q408 ceo final3 - ericsson · strong growth across portfolio 11 new managed services contracts –...

1© Copyright Telefon AB LM Ericsson 2009. All rights reserved FOURTH QUARTER REPORT 2008 2009-01-212009-01-212009-01-21© Copyright Telefon AB LM Ericsson 2009. All rights reserved

FOURTH QUARTER REPORT2008

2© Copyright Telefon AB LM Ericsson 2009. All rights reserved FOURTH QUARTER REPORT 2008 2009-01-212009-01-212009-01-21

2

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.



CARL-HENRIC SVANBERGPresident and CEO



”The mobile phone is the single most transformational tool for development in Africa”J. Sachs, special advisor to UN Secretary General

4 billion mobile subscriptions– A significant milestone

Mobile broadband breakthrough– New set of smart phones and players – HSPA PC modules new standard

Accelerated focus on all-IP convergence– Enables new services and reduces cost

Financial crisis in focus – Long-term positive fundamentals remains

Telecom in 2008


Ericsson in 2008Sales of SEK 208.9 (187.8) b, up 11% Operating income SEK 23.5 (23.5) b, excl Sony EricssonCash flow of SEK 24.0 (19.2) b, cash conversion 92% (66%)Net cash position SEK 34.7 (24.3) bRestructuring charges of SEK 6.7 bBoard to propose dividend of SEK 1.85 per share

Sony Ericsson significantly affected by economic slowdown

Numbers exclude restructuring charges and Sony Ericsson


The global economic slowdownFinancially strong operators, loaded networks, growing traffic – Effects on the mobile network market should not be that significant

So far hardly any effects on mobile network investments– Unreasonable that this will continue throughout 2009

Handset market clearly affected– Replacements affected but not usage

This slide contains forward looking statements


Cost reductions 2008 completedInitial target of SEK 4.0 b, savings and chargesActual savings of SEK 6.5 b and charges of SEK 6.7 bCharges in Q4 of SEK 2.3 bFull savings effect from year-end 2008


Further restructuring charges of SEK 6-7 bTargeting savings of SEK 10 b by second half 201050/50 split of cost of sales and operating expensesTechnology synergies and IP transformation

– Fewer software platforms and increased hardware reuse– Strategy and capabilities to remain intact

Consolidation of R&D sites, layoffs and fewer consultants Some 5,000 employees globally across all functions

– Of which some 1,000 employees in Sweden

Continued cost reductions in 2009


Strong fourth quarter sales SEK 67.0 (54.5) b– Positive exchange rate effect– Strong ending of the year in all regions

Operating income SEK 9.2 (7.6) b– Contribution from Sony Ericsson SEK -0.6 (2.3) b– Capital gain of SEK 0.8 b from divestment of Symbian shares

Cash flow SEK 7.0 (12.0) b

All numbers exclude restructing charges

Q4 in summary


Growing demand for mobile broadband Services close to 50% of sales – focus on managed servicesStrong performance in Germany, Denmark and Italy Positive currency impact

Regional Q4 commentsWestern Europe sales 5% YoY, -2% FY

SEK m


Regional Q4 commentsCentral Europe, Middle East, Africa sales 24% YoY, 9% FY

SEK m

High business activities has translated into sales growth Strong performance in Nigeria, Saudi Arabia, South Africa, Russia2G as well as 3G rollouts and expansions


Regional Q4 commentsAsia Pacific sales 49% YoY, 16% FY

SEK m

India Ericsson’s largest and fastest growing marketJapan and Indonesia strong, fifth and sixth largest markets3G licenses issued in China – rollout to start soon


Regional Q4 commentsLatin America sales 16% YoY, 25% FY

SEK m

A good year with 3G as well as 2G expansions Mexico and Brazil strong development – no financial effects yet3G now established across region

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Regional Q4 commentsNorth America sales 13% YoY, 34% FY

SEK m

Consumer breakthrough for mobile broadbandContinued HSPA rollouts and expansionsPositive currency effects

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FOURTH QUARTER REPORT2008HANS VESTBERG

Executive Vice President and CFO

17© Copyright Telefon AB LM Ericsson 2009. All rights reserved FOURTH QUARTER REPORT 2008 2009-01-212009-01-212009-01-212009-01-21

Q4 financial highlights

1) Excluding restructuring charges of SEK 3.0 b. Q4 2008, SEK 2.0 b. Q3, SEK 1.8 b. Q2 and SEK 0.8 b. Q1

1)

SEK b.

