SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 6-K

 

 

REPORT OF FOREIGN ISSUER

Pursuant to Rule 13a-16 or 15d-16 of

the Securities Exchange Act of 1934

February 1, 2008

 

 

LM ERICSSON TELEPHONE COMPANY

(Translation of registrant’s name into English)

 

 

Torshamnsgatan 23, Kista

SE-164 83, Stockholm, Sweden

(Address of principal executive offices)

 

 

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F. Form 20-F  x     Form 40-F  ¨

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.     Yes  ¨    No  x

Announcement of LM Ericsson Telephone company, dated February 1^st , 2008 regarding “Ericsson reports fourth quarter and full year results”.

 

 

 

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		Fourth quarter report 2007
		February 1, 2008

[Ericsson discloses the information provided herein pursuant to the Swedish Securities Exchange and Clearing Operations Act and/or the Swedish Financial Instruments Trading Act. The information was submitted for publication at 07.30 CET, on February 1, 2008.]

Ericsson reports fourth quarter and full year results

 

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Sales SEK 54.5 (54.2) b. full year SEK 187.8 (179.8) b. organic growth 8% in constant currencies

 

•

Operating income SEK 7.6 (12.2) b., full year SEK 30.6 (35.8) b.

 

•

Operating margin 14% (23%), 16% (20%) for full year

 

•

Cash flow from operations SEK 12.0 (11.0) b., SEK 19.2 (18.5) b. full year

 

•

Net income SEK 5.6 (9.7) b., full year SEK 21.8 (26.3) b1)

 

•

Earnings per share SEK 0.35 (0.61), SEK 1.37 (1.65) full year1)

 

•

The Board of Directors will propose an unchanged dividend of SEK 0.50 per share

CEO COMMENTS

“During 2007 we continued to strengthen our competitive position,” said Carl-Henric Svanberg, President and CEO of Ericsson (NASDAQ:ERIC). We generated an operating income of SEK 30 b. During the autumn we did however experience significant margin erosion in our networks business.

The continued rapid build out of mobile communications in emerging markets and our significant market share gains have resulted in a higher proportion of new network builds with initial lower margins. At the same time, we have seen a decline in network expansions and upgrades in mature markets. All this is resulting in a lower margin. The ongoing shift to new switching technologies, where we now build new footprint, has similar characteristics, which adds to this effect.

The mobile networks market growth slowed during the year. As expected, our sales in the quarter were affected by political unrest in certain emerging markets. Professional services continued to show strong growth with stable margins while Multimedia is in a build-up phase and includes areas with good growth and healthy margins as well as investment areas. Cash flow improved in the fourth quarter leading to a better cash conversion year-over-year.

We have steadily improved our leading position and market share in an increasingly challenging market. Our ambition is to continue to do so, irrespective of market fluctuations. Industry fundamentals and consumer behavior support a positive longer-term outlook. The market growth however slowed during last year and for 2008 we find it prudent to plan for a flattish mobile infrastructure market. We will intensify our operational excellence programs and reduce our cost base to safeguard our competitive position,” said Carl-Henric Svanberg.

FINANCIAL HIGHLIGHTS

Income statement and cash flow

 

		Fourth quarter									Third quarter						Full year
SEK b.		2007			2006			Change			2007			Change			2007			2006			Change
Net sales		54.5			54.2			0	%		43.5			25	%		187.8			179.8			4	%
Gross margin		36.1	%		42.2	%		—			35.6	%		—			39.3	%		41.7	%		—
EBITDA margin		18.4	%		26.3	%		—			17.4	%		—			20.8	%		24.1	%		—
Operating income		7.6			12.2			-38	%		5.6			35	%		30.6			35.8			-14	%
Operating margin		14.0	%		22.5	%		—			12.9	%		—			16.3	%		19.9	%		—
Operating margin ex Sony Ericsson		9.8	%		18.3	%		—			9.0	%		—			12.5	%		16.7	%		—
Income after financial items		7.6			12.2			-37	%		5.6			36	%		30.7			36.0			-15	%
Net income1)		5.6			9.7			-42	%		4.0			42	%		21.8			26.3			-17	%
EPS, SEK1)		0.35			0.61			-43	%		0.25			40	%		1.37			1.65			-17	%
Cash flow from operating activities		12.0			11.0			9	%		-1.6			—			19.2			18.5			4	%

1)

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

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The year-over-year sales for the quarter were flat due to less spending from operators on network infrastructure and a continued weakened USD. About 50% of sales are USD related. For the full year, the sales increase amounted to 4%. In constant currencies, estimated organic growth was 8%.

Gross margin declined year-over-year mainly due to the business mix shift, with high proportion of new network builds and less expansions and upgrades, and the ongoing shift to new switching technologies. Sequentially, gross margin was stable as a result of the prevailing business conditions within mobile networks.

Operating income amounted to SEK 7.6 (12.2) b. in the quarter and SEK 30.6 (35.8) b. for the full year. Operating expenses amounted to SEK 15.2 (13.2) b in the quarter as a consequence of seasonality and newly acquired companies. Sony Ericsson’s pre-tax profit contributed SEK 2.3 (2.2) b. to Group operating income in the quarter.

Cash flow from operating activities reached SEK 12.0 (11.0) b. in the quarter and SEK 19.2 (18.5) b. for the full year. The working capital decreased in the quarter as a result of a high completion rate of turn key projects. This includes a favorable development of current liabilities such as VAT and accrued expenses. In addition, a payment from 3 UK of SEK 1.6 b. has been received following a renegotiated contract. Cash conversion for the full year increased to 66% (57%). Days sales outstanding have increased over the year, reflecting the higher share of sales in markets with longer payment terms.

Other operating liabilities affected cash flow negatively by SEK 0.9 b. in the quarter as the advance payment from Sony Ericsson to Ericsson Mobile Platforms was consumed.

Cash flow from investing activities was SEK -27.5 (-14.9) b., attributable to acquisitions of SEK 26.3 (18.1) b. during the year. Cash flow from financing activities was SEK 6.3 b. for the full year.

