 2008. All rights reserved FIRST QUARTER REPORT 2008

FIRST QUARTER REPORT2008


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HENRY STÉNSONSenior Vice President Communications



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This presentation contains forward looking statements.Such statements are based on our current expectations and are subject tocertain risks and uncertainties that could negatively affect our business.Please read our earnings reports and our most recent annual report for abetter understanding of these risks and uncertainties.



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CARL-HENRIC SVANBERGPresident and CEO



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Q1 in summary

Mobile broadband and HSPA in focus– World’s leading operators support LTE

New network builds increases in high-growth markets– Africa and BRIC countries

Continued USD decline affects sales and earnings– Organic growth 9% in constant currencies

Unchanged planning assumptions– Cost adjustment program on plan


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Continued strong subscriber growth– Up 160 m in Q1 to 3.5 b – China 9 m, India 7 m in March– WCDMA has passed 200 m

Mobile technologies will co-exist– GSM > 80% market share - HSPA to dominate for years to come– LTE the first true global standard– Adds business – drives R&D – migration in focus

Market and business updateNetworks


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100 m videos, 250 m images, billions of SMS’s per day– Dramatic data traffic increases, transmission bottle necks

We provide enablers– World leader in revenue management, 670 m subscribers– Strong growth in service delivery platforms and provisioning– Investing in IPTV - 40% market share in IPTV head end

Market and business updateMultimedia


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Market and business updateServices

Managed services a growing business opportunity– ”Growth” driven in emerging markets– ”Cost” driven in mature markets

Accelerating demand for systems integration– Network complexity– Multimedia services


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Q1 numbers in short

Sales SEK 44.2 (42.2) b, up 5%– Organic sales growth in constant currencies 9%

Operating income SEK 4.3 (8.2) b– Operating margin 9.7% (19.3%)– EBITDA of 14.7% (23.8%)

Cash flow SEK 4.7 (4.6) b– Good progress in cash flow related activities– Cash contribution from Sony Ericsson of SEK 2.2 (3.5) b


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North America, +39% Increasing WCDMA upgrades Higher level IPR sales Spectrum winners to start rollouts

Western Europe, -7% Continued operator consolidation UK slower, Spain tough comparison Service driven growth in Germany

Latin America, +25% Continued 2G expansions 3G rollouts in Brazil and Mexico

Asia Pacific, +5% India significantly up, China strong Bangladesh affected by uncertainty Japan and Australia tough comparison

Central Europe, Middle East, Africa, +1% Overall high business activities Africa and Middle East strong 3G rollouts started in Russia

Regional Q1 comments


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Unchanged planning assumptions

Still planning for flattish mobile infrastructure market in 2008 Continued good growth for the professional services market

Industry fundamentals and consumer behavior supportmore positive longer-term outlook

This slide contains forward looking statements


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HANS VESTBERGExecutive Vice President and CFO



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-9.8%-15.5%7.7%Operating margin ex Sony Ericsson

-14.0%-19.3%9.7%Operating margin-44%7.6-47%8.24.3Operating income

-18.4%-23.8%14.7%EBITDA margin-36.1%-43.0%38.6%Gross margin

-19%54.55%42.244.2Net salesChange2007Change20072008

Fourth quarterFirst quarter

Q1 financial highlights

1) Excluding restructuring charges of SEK 0.8 b., of which SEK 0.2 b. in cost of sales and SEK 0.6 b. in operating expenses in 2008.

SEK b.

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Increased new network builds pressures margins Q1 opex SEK 14.1 b, up SEK 2.3 b. year-over-year

– Primarily acquired intangibles and opex, higher R&D investments in LTE, IPTV, EMP EBITDA margin healthy despite USD decline

– Intangibles and software amortizations, Capex depreciations


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Q1 financial highlights

2) Attributable to stockholders of the Parent Company, excluding minority interest.

-61%12.03%4.64.7Cash flow from operating activities

-51%0.35-54%0.370.17EPS, SEK

-53%5.6-55%5.82.6Net income

-41%7.6-46%8.34.5Income after financial items

Change2007Change20072008

Fourth quarterFirst quarter

1) Excluding restructuring charges of SEK 0.8 b., of which SEK 0.2 b. in cost of sales and SEK 0.6 b. in operating expenses in 2008.

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Improved cash flow – continued focus on capital efficiency– Cash contribution from Sony Ericsson of SEK 2.2 (3.5) b

Cash conversion of 83% (80%) Net income and EPS includes restructuring charges of SEK 0.8 b

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SEK b.


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1) Excluding restructuring charges in 2008.

Networks

-30%6.420%3.84.5Of which

network rollout

-10%-17%9%Operating margin

-15%-23%15%EBITDA margin

-20%37.52%29.330.0Net sales

ChangeQ4ChangeQ1Q1SEK b.

200720072008

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Increased proportion of sales in high-growth markets– Network rollout up 20%– GSM rollouts in India accelerating

Weaker USD effects on sales and margins Slightly higher software and IPR sales


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Multimedia

--9%-8%-13%Operating margin

--3%-9%-6%EBITDA margin

-20%4.916%3.43.9Net sales


200720072008

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A business in early phase - sales and margins may vary between quarters ~75% of sales in business areas with good growth and margins

– Revenue management, service delivery platforms, Tandberg, EMP ~25% of sales in new investment areas with significant R&D

– IPTV, IMS and enterprise applications EMP negatively affected by SEK 0.3 b from lower sales to Sony Ericsson


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Professional Services

-15%-15%13%Operating margin

-16%-16%15%EBITDA margin

-6%3.320%2.63.1Of which managed

services

-15%12.18%9.510.3Net sales


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Organic growth 10% in constant currencies despite 3 UK contract effects New major deals with TDC in Denmark, Mobily in Saudi Arabia Margin decline due to managed services contracts in early cycle



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Cost reductions on track

Savings of SEK ~4 b with full effect in 2009 Charges of SEK ~4 b recognized as activities are decided

Progress Reductions announced in Sweden, UK, Germany and Italy Charges of SEK 0.8 b in Q1, mainly Europe Sweden announced and will impact Q2


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Sony Ericsson Q1 highlights

22.3 million units, up 2% year-on-year R&D investments continue to expand portfolio and addressable market New brand launched - XPERIA X1 – high-end multimedia phone Q1 dividend of SEK 2.2 (3.5) b, second dividend later in the year


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Summary

Challenging but stable business environment– Business mix and declining dollar

Focus on market trends and execution– Cost reductions on track

Continue to outperform the market– Good organic growth in constant currencies

Fundamentals support more positive longer-term outlook


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Q & A



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first quarter report 2008 - ericsson · sek b. q1 q1 change q4 change 2008 2007 2007 1) 1) 1)...

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