Fourth quarter Third quarter Full year

20081) 2007 % 20081) % 20081) 2007 %

Net sales 67.0 54.5 23 % 49.2 36 % 208.9 187.8 11 %

Gross margin 35.2% 36.1% - 37.0% - 36.8% 39.3% -

Operating income 9.2 7.6 21 % 5.7 62 % 23.9 30.6 -22 %

Operating margin 13.7% 14.0% - 11.5% - 11.4% 16.3% -

Operating margin ex Sony Ericsson 14.6% 9.8% - 11.5% - 11.3% 12.5% -

Net sales up 11% year-over-year, limited currency impactSlight gross margin decline due to high completion of large buildoutsOpex cost reductions offset by negative currency effects YoY


1) Excluding restructuring charges of SEK 3.0 b. Q4 2008, SEK 2.0 b. Q3, SEK 1.8 b. Q2 and SEK 0.8 b. Q12) Including restructuring charges3) Attributable to stockholders of the Parent Company, excluding minority interest

Q4 financial highlights

SEK b.


2008 2007 % 2008 % 2008 2007 %

Income after financial items 9.51) 7.6 25% 6.21) 54% 24.81) 30.7 -19%

Net income3) 3.92) 5.6 -31% 2.82) 37% 11.32) 21.8 -48%

EPS, SEK3) 1.212) 1.77 -32% 0.89 2) 36% 3.522) 6.84 -49%

Cash flow from operating activities 7.0 12.0 - 3.8 - 24.0 19.2 -

Continued positive cash flow development, SEK 24.0 (19.2) b YTDCash conversion of 92% (66%) YTDNet income SEK 3.9 b - Restructuring charges of SEK 6.7 b- Negative contribution from Sony Ericsson SEK -1.3 (2.3) b


Change in net cash 2008

+4.0 -0.4

+2.3+4.4

24.3

34.7

Change in net cash 10.4 b

Dividend -8.0 bSEK b.


Long-term debt maturity profile Q4 2008

Back-up facility of USD 2 b (SEK ~15 b) available if needed

SEK b.


Networks

1) Excluding effects from restructuring.

Strong ending of the year – continued market share gainsRecord deliveries for GSM – 3G licenses in China and IndiaEncouraging “firsts” in IP broadband portfolio Clear leadership in softswitch and blade cluster


SEK b. 20081) 2007 % 20081) % 20081) 2007 %

Net sales 45.8 37.5 22 % 33.0 39% 142.0 129.0 10%

Of which network rollout 7.6 6.4 17 % 4.7 61% 21.5 18.5 16%

EBITDA margin 17% 15% - 15% - 16% 19% -

Operating margin 14% 10% - 11% - 11% 13% -


Multimedia

1) Excluding effects from restructuring.2)Affected by SEK 0.2 b due to changed allocation of capitalized development expenses in Q23) Including effects of divestment of shares in Symbian of SEK 0.8 b.4) First quarter 2008 is restated for the transfer of the IPX operation from Professional Services to Multimedia


SEK b. 20081) 2007 % 20081) % 20081) 4) 2007 %

Net sales 5.0 4.9 4% 4.4 14% 17.9 15.9 13%

EBITDA margin 21% -3% - 12%2) - 11% 4% -

Operating margin 12%3) -9% - 3% - 1% -1% -

21% growth year-over-year for comparable units in Q4Economic slowdown impacting mobile platformsGood growth in Tandberg Television and revenue managementCapital gain of SEK 0.8 b from sale of Symbian shares


Professional Services

1) Excluding effects from restructuring.2) First quarter 2008 is restated for the transfer of the IPX operation from Professional Services to Multimedia.


SEK b. 20081) 2007 % 20081) % 20081) 2) 2007 %

Net sales 16.2 12.1 34% 11.8 38 % 49.0 42.9 14%

Of which managed services 4.3 3.3 29 % 3.5 23 % 14.3 12.2 17 %

EBITDA margin 19% 16 % - 19 % - 17 % 16 % -

Operating margin 18 % 15 % - 16 % - 16 % 15 % -

Strong growth across portfolio11 new managed services contracts – world leading position – 250 m subscribers in managed operations - 60% in high-growth markets

Healthy margins with positive effects from cost efficiency activities– Leveraging scale in managed operations

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W595W595 W902W902 W302W302 G705G705 W705W705C905C905 F305F305 S302S302

Sony Ericsson Q4

X1X1

Global economic slowdown leads to contracting consumer demandSales of EUR 2,914 (3,771) m, down 23% year-over-yearIncome before taxes of EUR -133 (501) mAnnounced EUR 300 m opex reductions increased to EUR 480 mSuccessful rollout of Xperia, Cybershot C905 phones and PlayNow


Management focus for 2009Stay close to customersPrepare cost for tougher timesFocus on margins and cash generationTight operational governanceTake advantage of opportunities to extend leadership


FOURTH QUARTER REPORT2008Q & A

27© Copyright Telefon AB LM Ericsson 2009. All rights reserved FOURTH QUARTER REPORT 2008 2009-01-212009-01-212009-01-2129 2008-07-22© Copyright Telefon AB LM Ericsson 2008. All rights reserved THIRD QUARTER REPORT 2008

q408 ceo final3 - ericsson · strong growth across portfolio 11 new managed services contracts –...

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