Balance sheet and other performance indicators

 

		Twelve months			Nine months			Six months			Three months			Full year
SEK b.		2007			2007			2007			2007			2006
Net cash		24.3			11.5			16.1			29.1			40.7
Interest-bearing liabilities and post employment benefits		33.4			32.5			32.6			22.6			21.6
Trade receivables		60.5			56.8			55.3			52.4			51.1
Days sales outstanding		102			115			106			107			85
Inventory		22.5			25.6			24.6			24.1			21.5
Of which work in progress		12.5			14.0			14.1			14.9			14.2
Inventory turnover		5.2			4.5			4.4			4.2			5.2
Payable days		57			59			64			67			54
Customer financing, net		3.4			3.8			3.7			3.8			3.7
Return on capital employed		21	%		21	%		24	%		24	%		27	%
Equity ratio		55	%		56	%		54	%		57	%		56	%

Deferred tax assets increased in the quarter by SEK 0.2 b. to SEK 11.7 (11.5) b. due to the acquisition of LHS. Deferred tax assets increased during the year by SEK 2.0 b. due to acquisitions and were reduced by SEK 2.5 b. through normal utilization.

During the quarter, approximately SEK 1.2 b. of provisions was utilized, absorbing costs related to product warranties, customer projects, restructuring and other. Additions of SEK 1.7 b. and reversals of SEK 1.4 b. have been made as a result of risk assessments in the ongoing business.

At year end equity amounted to SEK 135.1 b., an increase by SEK 14.2 b. compared to previous year.

 

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Cost reductions

Cost reductions of SEK 4 b. in annual savings will be made. These reductions will have full effect in 2009. All parts of the business will be affected, but main focus areas are SG&A, sourcing, supply and service delivery. One-time charges are estimated to SEK 4 b. and will be recognized as each activity is decided.

A reduction of approximately 1,000 employees is expected in Sweden and will be made through voluntary programs as far as possible.

SEGMENT RESULTS

 

		Fourth quarter									Third quarter						Full year
SEK b.		2007			2006			Change			2007			Change			2007			20061)			Change
Networks sales		37.5			39.0			-4	%		28.5			31	%		129.0			127.7			1	%
Of which network rollout		6.4			5.6			16	%		4.0			61	%		18.5			16.4			13	%
Operating margin		10	%		21	%		—			8	%		—			13	%		17	%		—
EBITDA margin		15	%		26	%		—			13	%		—			19	%		22	%		—
Professional Services sales		12.1			10.6			15	%		11.0			10	%		42.9			36.8			16	%
Of which managed services		3.3			2.5			32	%		3.4			-1	%		12.2			9.5			28	%
Operating margin		15	%		15	%		—			15	%		—			15	%		14	%		—
EBITDA margin		16	%		16	%		—			17	%		—			16	%		16	%		—
Multimedia sales		4.9			4.5			7	%		4.0			21	%		15.9			13.9			14	%
Operating margin		-9	%		12	%		—			1	%		—			-1	%		5	%		—
EBITDA margin		-3	%		13	%		—			6	%		—			4	%		6	%		—
Unallocated sales2)		—			—			—			—			—			—			1.6			—
Total sales		54.5			54.2			0	%		43.5			25	%		187.8			179.8			4	%
Of which Mobile Systems		37.5			37.4			0	%		28.5			32	%		127.1			122.8			3	%

1)

Including cost for Marconi restructuring and career change program of SEK 2.9 b that took place in third quarter 2006.

2)

Defense business divested in third quarter 2006

Networks

Sales in Networks declined by 4% in the quarter, year-over-year. For the full year sales grew by 1%. During the second half of 2007, sales were affected by the shift from capacity expansions and software upgrades to new network buildouts. This shift in business mix, as well as the rollout of new switching technologies, has negatively affected gross margin. Network rollout services increased 61% sequentially, reflecting the higher proportion of large network buildout projects.

Redback has significantly increased its international sales over the year through leveraging Ericsson’s global sales organization. In the US, however, Redback saw a decline in business from one major customer which impacted domestic sales. Redback full year sales grew slightly.

Professional Services

Sales in Professional Services grew by 15% in the quarter year-over-year and by 16% for the full year. Growth in constant currencies amounted to 19% and 16% respectively. Managed services and systems integration showed the fastest growth. Operating margins remained stable at 15%.

Ericsson won the managed services contract for T-Mobile in the UK. T-Mobile and 3 UK have agreed on network sharing. Subsequently, the 3 UK managed services contract has been adjusted and the scope somewhat reduced to accommodate this change. Going forward this will affect sales but not margins.

Multimedia

Sales growth amounted to 7% in the quarter year-over-year and 14% for the full year. Operating margin in the quarter was negative 9% and just below break-even for the full year. Multimedia is in a build-up phase. It includes areas with good growth and healthy margins as well as new areas with significant investments, and sales and results fluctuate.

 

3

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Sony Ericsson Mobile Communications

For information on transactions with Sony Ericsson Mobile Communications, please see Financial statements and Additional information.

 

		Fourth quarter									Third quarter						Full year
EUR m.		2007			2006			Change			2007			Change			2007			2006			Change
Number of units shipped (m.)		30.8			26.0			18	%		25.9			19	%		103.4			74.8			38	%
Average selling price (EUR)		123			146			-16	%		120			3	%		125			146			-14	%
Net sales		3,771			3,782			0	%		3,108			21	%		12,916			10,959			18	%
Gross margin		32	%		29	%		—			31	%		—			31	%		29	%		—
Operating margin		13	%		13	%		—			13	%		—			12	%		11	%		—
Income before taxes		501			502			0	%		384			30	%		1,574			1,298			21	%
Net income		373			447			-17	%		267			40	%		1,114			997			12	%

Units shipped in the quarter reached 30.8 million, an 18% increase compared to the same period last year and the company continues to capture market share. Sales and operating income were in level with last year. Average selling price (ASP) increased slightly sequentially, a result of the introduction of new flag-ship Walkman and Cyber-shot phones such as the W910 and K850 models. The trend of lower ASPs during the year reflects the company’s direction to broaden its product portfolio.

Ericsson’s share in Sony Ericsson’s income before tax was SEK 2.3 (2.2) b. in the quarter and SEK 7.1 (5.9) b. for the full year.

REGIONAL OVERVIEW

 

		Fourth quarter							Third quarter					Full year
Sales, SEK b.		2007		2006		Change			2007		Change			2007		2006		Change
Western Europe		15.4		17.2		-10	%		12.3		25	%		52.7		53.2		-1	%
Central and Eastern Europe, Middle
East and Africa		14.3		14.3		-1	%		12.0		19	%		48.7		46.4		5	%
Asia Pacific		13.7		14.0		-2	%		12.0		14	%		54.6		47.9		14	%
Latin America		6.8		4.8		41	%		4.2		59	%		18.4		16.5		12	%
North America		4.3		4.0		9	%		3.0		45	%		13.4		15.9		-15	%

Western Europe sales declined by 10% in the quarter year-over-year and 1% for the full year. The softer development was mainly driven by temporary effects from operator consolidation in the UK and Italy. There is a shift in operator investments from 2G to 3G. The momentum for managed services continued with key wins in UK and Germany.

