January 25, 2010, 07:29 (CET)
1) Excluding restructuring charges
2) Excluding capital gain of SEK 0.8 b from divested Symbian shares in the fourth quarter 2008
3) Excluding cash outlays for restructuring cost that has been provided for of SEK 1.1 (1.0) b and dividends from Sony Ericsson of SEK 3.6 b for the full year 2008
"During the second half of 2009, Networks' sales were impacted by reduced operator spending in a number of markets. Group sales for the full year were less affected and the operating margin increased slightly," says Hans Vestberg, President and CEO of Ericsson (NASDAQ:ERIC). "We maintained market shares well in all segments, cash flow was good and our financial position is strong. The services business performed well, and our joint ventures remain on track to return to profit.
The shift from voice telephony to mobile broadband investments continues. Users and traffic are increasing rapidly and will eventually connect billions of people to the internet. As previously stated, with this shift follows the anticipated decline in GSM sales, accelerated by the current economic climate, which is not yet offset by the growth in mobile broadband and investments in next-generation IP networks.
Current operator investment behavior varies between regions and countries. During 2009, operators in a number of developing markets, especially Central Europe, Middle East and Africa, became increasingly cautious with investments. Meanwhile, other markets including China, India and the US continued to show good development with major network buildouts. There is also a continued strong demand for services targeting the operational efficiency of operators, such as managed services and consulting.
During the year, we significantly strengthened our position in North America with key wins in both our networks and services businesses such as LTE to Verizon and Metro PCS and services to Sprint. The confidence TeliaSonera has shown in us by selecting our LTE solutions in the beginning of this year further confirms the technical quality of our solutions and strong services portfolio.
For 2010 we are determined to increase our efforts to combine our strong technology leadership position and service capabilities to provide value to our customers and ensure our continued healthy financial development," concludes Hans Vestberg.
|
Fourth quarter |
Third quarter |
Full year |
||||||
|
SEK b. |
2009 |
2008 |
Change |
2009 |
Change |
2009 |
2008 |
Change |
|
Net sales |
58.3 |
67.0 |
-13% |
46.4 |
26% |
206.5 |
208.9 |
-1% |
|
Net sales for comparable units |
55.6 |
65.9 |
-16% |
46.4 |
20% |
203.8 |
203.7 |
0% |
|
Gross margin |
35% |
35% |
- |
36% |
- |
36% |
37% |
- |
|
EBITDA margin excl JVs |
17% |
16%1) |
- |
16% |
- |
16% |
15% |
- |
|
Operating income excl JVs |
7.5 |
9.0 1) |
-16% |
5.5 |
37% |
24.6 |
23.4 |
5% |
|
Operating margin excl JVs |
13% |
13%1) |
- |
12% |
- |
12% |
11% |
- |
|
Income after financial items |
6.7 |
9.5 |
-30% |
4.0 |
68% |
18.8 |
24.8 |
-24% |
|
Net income |
0.7 |
4.1 |
-82% |
0.8 |
-6% |
4.1 |
11.7 |
-65% |
|
EPS diluted, SEK |
0.10 |
1.21 |
-92% |
0.25 |
-60% |
1.14 |
3.52 |
-68% |
|
Adjusted cash flow2) |
13.6 |
7.9 |
- |
6.9 |
- |
28.7 |
22.1 |
- |
|
Cash flow from operations |
12.5 |
7.0 |
- |
5.7 |
- |
24.5 |
24.0 |
- |
All numbers, excl. EPS, Net income and Cash flow from operations, excl. restructuring charges
1) Excluding a capital gain of SEK 0.8 b. from divested Symbian shares in the fourth quarter 2008
2) Cash flow from operations excl. restructuring cash outlays that has been provided for. Cash outlays in the quarter of SEK 1.1 (1.0) b. For the full year, cash outlays of SEK 4.2 (1.8) b and dividends from Sony Ericsson of SEK 3.6 b for 2008 are excluded
Sales in the quarter were -16% lower year-over-year for comparable units, i.e. excluding Ericsson Mobile Platforms and the acquired Nortel CDMA and LTE business in North America, and decreased -20% adjusted also for currency exchange rate effects and hedging. The acquired Nortel business contributed sales of SEK 2.7 b. in the quarter. The fourth quarter 2008 was comparatively strong and was also affected by net positive currency exchange rate effects.
For the full year, sales for comparable units were stable but decreased -9% adjusted for currency exchange rate effects and hedging. Decreased sales in Networks were not fully offset by increased sales in Professional Services.
The gross margin was down slightly sequentially due to product mix and effects from the reduced scope in a managed services agreement in Italy and the Sprint contract. Gross margin year-over-year was flat in the quarter as well as for the full year, affected by a higher proportion of services as well as efficiency gains and restructuring effects.
Operating expenses amounted to SEK 14.0 (15.3) b. in the quarter, excluding restructuring charges. This includes operating expenses from the acquired Nortel business. The year-over-year reduction is primarily a result of ongoing cost reduction activities, offsetting negative impact from currency exchange rate effects. Full year operating expenses amounted to SEK 52.9 (56.3) b., also positively affected by the ongoing cost reduction activities.
Other operating income and expenses were SEK 0.9 (1.5) b. in the quarter.
Operating income, excluding joint ventures and restructuring charges, amounted to SEK 7.5 (9.0) b. in the quarter, including positive contribution from the acquired Nortel business. Operating margin was 13% (13%) in the quarter, despite lower year-over-year sales and was flat sequentially as a result of the ongoing cost reduction activities.
For the full year, operating income, excluding joint ventures and restructuring charges, amounted to SEK 24.6 (23.4) b. and the margin was stable 12% (11%) despite lower volumes.
Ericsson's share in earnings of joint ventures amounted to SEK -0.4 (-0.6) b. in the quarter excluding restructuring charges, compared to SEK -1.5 b. in the third quarter. This is a significant sequential improvement from ongoing efficiency programs and improved sales and margins in Sony Ericsson. Restructuring charges in joint ventures were SEK 1.0 b in the quarter. For the full year, Ericsson's share in earnings of joint ventures amounted to SEK -6.1 (0.4) b., excluding restructuring charges.
Financial net was SEK -0.4 (0.3) b. in the quarter, mainly due to lower interest rates and negative currency revaluation effects on financial assets and liabilities.
The tax rate for 2009 was 34% (32%) mainly due to a lower tax percentage rate from the loss making joint venture companies. The tax rate excluding Sony Ericsson and ST-Ericsson was 26%.
Net income amounted to SEK 0.7 (4.1) b. in the quarter. For the full year, net income was SEK 4.1 (11.7) b. and earnings per share were SEK 1.14 (3.52).
Adjusted cash flow amounted to SEK 13.6 (7.9) b. in the quarter, up sequentially from SEK 6.9 b. Adjusted cash flow for the full year amounted to SEK 28.7 (22.1) b., reflecting focus on capital efficiency. Full year cash conversion rate was 117% (92%).
Trade receivables increased by SEK 4.0 b in the quarter to SEK 66.4 (62.4) b., impacted by seasonally higher sales. Despite the higher sales, days sales outstanding (DSO) improved sequentially to 106 (118) days, mainly due to strong collections.
Inventory was reduced by SEK -4.1 b. in the quarter to SEK 22.7 (26.8) b. and turnover improved sequentially to 68 (77) days, mainly due to customary year-end project completions.
|
SEK b. |
Dec 31 2009 |
Sep 30 2009 |
June 30 2009 |
Mar 31 2009 |
Dec 31 2008 |
|
Net cash |
36.1 |
33.9 |
27.9 |
22.9 |
34.7 |
|
Interest-bearing liabilities and post- employment benefits |
40.7 |
45.9 |
47.6 |
41.2 |
40.4 |
|
Trade receivables |
66.4 |
62.4 |
69.4 |
75.2 |
75.9 |
|
Days sales outstanding |
106 |
118 |
121 |
124 |
106 |
|
Inventory |
22.7 |
26.8 |
29.0 |
30.7 |
27.8 |
|
Of which market unit inventory |
12.9 |
15.9 |
17.7 |
18.9 |
16.5 |
|
Inventory days |
68 |
77 |
78 |
83 |
68 |
|
Payable days |
57 |
57 |
59 |
65 |
55 |
|
Customer financing, net |
2.3 |
2.7 |
3.1 |
2.8 |
2.8 |
|
Return on capital employed |
4% |
4% |
5% |
7% |
11% |
|
Equity ratio |
52% |
52% |
51% |
52% |
50% |
The net cash position increased by SEK 2.2 b. in the quarter to SEK 36.1 (33.9) b. Cash, cash equivalents and short-term investments amounted to SEK 76.7 (79.8) b. Gross cash decreased slightly in the quarter due to payments made for the acquisition of the Nortel business of SEK 8.3 b. and repayment of a callable bond of EUR 471 m. However, this was offset by a positive cash flow from operating activities of SEK 12.5 b.