Central and Eastern Europe, Middle East and Africa sales were flattish in the quarter and increased 5% for the full year. Sales were mainly driven by network rollout and expansions. Middle East showed a slower development in the fourth quarter. 3G rollouts have started in large number of markets in Central Europe.

Asia Pacific sales declined by 2% for the quarter and increased by 14% for the full year. China ended strong, and grew 16% for the full year. Pakistan, Bangladesh and Thailand were significantly affected by political unrest. India reported strong sales growth for the full year although growth in the fourth quarter was lower. Australia was down in the quarter as well as for the full year after major rollouts in 2006. The strong subscriber growth continues across the region.

Latin America sales were up 41% in the quarter and 12% for the full year, with continued 2G expansions and accelerated 3G buildouts. Argentina and Brazil showed strong growth in the quarter. North America sales grew by 9% in the quarter, primarily due to strong sales to T-Mobile. For the full year, sales declined by 15%. US operator Verizon Wireless has officially announced LTE as their next-generation technology choice.

 

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MARKET DEVELOPMENT

Growth rates based on Ericsson and market estimates.

2007 was characterized by large mergers and industry consolidation among operators. This creates short-term disruptions as well as market opportunities. The mobile infrastructure market is estimated to have started at mid single-digit growth but ended flattish. During the autumn, network upgrades and expansions slowed in mature markets. In addition, certain emerging markets have declined following political unrest.

The change in the competitive landscape continues, including the ongoing mergers as well as an intensified competition from Chinese vendors.

Mobile subscriptions grew with some 150 million in the quarter to a total of 3.3 billion. 180 million are WCDMA subscriptions, up by close to 20 million in the fourth quarter. There are 197 WCDMA networks in 87 countries, of which the large majority is upgraded to HSPA. Uptake in data traffic accelerates quickly, and in 3G networks monitored by Ericsson total data traffic now exceeds voice traffic.

In the twelve-month period ending September 30, 2007, fixed broadband connections grew with 24% to some 320 million.

PLANNING ASSUMPTIONS

Unchanged industry fundamentals and consumer behavior support a positive longer-term outlook. However, for 2008, we are planning for a flattish development in the mobile infrastructure market while the professional services market is expected to show good growth.

In the third quarter report 2007, we said that we continued to believe that the GSM/WCDMA track within the global mobile systems market, measured in USD, would continue to show mid-single digit growth in 2007. We also said that we continued to believe that the addressable market for professional services would show good growth in 2007. And we said that our early expectation for 2008 was that the current market conditions would prevail.

PARENT COMPANY INFORMATION

Net sales for the year amounted to SEK 3.2 (2.6) b. and income after financial items was SEK 14.7 (13.6) b. Patent license fees are included in net sales from 2007, instead of in other operating income and expenses, and 2006 has been restated accordingly.

Major changes in the Parent Company’s financial position for the year include: increased investments in subsidiaries of SEK 30.3 b., mostly attributable to the Tandberg, Redback, Entrisphere and LHS acquisitions; decreased other current receivables of SEK 2.2 b.; decreased cash and bank and short-term investments of SEK 8.4 b.; increased notes and bond loans of SEK 11.1 b. through the bond issue program; current and non-current liabilities to subsidiaries increased by SEK 4.7 b.

As per December 31, 2007, cash and bank and short-term investments amounted to SEK 45.6 (54.0) b.

Major transactions with related parties include the following transactions and balances with Sony Ericsson Mobile Communications: revenues of SEK 3.0 (1.5) b.; receivables of SEK 0.9 (0.1) b.; dividend of SEK 3.9 (1.2) b.

In accordance with the conditions of the Stock Purchase Plans and Stock Option Plans for Ericsson employees, 6,408,841 shares from treasury stock were sold or distributed to employees during the fourth quarter and 19,022,349 shares during the year. The holding of treasury stock at December 31, 2007, was 231,991,543 Class B shares.

 

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DIVIDEND PROPOSAL

The Board of Directors will propose to the Annual General Meeting a dividend of SEK 0.50 (0.50) per share, representing some SEK 8.0 (7.9) b., and Monday April 14, 2008, as record day for payment of dividend.

ANNUAL REPORT

The annual report will be made available to shareholders at the Ericsson headquarters, Torshamnsgatan 23, Stockholm, approximately two weeks prior to the Annual General Meeting 2008.

ANNUAL GENERAL MEETING OF SHAREHOLDERS

The Annual General Meeting of shareholders will be held on Wednesday April 9, 2008, 15.00 (CET) in the Stockholm Globe Arena.

OTHER INFORMATION

Acquisitions 2007

On January 25, 2007, Ericsson announced the finalization of the acquisition of Redback Networks.

On February 12, 2007, Ericsson announced its acquisition of Entrisphere, a company providing fiber access technology.

On February 26, 2007, Ericsson announced its voluntary public cash offer to acquire Tandberg Television for NOK 106 in cash per share. Tandberg Television was consolidated from May 2007.

On March 15, 2007, Ericsson announced its intention to acquire the business and assets of Mobeon AB, the world leader in IP messaging components for mobile and fixed networks.

On June 5, Ericsson announced a voluntary public cash offer to acquire LHS AG for approximately EUR 310 m. LHS was consolidated from October 1, 2007.

On June 27, the acquisition of Drutt Corporation was closed. Drutt is a leading provider of service delivery platform solutions.

On December 20, 2007, Ericsson announced the acquisition of HyC Group, a leading Spanish company in TV consultancy and systems integration.

Class action

In the autumn 2007, Ericsson was named as a defendant in three putative class action suits filed in the United States District Court for the Southern District of New York. The complaints allege violations of the United States securities laws, principally in connection with Ericsson’s October 2007 profit warning. At the conclusion of various pending procedural motions and after plaintiffs file a consolidated amended class action complaint, Ericsson intends to seek the dismissal of the lawsuits.

Assessment of risk environment

Ericsson’s operational and financial risk factors and exposures are described under “Risk factors” in our Annual Report 2006 and we have determined that the risk environment has not materially changed. However, the increased activities related to the new Multimedia segment may result in a more volatile quarterly sales pattern. Specific additional risks for the near term are associated with the acquisitions made during 2007, as a timely and effective integration of these is essential to make them accretive as planned.

 

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Risk factors and exposures in focus for the Parent Company and the Ericsson Group for the forthcoming six-month period include: unfavorable product mix in the Networks segment with reduced sales of software, upgrades and extensions and an increased proportion of new network build-outs and break-in contracts, which may result in lower gross margins and/or working capital build-up, which in turn puts pressure on our cash conversion rate; variability in the seasonality could make it more difficult to forecast future sales; effects of the ongoing industry consolidation among the Company’s customers as well as between our largest competitors, e.g. intensified price competition; changes in foreign exchange rates, in particular a continued weakness or further deterioration of the USD/SEK rate; increases in interest rates and the potential effect on operators’ willingness to invest in network development; and continued political unrest or instability in certain markets.

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 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 2006, where we describe our risks and uncertainties along with our strategies and tactics to mitigate the risk exposures or limit unfavorable outcomes.

Stockholm, February 1, 2008

Carl-Henric Svanberg

President and CEO

Telefonaktiebolaget LM Ericsson (publ)

Date for next report: April 25, 2008

REVIEW REPORT

We have reviewed this report for the period January 1 to December 31, 2007, for Telefonaktiebolaget LM Ericsson (publ). The board of directors and the CEO are responsible for the preparation and presentation of this interim financial information in accordance with IAS 34 and the Annual Accounts Act. Our responsibility is to express a conclusion on this interim financial information 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. 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 accompanying interim financial information is not, in all material respects, in accordance with IAS 34 and the Annual Accounts Act.

Stockholm, February 1, 2008

PricewaterhouseCoopers AB

 

Bo Hjalmarsson		Peter Clemedtson
Authorized Public Accountant		Authorized Public Accountant
Lead partner

EDITOR’S NOTE

To read the complete report with tables, please go to:

www.ericsson.com/investors/financial_reports/2007/12month07-en.pdf

Ericsson invites media, investors and analysts to a press conference at the Ericsson headquarters,

Torshamnsgatan 23, Stockholm, at 09.00 (CET), February 1.

 

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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.

FOR FURTHER INFORMATION, PLEASE CONTACT

Henry Sténson, Senior Vice President,

Communications

Phone: +46 8 719 4044

E-mail: investor.relations.se@ericsson.com

or press.relations@ericsson.com

Investors

Gary Pinkham, Vice President,

Investor Relations

Phone: +46 8 719 0000

E-mail: investor.relations.se@ericsson.com

Susanne Andersson,

Investor Relations

Phone: +46 8 719 4631

E-mail: investor.relations.se@ericsson.com

Media

Åse Lindskog, Vice President,

Head of Media Relations

Phone: +46 8 719 9725, +46 730 244 872

E-mail: press.relations@ericsson.com

Ola Rembe, Vice President

Phone: +46 8 719 9727, +46 730 244 873

E-mail: press.relations@ericsson.com

 

8

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Telefonaktiebolaget LM Ericsson (publ)

Org. number: 556016-0680

Torshamnsgatan 23

SE-164 83 Stockholm

Phone: +46 8 719 00 00

www.ericsson.com

Safe Harbor Statement of Ericsson under the 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) further 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.

FINANCIAL STATEMENTS AND ADDITIONAL INFORMATION

 

		Page
Financial statements
Consolidated income statement		10
Consolidated balance sheet		11
Consolidated statement of cash flows		12
Consolidated statement of recognized income and expense		13
Consolidated income statement - isolated quarters		14
Consolidated statement of cash flows - isolated quarters		15
Parent company income statement		16
Parent company balance sheet		16
		Page
Additional information
Accounting policies		17
Net sales by segment by quarter		19
Operating income and margin by segment by quarter		20
Number of employees		20
EBITDA income and margin by segment by quarter		21
Net sales by market area by quarter		22
Top ten markets in sales		23
External net sales by market area by segment		23
Transactions with Sony Ericsson Mobile Communications		23
Provisions		23
Other information		24
Ericsson planning assumptions for year 2008		24
Acquisition of LHS		25

---

ERICSSON

CONSOLIDATED INCOME STATEMENT

 

		Oct - Dec						Change			Jan - Dec
SEK million		2007			2006						2007			2006			Change
Net sales		54,460			54,211			0	%		187,780			179,821			4	%
Cost of sales		-34,809			-31,331						-114,059			-104,875
Gross margin		19,651			22,880			-14	%		73,721			74,946			-2	%
Gross margin %		36.1	%		42.2	%					39.3	%		41.7	%
Research and development expenses		-7,952			-7,155			11	%		-28,842			-27,533			5	%
Selling and administrative expenses		-7,238			-6,071			19	%		-23,199			-21,422			8	%
Operating expenses		-15,190			-13,226						-52,041			-48,955
Other operating income		781			321			143	%		1,734			3,903			-56	%
Share in earnings of JVs and associated companies		2,362			2,210			7	%		7,232			5,934			22	%
Operating income		7,604			12,185			-38	%		30,646			35,828			-14	%
Operating margin %		14.0	%		22.5	%					16.3	%		19.9	%
Financial income		510			366						1,778			1,954
Financial expenses		-517			-396						-1,695			-1,789
Income after financial items		7,597			12,155			-37	%		30,729			35,993			-15	%
Taxes		-1,774			-2,352						-8,594			-9,557
Net income		5,823			9,803			-41	%		22,135			26,436			-16	%
Net income attributable to:
Stockholders of the parent company		5,642			9,731						21,836			26,251
Minority interest		181			72						299			185
Other information
Average number of shares, basic (million)		15,896			15,877						15,891			15,871
Earnings per share, basic (SEK) 1)		0.35			0.61						1.37			1.65
Earnings per share, diluted (SEK) 1)		0.35			0.61						1.37			1.65

 

1)	Based on Net income attributable to stockholders of the parent company

 

10

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ERICSSON

CONSOLIDATED BALANCE SHEET

 