Customer financing remained low at SEK 2.3 (2.7) b.
During the quarter, approximately SEK 2.6 b. of provisions were utilized, of which SEK 1.1 b. related to restructuring. Additions of SEK 3.6 b. were made, of which SEK 1.9 b. related to restructuring. Reversals of SEK 1.2 b. were made.
In January, 2009, cost reduction activities were initiated, targeting annual savings of SEK 10 b. from the second half of 2010 split equally between cost of sales and operating expenses. Related restructuring charges were estimated to SEK 6-7 b.
In the third quarter 2009, it was reported that the program was ahead of plan and additional opportunities for efficiency improvements had evolved during the program and would lead to further cost savings, with related charges, during the last three quarters of the program.
The program is planned to be completed by the second quarter 2010 and it is now estimated that the total annual savings of the entire program will amount to SEK 15-16 b. from the second half of 2010. Related total restructuring charges are estimated to SEK 13-14 b.
In the fourth quarter, restructuring charges, excluding joint ventures, amounted to SEK 4.3 b., resulting in a total of SEK 11.3 b. for the full year. At the end of the quarter, cash outlays of SEK 4.3 b. remain to be made.
When the initial program was announced in January 2009, it was anticipated that the actions would result in a reduction of the number of employees by some 5,000, of which about 1,000 in Sweden. The 5,000 has been exceeded and is estimated to reach approximately 6,500.
|
Restructuring charges, SEK b. |
2009 |
2008 |
||||
|
Full year |
Q4 |
Q3 |
Q2 |
Q1 |
Full year |
|
|
Cost of sales |
-4.2 |
-1.7 |
-0.8 |
-1.3 |
-0.4 |
-2.5 |
|
Research and development expenses |
-6.1 |
-2.3 |
-1.8 |
-1.7 |
-0.3 |
-2.7 |
|
Selling and administrative expenses |
-1.0 |
-0.3 |
-0.1 |
-0.6 |
- |
-1.5 |
|
Total |
-11.3 |
-4.3 |
-2.7 |
-3.6 |
-0.7 |
-6.7 |
|
Fourth quarter |
Third quarter |
Full year |
||||||
|
SEK b. |
2009 |
2008 |
Change |
2009 |
Change |
2009 |
2008 |
Change |
|
Networks sales |
38.5 |
45.8 |
-16% |
30.3 |
27% |
137.1 |
142.0 |
-3% |
|
Of which network rollout |
6.7 |
7.6 |
-12% |
5.8 |
15% |
23.1 |
21.5 |
7% |
|
EBITDA margin |
17% |
17% |
- |
15% |
- |
15% |
16% |
- |
|
Operating margin |
13% |
14% |
- |
11% |
- |
11% |
11% |
- |
|
Professional Services sales |
16.5 |
16.2 |
2% |
12.8 |
29% |
56.1 |
49.0 |
15% |
|
Of which managed services |
5.1 |
4.3 |
19% |
3.6 |
43% |
17.4 |
14.3 |
22% |
|
EBITDA margin |
16% |
19% |
- |
17% |
- |
17%1) |
17% |
- |
|
Operating margin |
13% |
18% |
- |
15% |
- |
15%1) |
16% |
- |
|
Multimedia sales2) |
3.4 |
3.9 |
-14% |
3.4 |
0% |
13.3 |
12.7 |
5% |
|
EBITDA margin2) |
20% |
5% |
- |
19% |
- |
16% |
8% |
- |
|
Operating margin2) |
10% |
-2% |
- |
11% |
- |
8% |
0% |
- |
|
Sales from divested and transferred businesses |
0.0 |
1.1 |
- |
0.0 |
- |
0.0 |
5.2 |
- |
|
Total sales |
58.3 |
67.0 |
-13% |
46.4 |
26% |
206.5 |
208.9 |
-1% |
All numbers exclude restructuring charges
1) SEK 0.8 b. adjusted for divestment of TEMS in the second quarter 2009
2) 2008 and 2009 numbers for Multimedia exclude divested Ericsson Mobile Platforms and PBX operations and capital gain from divestment of Symbian shares SEK 0.8 b. in fourth quarter 2008
Networks' sales in the quarter declined by -16% year-over-year. Full year sales declined by -3%. The mobile infrastructure market share was maintained well in 2009. During the second half of 2009, Networks' sales were impacted by reduced operator spending in a number of markets. Currency exchange rate effects had a positive impact on sales for the full year due to a strong USD in the beginning of 2009. Compared to the all-time-high GSM volumes in 2008, volumes decreased and are not yet offset by increased sales of WCDMA and initial rollouts of LTE. The IP-router business developed well during the year and the common core part of the recent LTE win with TeliaSonera is based on Ericsson's SmartEdge IP platform.
Mobile voice and data traffic continues to grow and will in the longer-term require operator investments in capacity and next-generation IP networks. Current operator investment activity varies between regions and countries. During the year, operators in a number of developing markets, especially in Central Europe, Middle East and Africa, have become increasingly cautious with investments. Meanwhile, operators in China, India and the US have continued to invest.
As of November 13, the former Nortel CDMA and LTE business are consolidated. The vast majority of the sales are related to Networks and only a small proportion to Professional Services. In the quarter, the Nortel business added a total of SEK 2.7 b. of sales with an operating margin well above Networks' average driven by year-end seasonality.
EBITDA-margin in the quarter was flat year-over-year at 17% (17%) despite lower sales, positively impacted by ongoing cost reduction activities. The full year margin was 15% (16%).
Professional Services sales in the quarter were flat year-over-year. Organic growth in local currencies amounted to 2%. Managed services sales in the quarter increased by 19% year-over-year and by 22% for the full year. Sales for the second half of the year were negatively impacted by the reduced scope in a managed services agreement in Italy as well as somewhat lower volumes in project-related services. At the same time, sales in the second half were positively impacted by the contract with Sprint in the US.
For the full year, sales increased 15% and growth in local currencies amounted to 8%.
Despite 2009's financial climate, there has been a continued demand for services, especially those targeting the operational efficiency of operators, such as managed services, consulting and systems integration.
EBITDA-margin for Professional Services in the quarter declined to 16% (19%), negatively impacted by start-up costs from new managed services contracts with Sprint and Zain as well as the reduced scope in a managed services agreement in Italy. This was partly offset by continued efficiency gains. The full year adjusted EBITDA-margin was stable at 17% (17%).
The total number of subscribers in managed networks is now 370 million, of which 50% are in high-growth markets. After the close of the quarter, Ericsson announced the acquisition of Pride Spa in Italy, a consulting and systems integration company. With the added 1,000 employees the number of services professionals now amounts to 40,000 globally.
Multimedia sales in the quarter for comparable units, i.e. adjusted for the divestment of the PBX and mobile platform operations, decreased year-over-year by -14% mainly due to tough comparison with a strong fourth quarter 2008 and somewhat slower sales of revenue management solutions in several emerging markets. However, TV and multimedia brokering (IPX) continued to show good development. The combined strength of the business support systems (BSS) offering and the strong services portfolio is generating increased operator interest.
For the full year, sales increased by 5% for comparable units. Multimedia brokering (IPX) and revenue management solutions showed good development despite a decline in the fourth quarter.
EBITDA-margin for comparable units, i.e. also adjusted for a capital gain from divestment of Symbian shares in the fourth quarter 2008, increased in the quarter to 20% (5%). For the full year, the margin amounted to 16% (8%), positively impacted by efficiency gains and an improved gross margin.