SEK million		Dec 31 2007		Sep 30 2007		Dec 31 2006
ASSETS
Non-current assets
Intangible assets
Capitalized development expenses		3,661		3,953		4,995
Goodwill		22,826		22,177		6,824
Intellectual property rights		23,958		24,166		15,649
Property, plant and equipment		9,304		8,535		7,881
Financial assets
Equity in JVs and associated companies		10,903		8,975		9,409
Other investments in shares and participations		738		3,268		721
Customer financing, non-current		1,012		1,692		1,921
Other financial assets, non-current		2,918		2,900		2,409
Deferred tax assets		11,690		11,535		13,564
		87 010		87,201		63,373
Current assets
Inventories		22 475		25,603		21,470
Trade receivables		60 492		56,763		51,070
Customer financing, current		2,362		2,126		1,735
Other current receivables		15,062		15,061		15,012
Short-term investments		29,406		23,322		32,311
Cash and cash equivalents		28,310		20,627		29,969
		158,107		143,502		151,567
Total assets		245,117		230,703		214,940
EQUITY AND LIABILITIES
Equity
Stockholders’ equity		134,112		129,511		120,113
Minority interest in equity of consolidated subsidiaries		940		663		782
		135,052		130,174		120,895
Non-current liabilities
Post-employment benefits		6,188		6,180		6,968
Provisions, non-current		368		391		602
Deferred tax liabilities		2,799		3,751		382
Borrowings, non-current		21,320		20,935		12,904
Other non-current liabilities		1,714		1,641		2,868
		32,389		32,898		23,724
Current liabilities
Provisions, current		9,358		9,966		13,280
Borrowings, current		5,896		5,351		1,680
Trade payables		17,427		16,060		18,183
Other current liabilities		44,995		36,254		37,178
		77,676		67,631		70,321
		245,117		230,703		214,940
Of which interest-bearing liabilities and post-employment benefits		33,404		32,466		21,552
Net cash		24,312		11,483		40,728
Assets pledged as collateral		360		638		285
Contingent liabilities		1,182		1,183		1,392

 

11

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ERICSSON

CONSOLIDATED STATEMENT OF CASH FLOWS

 

		Oct - Dec				Jan - Dec
SEK million		2007		2006		2007		2006
Net income		5,823		9,803		22,135		26,436
Adjustments to reconcile net income to cash
- taxes		49		1,671		1,119		4,282
- undistributed earnings in JVs and associated companies		-2,033		-1,751		-1,413		-2,971
- depreciation, amortization and impairment losses		2,407		2,067		8,363		7,516
- other		-829		90		-897		-2,767
		5,417		11,880		29,307		32,496
Operating net assets
Inventories		3,401		2,972		-445		-2,553
Customer financing, current and non-current		467		1,242		365		1,186
Trade receivables		-2,948		-4,077		-7,467		-10,563
Provisions and post-employment benefits		-1,011		-1,935		-4,401		-3,729
Other operating assets and liabilities, net		6,693		927		1,851		1,652
		6,602		-871		-10,097		-14,007
Cash flow from operating activities		12,019		11,009		19,210		18,489
Investing activities
Investments in property, plant and equipment		-1,656		-929		-4,319		-3,827
Sales of property, plant and equipment		62		34		152		185
Acquisitions and divestments of subsidiaries and other operations, net		196		-193		-26,208		-14,992
Product development		-359		-373		-1,053		-1,353
Other investing activities		604		-632		396		-1,070
Short-term investments		-5,745		3,136		3,499		6,180
Cash flow from investing activities		-6,898		1,043		-27,533		-14,877
Cash flow before financing activities		5,121		12,052		-8,323		3,612
Financing activities
Dividends paid		-7		0		-8,132		-7,343
Other financing activities		2,254		-271		14,390		-8,096
Cash flow from financing activities		2,247		-271		6,258		-15,439
Effect of exchange rate changes on cash		315		-326		406		58
Net change in cash		7,683		11,455		-1,659		-11,769
Cash and cash equivalents, beginning of period		20,627		18,514		29,969		41,738
Cash and cash equivalents, end of period		28,310		29,969		28,310		29,969

 

12

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CONSOLIDATED STATEMENT OF RECOGNIZED INCOME AND EXPENSE

 

		Jan - Dec 2007						Jan - Dec 2006
SEK million		Stock- holders’ equity		Minority interest		Total equity		Stock- holders’ equity		Minority interest		Total equity
Actuarial gains and losses related to pensions including payroll tax		1,208		—		1,208		440		—		440
Revaluation of other investments in shares and participations:
Fair value measurement reported in equity		2		—		2		-2		1		-1
Cash flow hedges :
Fair value remeasurement of derivatives reported in equity		584		—		584		4,100		—		4,100
Transferred to income statement for the period		-1,390		—		-1,390		-1,990		—		-1,990
Transferred to balance sheet for the period		—		—		—		99		—		99
Changes in cumulative translation effects due to changes in foreign currency exchange rates		-796		-1		-797		-3,028		-91		-3,119
Tax on items reported directly in/or transferred from equity		-73		—		-73		-769		—		-769
Total transactions reported in equity		-465		-1		-466		-1,150		-90		-1,240
Net income		21,836		299		22,135		26,251		185		26,436
Total income and expenses recognized for the period		21,371		298		21,669		25,101		95		25,196
Other changes in equity:
Sale of own shares		62		—		62		58		—		58
Stock Purchase and Stock Option Plans		509		—		509		473		—		473
Dividends paid		-7,943		-189		-8,132		-7,141		-202		-7,343
Stock issue, net		—		—		—		—		70		70
Business combinations		—		49		49		—		-31		-31

 

13

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ERICSSON

CONSOLIDATED INCOME STATEMENT - ISOLATED QUARTERS

 

		2007												2006
SEK million		Q4			Q3			Q2			Q1			Q4			Q3			Q2			Q1
Net sales		54,460			43,545			47,619			42,156			54,211			41,271			44,768			39,571
Cost of sales		-34,809			-28,050			-27,166			-24,034			-31,331			-25,506			-25,692			-22,346
Gross margin		19,651			15,495			20,453			18,122			22,880			15,765			19,076			17,225
Gross margin %		36.1	%		35.6	%		43.0	%		43.0	%		42.2	%		38.2	%		42.6	%		43.5	%
Research and development expenses		-7,952			-7,229			-7,208			-6,453			-7,155			-6,990			-6,767			-6,621
Selling and administrative expenses		-7,238			-4,783			-5,856			-5,322			-6,071			-5,296			-5,263			-4,792
Operating expenses		-15,190			-12,012			-13,064			-11,775			-13,226			-12,286			-12,030			-11,413
Other operating income		781			402			389			162			321			3,252			215			115
Share in earnings of JVs and associated companies		2,362			1,751			1,477			1,642			2,210			2,035			992			697
Operating income		7,604			5,636			9,255			8,151			12,185			8,766			8,253			6,624
Operating margin %		14.0	%		12.9	%		19.4	%		19.3	%		22.5	%		21.2	%		18.4	%		16.7	%
Financial income		510			389			322			556			366			499			567			522
Financial expenses		-517			-442			-292			-443			-396			-397			-529			-467
Income after financial items		7,597			5,583			9,285			8,264			12,155			8,868			8,291			6,679
Taxes		-1,774			-1,629			-2,776			-2,415			-2,352			-2,572			-2,559			-2,074
Net income		5,823			3,954			6,509			5,849			9,803			6,296			5,732			4,605
Net income attributable to:
Stock holders of the parent company		5,642			3,970			6,409			5,815			9,731			6,233			5,712			4,575
Minority interest		181			-16			100			34			72			63			20			30
Other information
Average number of shares, basic (million)		15,896			15,894			15,890			15,883			15,877			15,872			15,869			15,866
Earnings per share, basic (SEK) 1)		0.35			0.25			0.40			0.37			0.61			0.39			0.36			0.29
Earnings per share, diluted (SEK) 1)		0.35			0.25			0.40			0.36			0.61			0.39			0.36			0.29