|
Fourth quarter |
Third quarter |
Full year |
||||||
|
EUR m. |
2009 |
2008 |
Change |
2009 |
Change |
2009 |
2008 |
Change |
|
Number of units shipped (m.) |
14.6 |
24.2 |
-40% |
14.1 |
3% |
57.1 |
96.6 |
-41% |
|
Average selling price (EUR) |
120 |
121 |
-1% |
114 |
5% |
119 |
116 |
3% |
|
Net sales |
1,750 |
2,914 |
-40% |
1,619 |
8% |
6,788 |
11,244 |
-40% |
|
Gross margin |
23% |
15% |
- |
16% |
- |
15% |
22% |
- |
|
Operating margin |
-10% |
-9% |
- |
-12% |
- |
-15% |
-1% |
- |
|
Income before taxes |
-190 |
-261 |
- |
-199 |
- |
-1,043 |
-83 |
- |
|
Income before taxes, excl restructuring charges |
-40 |
-133 |
- |
-198 |
- |
-878 |
92 |
- |
|
Net income |
-167 |
-187 |
- |
-164 |
- |
-836 |
-73 |
- |
Units shipped in the quarter were 14.6 million, a sequential increase of 3% and a decrease of -40% year-over-year. Sales in the quarter were EUR 1,750 million, a sequential increase of 8% and a decrease of -40% year-over-year. The sequential increase was driven by seasonality and sales of Satio and Aino phones.
Average selling price in the quarter increased sequentially by 5% due to product mix. Gross margin improved sequentially and year-over-year mainly driven by sales of new higher margin phones as well as positive impact of cost reduction activities.
Income before taxes for the quarter, excluding restructuring charges, was a loss of EUR -40 (-133) million. The reduced loss was due to improved gross margin and reduced operating expenses. As of December 31, 2009, Sony Ericsson had a net cash position of EUR 620 million.
Ericsson's share in Sony Ericsson's income before tax was SEK -1.0 (-1.3) b. in the quarter.
Mid 2008 a program was initiated to reduce operating expenses by EUR 880 million. Full benefit of the program is expected during second half 2010. Charges for the program are estimated to be well within the previously announced EUR 500 million.
|
USD m. |
2009 |
2008 |
||||
|
Full year |
Q4 |
Q3 |
Q2 |
Feb-Mar |
Proforma |
|
|
Net sales |
2,524 |
740 |
728 |
666 |
391 |
746 |
|
Adjusted opera-ting income 1) |
-369 |
-50 |
-77 |
-165 |
-78 |
-98 |
|
Operating income before taxes |
-581 |
-139 |
-121 |
-224 |
-98 |
-127 |
|
Net income |
-539 |
-125 |
-112 |
-213 |
-89 |
NA |
1) Operating loss adjusted for amortization of acquisition related intangibles and restructuring charges
Net sales in the quarter showed an increase of 2% sequentially with further momentum in China.
Adjusted operating loss in the quarter was USD -50 (-98) million. Inventory declined while net cash increased USD 13 million sequentially to USD 229 million, including a one-time payment of USD 53 million from parent companies. This payment is related to final merger transaction adjustments already planned since the inception of the company.
The USD 250 million cost synergies program defined by ST-NXP Wireless is now fully completed. The USD 230 million savings plan, announced in April is on track and due to be completed by second quarter 2010. In December ST-Ericsson announced another plan to further improve financial performance and increase its competitiveness. The plan is targeting additional annualized savings of USD 115 million.
ST-Ericsson is reported in US-GAAP. Ericsson's share in ST-Ericsson's income before tax, adjusted to IFRS, was SEK -0.4 b. in the quarter, including restructuring charges of SEK 0.2 b. Ericsson Mobile Platforms incurred a loss of SEK 0.5 b. in January 2009, which is added to the reported year-to-date result in segment ST-Ericsson.
|
Sales, SEK b. |
Fourth quarter |
Third quarter |
Full year |
|||||
|
2009 |
2008 |
Change |
2009 |
Change |
2009 |
2008 |
Change |
|
|
Western Europe |
11.9 |
16.1 |
-26% |
10.1 |
18% |
44.6 |
51.6 |
-14% |
|
Central and Eastern Europe, Middle East and Africa |
14.0 |
17.6 |
-21% |
11.6 |
20% |
50.7 |
53.1 |
-4% |
|
Asia Pacific |
16.7 |
20.5 |
-18% |
15.3 |
9% |
65.8 |
63.3 |
4% |
|
Latin America |
5.9 |
7.9 |
-25% |
5.0 |
18% |
20.1 |
23.0 |
-13% |
|
North America |
9.8 |
4.9 |
101% |
4.4 |
126% |
25.3 |
17.9 |
41% |
|
Total |
58.3 |
67.0 |
-13% |
46.4 |
26% |
206.5 |
208.9 |
-1% |
Western Europe sales declined -21% year-over-year in the quarter and -6% for the full-year for comparable units, i.e. excluding mobile platforms and PBX. The second half of the year was impacted by the reduced scope of a managed services agreement in Italy. Demand for services continued to be good throughout the year, especially in the UK. During the quarter, TV4 Group in Sweden selected Ericsson to operate its nationwide playout-services. In the quarter, Ericsson was also awarded one of the largest contracts in the Nordics with Mobile Norway for a nationwide mobile broadband network and the world's first commercial 4G/LTE network was launched in Stockholm by TeliaSonera. After the closing of the quarter, Ericsson was selected as the sole supplier of the common core and a supplier of access to TeliaSonera's 4G/LTE network in Norway and Sweden. Ericsson was also named supplier of the world's first 84 Mbps HSPA network to 3 Scandinavia.
Sales in Central and Eastern Europe, Middle East and Africa decreased in the quarter by -21% year-over-year and by -4% for the full year. This is the region most impacted by the economic climate in 2009, and the credit environment is still tight for some operators. The decline in 2G is not yet offset by 3G/WCDMA sales. The interest for managed services remained strong in the region and Ericsson was selected as supplier by Romania's largest wireline operator Romtelecom with 400 employees and by operator du in UAE. A frame agreement for 2010 for radio access and other products and services was signed with MTN.
Asia Pacific sales in the quarter decreased -18% year-over-year and increased by 4% for the full year. During the year, the region showed large variations where China, India, Japan and Vietnam developed well with major rollouts, while Bangladesh, Indonesia and Pakistan were affected by the economic climate. India saw a slowdown in the fourth quarter due to the upcoming 3G licenses. In Taiwan, Ericsson will deliver HSPA and pre-paid charging to Far EasTone, covering the northern parts of the country. In Indonesia, Ericsson has been selected to expand XL Axiata's GPRS/Data Charging Systems.
Latin American sales in the quarter decreased by -25% year-over-year, and by -13% for the full year. Also this region has been affected by the economic climate. In the second half of the year, sales were also negatively impacted by delays of licensing of new spectrum and services. This has resulted in operators holding back investments in new technologies and applications, especially in larger countries. Mobile subscriptions are however continuing to develop positively with net additions for voice and in particular for mobile broadband services.
North American sales in the quarter increased by 101% year-over-year. Full-year sales increased 41%. In the quarter, the acquired Nortel business added a total of SEK 2.7 b. of sales. This was the first full quarter with the Sprint services business. Professional services generated a significant proportion of the revenue in the fourth quarter. The US is now the largest market with 15% of Group sales in the quarter. Accelerating demand for mobile broadband and effects of increased smartphone usage continue to drive data traffic and continued capacity investments in HSPA and LTE networks. The acquired Nortel assets and customer base substantially increase the addressable infrastructure and services market in North America.
Telecommunications plays a central role in the daily life of practically every person on earth. It is fundamental to the global economy and increasingly important to the environment. Over the last decade, mobile became an ubiquitous communications service, enabling people from all regions and walks of life to connect at an unprecedented level. The global economic slowdown is affecting all parts of the society. However, we believe that the fundamentals for longer-term positive development for the industry remain solid. Ericsson is well positioned to drive and benefit from this development.
Growth continues, with almost three billion new mobile subscriptions expected through 2014. These will, however, mainly come from low-usage customers in developing areas or from volume type users with multiple subscriptions. In parallel, mobile broadband is fast becoming the main growth driver for operators and equipment suppliers globally. Operators are increasingly focusing on network speed, with HSPA deployed in 130 countries today.
There are signs of a shift in focus in the telecom industry from connecting places and people to connecting devices and applications. In developed countries, data growth and resulting data capacity expansions are being stimulated by mobile broadband adoption and devices like smartphones, netbooks and laptops. In developing countries we are still seeing continued subscriber growth.
There is continued growth in mobile subscriptions, although the current growth rate is lower than in 2008. Mobile subscriptions grew by 163 million in the quarter to a total of 4.6 billion. In India alone, subscriptions grew by some 15 million per month during the fourth quarter. The global number of new WCDMA subscriptions is accelerating and grew by 38 million in the quarter to a total of 452 million, of which 185 million are estimated to be HSPA. In the third quarter, fixed broadband connections grew to 438 million, adding 15 million subscribers.