 

1)	Based on Net income attributable to stockholders of the parent company

 

14

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ERICSSON

CONSOLIDATED STATEMENT OF CASH FLOWS—ISOLATED QUARTERS

 

		2007								2006
SEK million		Q4		Q3		Q2		Q1		Q4		Q3		Q2		Q1
Net income		5,823		3,954		6,509		5,849		9,803		6,296		5,732		4,605
Adjustments to reconcile net income to cash
- taxes		49		-65		1,424		-289		1,671		737		1,397		477
- undistributed earnings in JVs and associated companies		-2,033		209		1,915		-1,504		-1,751		-1,462		-514		756
- depreciation, amortization and impairment losses		2,407		1,953		2,140		1,863		2,068		1,735		1,716		1,997
- other		-829		63		33		-164		89		-2,885		39		-10
		5,417		6,114		12,021		5,755		11,880		4,421		8,370		7,825
Operating net assets
Inventories		3,401		-1,563		-496		-1,787		2,972		-2,622		-433		-2,470
Customer financing, current and non-current		467		-76		94		-120		1,242		-302		-1,586		1,832
Trade receivables		-2,948		-2,443		-2,276		200		-4,077		-1,981		-3,269		-1,236
Provisions and post-employment benefits		-1,011		-824		-507		-2,059		-1,935		2,546		-2,427		-1,913
Other operating assets and liabilities, net		6,693		-2,813		-4,616		2,587		927		2,779		-422		-1,632
		6,602		-7,719		-7,801		-1,179		-871		420		-8,137		-5,419
Cash flow from operating activities		12,019		-1,605		4 220		4,576		11,009		4,841		233		2,406
Investing activities
Investments in property, plant and equipment		-1,656		-871		-1 024		-768		-929		-827		-1 371		-700
Sales of property, plant and equipment		62		13		38		39		34		91		46		14
Acquisitions/divestments of subsidiaries and other operations, net		196		-2,444		-8 264		-15,696		-193		2,833		- 21		-17,611
Product development		-359		-237		- 251		-206		-373		-210		- 412		-358
Other investing activities		604		-92		- 42		-74		-632		-167		- 462		191
Short-term investments		-5,745		67		1 654		7,523		3,136		-3,818		9 700		-2,838
Cash flow from investing activities		-6,898		-3,564		-7,889		-9,182		1,043		-2,098		7,480		-21,302
Cash flow before financing activities		5,121		-5,169		-3 669		-4,606		12,052		2,743		7,713		-18,896
Financing activities
Dividends paid		-7		-177		-7 948		0		0		-183		-7 154		-6
Other financing activities		2,254		241		11 323		572		-271		-576		-8 147		898
Cash flow from financing activities		2,247		64		3 375		572		-271		-759		-15 301		892
Effect of exchange rate changes on cash		315		171		- 337		257		-326		-116		485		15
Net change in cash		7,683		-4,934		- 631		-3,777		11,455		1,868		-7 103		-17,989
Cash and cash equivalents, beginning of period		20,627		25,561		26 192		29,969		18,514		16,646		23 749		41,738
Cash and cash equivalents, end of period		28,310		20,627		25 561		26,192		29,969		18,514		16 646		23,749

 

15

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ERICSSON PARENT COMPANY INCOME STATEMENT

 

		Oct - Dec				Jan - Dec
SEK million		2007		2006		2007		2006
Net sales		783		700		3,236		2,601
Cost of sales		-303		-118		-368		-285
Gross margin		480		582		2,868		2,316
Operating expenses 1)		-265		-294		-1,351		-1,278
Other operating income and expenses		923		740		2,723		2,339
Operating income		1,138		1,028		4,240		3,377
Financial net		384		100		10,485		10,262
Income after financial items		1,522		1,128		14,725		13,639
Transfers to untaxed reserves, net		-265		-88		-265		-88
Taxes		-239		-441		-1,315		-1,189
Net income		1,018		599		13,145		12,362

 

1)	Operating expenses include the net effect of risk provisions for customer financing of SEK 24 million for the period October to December (SEK 396 million 2006) and SEK 133 million for the period January to December (SEK 1,262 million in 2006).

ERICSSON PARENT COMPANY BALANCE SHEET

 

SEK million		Dec 31 2007		Dec 31 2006
ASSETS
Fixed assets
Intangible assets		2,989		2,800
Tangible assets		443		300
Financial assets		106,478		74,956
		109,910		78,056
Current assets
Inventories		84		91
Receivables		28,873		32,951
Cash, bank and short-term investments		45,608		53,986
		74,565		87,028
Total assets		184,475		165,084
STOCKHOLDERS’ EQUITY, PROVISIONS AND LIABILITIES
Equity
Restricted equity		47,624		47,624
Non-restricted equity		35,225		32,987
		82,849		80,611
Untaxed reserves		1,339		1,074
Provisions		1,057		1,614
Non-current liabilities		50,457		43,718
Current liabilities		48,773		38,067
Total stockholders’ equity, provisions and liabilities		184,475		165,084
Assets pledged as collateral		359		277
Contingent liabilities		9,650		7,670

 

16

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ACCOUNTING POLICIES AND CHANGES IN FINANCIAL REPORTING STRUCTURE

This interim report is prepared in accordance with IAS 34. The term IFRS used in this document refers to the application of IAS and IFRS as well as interpretations of these standards as issued by IASB’s Standards Interpretation Committee (SIC) and International Financial Reporting Interpretations Committee (IFRIC).

New or amended standards (IAS/IFRS)

IFRS 7, Financial Instruments: Disclosures, is amended effective from January 1, 2007, together with a complementary amendment to IAS 1, Presentation of Financial Statements – Capital Disclosures. IFRS 7 introduces new disclosure requirements to improve the information about financial instruments. The amendment to IAS 1 introduces disclosures about the level of an entity’s capital and how it manages capital. Since the new or amended standards relate to changes in disclosure or presentation, they have not had any impact on the Company’s financial result or position.