Voice traffic continues to be the main revenue source for operators even though data represents an increasing share. For many large operators, mobile data revenues constitute 25% of total service revenues or more. In addition to capacity enhancements, operators face the challenge of converting to all-IP broadband networks. This will include increased deployments of broadband access, routing and transmission equipment along with next-generation service delivery and revenue management systems.
There is continued good growth in professional services, fueled by operators' desire to reduce operating expenses and improve efficiency in network operation and maintenance. The move toward all-IP and increased network complexity will create further demand for systems integration and consulting.
Net sales for the year amounted to SEK 0.3 (5.1) billion and income after financial items was SEK 8.1 (19.4) billion. Effective January 1, 2009, the right to all license revenues from third parties related to patent licenses was transferred to Ericsson AB, a wholly owned subsidiary, and consequently net sales in 2009 were insignificant compared to 2008.
Major changes in the Parent Company's financial position for the year include investments in the joint venture ST-Ericsson of SEK 8.6 billion, decreased current and non-current receivables from subsidiaries of SEK 10.1 billion, decreased other current receivables of SEK 2.0 billion, increased cash, cash equivalents and short-term investments of SEK 3.2 billion, increased current and non-current liabilities to subsidiaries of SEK 5.0 billion and decreased other current liabilities of SEK 7.4 billion.
At year end, cash, cash equivalents and short-term investments amounted to SEK 62.4 (59.2) billion.
As per December 31, 2009, guarantees to Sony Ericsson amount to SEK 0.8 b. and are reported as Contingent Liabilities.
In accordance with the conditions of the long-term variable remuneration program (LTV) for Ericsson employees, 3,237,304 shares from treasury stock were sold or distributed to employees during the fourth quarter and 9,087,564 shares during the year. In the second quarter 27,000,000 treasury shares were repurchased. The holding of treasury stock at December 31, 2009, was 78,978,533 Class B shares.
The Board of Directors will propose to the Annual General Meeting a dividend of SEK 2.00 (1.85) per share, representing some SEK 6.4 (6.0) b., and April 16, 2010, as record day for payment of dividend.
The annual report will be made available to shareholders on our website www.ericsson.com [1] and at the Ericsson headquarters, Torshamnsgatan 23, Stockholm, approximately two weeks prior to the Annual General Meeting.
The Annual General Meeting of shareholders will be held on April 13, 15.00 (CET) at Kistamässan, Stockholm.
On November 25, 2009, Ericsson was selected to acquire certain assets of the Carrier Networks division relating to Nortel's GSM business in the US and Canada. The purchase is an asset transaction at the cash purchase price of USD 70 million on a cash and debt free basis. Ericsson's bid was made together with Kapsch CarrierCom AG of Austria that will acquire the remaining assets outside North America at a price of USD 33 million.
The operations generated approximately USD 400 million of sales in 2008 and have approximately 350 employees.
Consummation of the transaction is subject to approval of US and Canadian bankruptcy courts and the satisfaction of regulatory and other conditions.
On January 12, 2010, Ericsson announced that it has agreed to acquire Pride Spa in Italy, a consulting and systems integration company. With the added 1,000 employees the number of services professionals now amounts to 40,000 globally. Closing is expected by February 1, 2010.
Jan Frykhammar has been appointed CFO and Executive Vice President.
Magnus Mandersson has been appointed head of business unit Global Services and is also a member of the Group Management Team.
Rima Qureshi has been appointed head of business unit CDMA Mobile Systems and member of the Group Management Team. She is also head of Ericsson Response.
Gary Pinkham, presently head of Global Investor and Analyst Relations, has been appointed head of Corporate Affairs and Communications in North America.
Cesare Avenia, presently head of market unit South East Europe, has been appointed Chief Brand Officer and member of the Group Management Team.
Håkan Eriksson, CTO and member of the Group Management Team, has, in addition to his present responsibilities, been appointed head of Ericsson in Silicon Valley.
Johan Wibergh, head of business unit Networks and member of the Group Management Team, has been appointed Executive Vice President.
Ericsson's operational and financial risk factors and uncertainties are described under "Risk factors Assessment of risk environment" in our Annual Report 2008.