New interpretations (IFRIC:s)

None of the new IFRIC:s that shall be applied as from January 1, 2007, have had a significant impact on the Company’s financial result or position. The IFRIC:s applicable as from January 1, 2007, are:

 

•

IFRIC Interpretation 7: Applying the Restatement Approach under IAS 29 Financial Reporting in Hyperinflationary Economies. This Interpretation provides guidance on how to apply the requirements of IAS 29 in a reporting period in which an entity identifies the existence of hyperinflation in the economy of its functional currency.

 

•

IFRIC Interpretation 8: Scope of IFRS 2 Share-based Payment. This interpretation applies to transactions when the identifiable consideration received appears to be less than the fair value of the equity instruments granted.

 

•

IFRIC Interpretation 9: Reassessment of Embedded Derivatives. This interpretation determines when an entity shall reassess the need for an embedded derivative to be separated.

 

•

IFRIC Interpretation 10: Interim Financial Reporting and Impairment. As per this interpretation, an entity shall not reverse an impairment loss recognized in a previous interim period in respect of goodwill or an investment in either an equity instrument or a financial asset carried at cost.

Amendment issued by the Swedish Financial Accounting Standards Council (Rådet för finansiell rapportering)

In March 2007, an amendment to URA 43 Accounting for special payroll tax and tax on investment returns was issued. The amendment had no impact on the Company’s financial result or position.

Changes in financial reporting structure

 

•

Business segments. As previously announced, Ericsson has from January 1, 2007, reorganized its operating structure. From the first quarter report 2007, the Company’s financial reporting is adapted to reflect this new structure. The Company has also taken this opportunity to make other modifications to further enhance transparency with additional disclosures.

Ericsson reports the following business segments: Networks, Professional Services and Multimedia. The segment Phones, represented by the share in earnings of Sony Ericsson is reported as before. However, Sony Ericsson has increased its disclosure as of the first quarter report 2007.

The changed segment reporting is in accordance with the objectives set forth in IAS 14 Segment reporting. The business activities previously reported in Other Operations have been merged into the new segments to better leverage the opportunities provided by internal business combinations.

Business segment Networks includes products for mobile and fixed broadband access, core networks, transmission and next-generation IP-networks. Related network rollout services are also included. In addition, the power modules and cables operations, previously reported under Other Operations, are now included within Networks, as well as the acquired operations of Redback and Entrisphere.

 

17

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Business segment Professional Services includes all service operations, excluding Network rollout reported under Networks. Services for system integration of IP and core networks previously reported as network rollout are now reclassified as Professional Services. Sales of managed services as a part of the total Professional Services will be disclosed since this represents service revenues of a recurring nature. The acquired operations of HyC is now included in Professional Services.

Business segment Multimedia includes multimedia systems, previously reported under segment Systems, and enterprise solutions and mobile platforms, previously included in Other Operations. The operations of Tandberg TV, Mobeon, Drutt and LHS are also included in Multimedia.

For each of the business segments, we will report net sales and operating margin quarterly. In addition, sales of mobile systems, including relevant parts of Networks and Multimedia, will continue to be disclosed.

 

•

Within the consolidated income statement, royalty revenues for intellectual property rights (IPR) related to products will be included as part of Net Sales instead of other operating income. Accordingly, the related costs, previously reported as part of Research and development expenses, will be reported as Cost of Sales or Selling and administrative expenses, depending on the nature of the costs.

 

•

Research and development expenses. These were prior to 2007 called “Research and development and other technical expenses” but are from 2007 renamed “Research and development expenses”. This change is only related to adoption of IFRS terminology and has not resulted in any changes of amounts.

 

•

Cash flow statement. Changes within the consolidated statement of cash flows include additional breakdown of adjustments to reconcile net income to cash, operating net assets and investing activities. Cash flow from operations will be disclosed as before. The subtotals “Cash flow from operating investing activities” and “Cash flow before financial investing activities” will no longer be reported.

 

•

The table “Customer financing risk exposure” will no longer be separately disclosed quarterly due to the decrease in activity compared to prior years. However, significant changes to risk and exposure will be commented within the text of interim reports.

Change in working capital is defined as changes in operating net assets from the cash flow statement.

 

•

Payable days is defined as the average of Accounts payable divided by cost of sales and multiplied by 365 days.

 

•

Cash conversion measures the proportion of profits that are converted to cash flow. It is calculated by dividing total cash flow from operating activities by net income and adjustments to reconcile net income to cash.

 

18

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NET SALES BY SEGMENT BY QUARTER

SEK million

 

		2007									Q1			2006
Isolated quarters		Q4			Q3			Q2						Q4			Q3			Q2			Q1
Networks		37,463			28,538			33,666			29,350			39,035			29,155			31,448			28,056
- Of which Network rollout		6,444			4,002			4,309			3,752			5,558			3,498			3,430			3,924
Professional Services		12,134			10,995			10,257			9,516			10,566			8,722			9,252			8,307
- Of which Managed services		3,318			3,352			2,910			2,592			2,514			2,238			2,414			2,325
Multimedia		4,868			4,017			3,650			3,370			4,548			3,066			3,449			2,831
Unallocated 1)		—			—			—			—			—			372			764			479
Less: Intersegment sales		-5			-5			46			-80			62			-44			-145			-102
Total		54,460			43,545			47,619			42,156			54,211			41,271			44,768			39,571
1)       Including the Defense business
		2007									Q1			2006
Sequential change (%)		Q4			Q3			Q2						Q4			Q3			Q2			Q1 2)
Networks		31	%		-15	%		15	%		-25	%		34	%		-7	%		12	%		—
- Of which Network rollout		61	%		-7	%		15	%		-32	%		59	%		2	%		-13	%		—
Professional Services		10	%		7	%		8	%		-10	%		21	%		-6	%		11	%		—
- Of which Managed services		-1	%		15	%		12	%		3	%		12	%		-7	%		4	%		—
Multimedia		21	%		10	%		8	%		-26	%		48	%		-11	%		22	%		—
Unallocated 1)		—			—			—			—			—			—			—			—
Less: Intersegment sales		—			—			—			—			—			—			—			—
Total		25	%		-9	%		13	%		-22	%		31	%		-8	%		13	%		—
1)       Including the Defense business 2)       2005 is not restated according to new organization
		2007									Q1			2006 2)
Year over year change (%)		Q4			Q3			Q2						Q4			Q3			Q2			Q1
Networks		-4	%		-2	%		7	%		5	%		—			—			—			—
- Of which Network rollout		16	%		14	%		26	%		-4	%		—			—			—			—
Professional Services		15	%		26	%		11	%		15	%		—			—			—			—
- Of which Managed services		32	%		50	%		21	%		11	%		—			—			—			—
Multimedia		7	%		31	%		6	%		19	%		—			—			—			—
Unallocated 1)		—			—			—			—			—			—			—			—
Less: Intersegment sales		—			—			—			—			—			—			—			—
Total		0	%		6	%		6	%		7	%		—			—			—			—
1)       Including the Defense business 2)       2005 is not restated according to new organization
		2007									0703			2006
Year to Date		0712			0709			0706						0612			0609			0606			0603
Networks		129,017			91,554			63,016			29,350			127,694			88,659			59,504			28,056
- Of which Network rollout		18,507			12,063			8,061			3,752			16,410			10,852			7,354			3,924
Professional Services		42,902			30,768			19,773			9,516			36,847			26,281			17,559			8,307
- Of which Managed services		12,172			8,854			5,502			2,592			9,491			6,977			4,739			2,325
Multimedia		15,905			11,037			7,020			3,370			13,894			9,346			6,280			2,831
Unallocated 1)		—			—			—			—			1,615			1,615			1,243			479
Less: Intersegment sales		-44			-39			-34			-80			-229			-291			-247			-102
Total		187,780			133,320			89,775			42,156			179,821			125,610			84,339			39,571
1)       Including the Defense business
		2007									0703			2006 2)
YTD year over year change (%)		0712			0709			0706						0612			0609			0606			0603
Networks		1	%		3	%		6	%		5	%		—			—			—			—
- Of which Network rollout		13	%		11	%		10	%		-4	%		—			—			—			—
Professional Services		16	%		17	%		13	%		15	%		—			—			—			—
- Of which Managed services		28	%		27	%		16	%		11	%		—			—			—			—
Multimedia		14	%		18	%		12	%		19	%		—			—			—			—
Unallocated 1)		—			—			—			—			—			—			—			—
Less: Intersegment sales		—			—			—			—			—			—			—			—
		4	%		6	%		6	%		7	%		—			—			—			—
1)       Including the Defense business 2)       2005 is not restated according to new organization