Risk factors and uncertainties in focus during the forthcoming six-month period for the Parent Company and the Ericsson Group include:
Ericsson conducts business in certain countries which are subject to trade restrictions or which are focused on by certain investors. We stringently follow all relevant regulations and trade embargos applicable to us in our dealings with customers operating in such countries. Moreover, Ericsson operates globally in accordance with Group level policies and directives for business ethics and conduct. In no way should our business activities in these countries be construed as supporting a particular political agenda or regime. We have activities in such countries mainly due to that certain customers with multi-country operations put demands on us to support them in all of their markets.
Please refer further to Ericsson's Annual Report 2008, where we describe our risks and uncertainties along with our strategies and tactics to mitigate the risk exposures or limit unfavorable outcomes.
Stockholm, January 25, 2010
Hans Vestberg, President and CEO
Telefonaktiebolaget LM Ericsson (publ)
Date for next report: April 23, 2010
We have reviewed this report for the period January 1 to December 31, 2009, for Telefonaktiebolaget LM Ericsson (publ). The board of directors and the CEO are responsible for the preparation and presentation of this interim report in accordance with IAS 34 and the Annual Accounts Act. Our responsibility is to express a conclusion on this interim report based on our review.
We conducted our review in accordance with the Standard on Review Engagements SÖG 2410, Review of Interim Financial Information Performed by the Independent Auditor of the Entity, issued by FAR SRS. A review consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Standards on Auditing in Sweden, RS, and other generally accepted auditing practices. The procedures performed in a review do not enable us to obtain a level of assurance that would make us aware of all significant matters that might be identified in an audit. Therefore, the conclusion expressed based on a review does not give the same level of assurance as a conclusion expressed based on an audit.
Based on our review, nothing has come to our attention that causes us to believe that the interim report is not prepared, in all material respects, in accordance with IAS 34 and the Swedish Annual Accounts Act regarding the Group and with the Swedish Annual Accounts Act regarding the Parent Company.
Stockholm, January 25, 2010
PricewaterhouseCoopers AB
Peter Clemedtson
Authorized Public Accountant
To read the complete report with tables, please go to: www.ericsson.com/investors/financial_reports/2009/12month09-en.pdf [2]
Ericsson invites media, investors and analysts to a press conference at the Ericsson headquarters, Torshamnsgatan 23, Stockholm, at 09.00 (CET), January 25.
An analysts, investors and media conference call will begin at 14.00 (CET).
Live webcasts of the press conference and conference call as well as supporting slides will be available at www.ericsson.com/press and www.ericsson.com/investors.
Henry Sténson, Senior Vice President, Communications
Phone: +46 10 719 4044
E-mail: investor.relations@ericsson.com [3] or press.relations@ericsson.com [4]
Gary Pinkham, Vice President,
Investor Relations
Phone: +46 10 719 0000
E-mail: investor.relations@ericsson.com [3]
Susanne Andersson,
Investor Relations
Phone: +46 10 719 4631
E-mail: investor.relations@ericsson.com [3]
Lars Jacobsson,
Investor Relations
Phone: +46 10 719 9489
E-mail: investor.relations@ericsson.com [3]
Åse Lindskog, Vice President,
Head of Public and Media Relations
Phone: +46 10 719 9725, +46 730 244 872
E-mail: media.relations@ericsson.com [5]
Ola Rembe,
Public and Media Relations
Phone: +46 10 719 9727, +46 730 244 873
E-mail: media.relations@ericsson.com [5]
Telefonaktiebolaget LM Ericsson (publ)
Org. number: 556016-0680
Torshamnsgatan 23
SE-164 83 Stockholm
Phone: +46 10 719 0000
www.ericsson.com [1]
Ericsson discloses the information provided herein pursuant to the Securities Markets Act. The information was submitted for publication at 07.30 CET, on January 25, 2010.
Safe Harbor Statement of Ericsson under the US Private Securities Litigation Reform Act of 1995;
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.
Links:
[1] http://www.ericsson.com/
[2] http://www.ericsson.com/investors/financial_reports/2009/12month09-en.pdf
[3] mailto:investor.relations@ericsson.com
[4] mailto:press.relations@ericsson.com
[5] mailto:media.relations@ericsson.com