 

19

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OPERATING INCOME BY SEGMENT BY QUARTER

 

SEK million
		2007									Q1			2006
Isolated quarters		Q4			Q3			Q2						Q4			Q3 2)			Q2			Q1
Networks		3,836			2,256			6,396			4,910			8,230			2,625			6,032			4,835
Professional Services		1,792			1,682			1,515			1,405			1,581			1,039			1,441			1,248
Multimedia		-439			42			-11			273			527			86			23			78
Phones		2,286			1,737			1,464			1,621			2,247			1,974			961			670
Unallocated 1)		129			-81			-109			-58			-400			3,042			-204			-207
Total		7,604			5,636			9,255			8,151			12,185			8,766			8,253			6,624
		2007									0703			2006
Year to Date		0712			0709			0706						0612			0609 2)			0606			0603
Networks		17,398			13,562			11,306			4,910			21,722			13,492			10,867			4,835
Professional Services		6,394			4,602			2,920			1,405			5,309			3,728			2,689			1,248
Multimedia		-135			304			262			273			714			187			101			78
Phones		7,108			4,822			3,085			1,621			5,852			3,605			1,631			670
Unallocated 1)		-119			-248			-167			-58			2,231			2,631			-411			-207
Total		30,646			23,042			17,406			8,151			35,828			23,643			14,877			6,624
OPERATING MARGIN BY SEGMENT BY QUARTER
		2007									Q1			2006
As percentage of net sales, isolated quarters		Q4			Q3			Q2						Q4			Q3 2)			Q2			Q1
Networks		10	%		8	%		19	%		17	%		21	%		9	%		19	%		17	%
Professional Services		15	%		15	%		15	%		15	%		15	%		12	%		16	%		15	%
Multimedia		-9	%		1	%		0	%		8	%		12	%		3	%		1	%		3	%
Phones 3)		—			—			—			—			—			—			—			—
Unallocated 3)		—			—			—			—			—			—			—			—
Total		14	%		13	%		19	%		19	%		22	%		21	%		18	%		17	%
		2007									0703			2006
As percentage of net sales, Year to Date		0712			0709			0706						0612			0609 2)			0606			0603
Networks		13	%		15	%		18	%		17	%		17	%		15	%		18	%		17	%
Professional Services		15	%		15	%		15	%		15	%		14	%		14	%		15	%		15	%
Multimedia		-1	%		3	%		4	%		8	%		5	%		2	%		2	%		3	%
Phones 3)		—			—			—			—			—			—			—			—
Unallocated 3)		—			—			—			—			—			—			—			—
Total		16	%		17	%		19	%		19	%		20	%		19	%		18	%		17	%
1)       “Unallocated” consists mainly of costs for corporate staffs, non-operational capital gains and losses and the Defense business divested in 2006 2)       Including restructuring charges of SEK 2.9 b. and capital gains of SEK 3.0 b. 3)       Calculation not applicable   NUMBER OF EMPLOYEES
		2007									0703			2006
Year to date		0712			0709			0706						0612			0609			0606			0603
Western Europe 1)		41,500			40,300			39,600			38,050			38,450			38,900			40,600			40,600
Central & Eastern Europe, Middle East & Africa		7,350			6,850			6,200			6,600			6,300			6,050			5,500			5,300
North America		5,500			5,450			5,000			4,900			4,150			4,200			4,300			4,400
Latin America		6,550			6,000			5,050			4,600			4,500			4,200			3,700			3,550
Asia Pacific		13,100			12,350			11,650			11,000			10,400			10,150			9,700			9,400
Total		74,000			70,950			67,500			65,150			63,800			63,500			63,800			63,250
1) Of which Sweden		19,800			19,450			19,300			18,900			19,100			19,400			21,100			21,100

 

20

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EBITDA BY SEGMENT BY QUARTER

SEK million

 

		2007									Q1			2006
Isolated quarters		Q4			Q3			Q2						Q4			Q3 2)			Q2			Q1
Networks		5,767			3,846			8,183			6,643			10,170			4,227			7,624			6,677
Professional Services		1,988			1,828			1,689			1,494			1,660			1,147			1,544			1,345
Multimedia		-159			260			167			314			574			113			44			98
Phones		2,286			1,737			1,464			1,621			2,247			1,974			961			670
Unallocated 1)		129			-81			-109			-58			-399			3,041			-204			-169
Total		10,011			7,590			11,394			10,014			14,252			10,502			9,969			8,621
		2007									0703			2006
Year to Date		0712			0709			0706						0612			0609 2)			0606			0603
Networks		24,439			18,672			14,826			6,643			28,698			18,528			14,301			6,677
Professional Services		6,999			5,011			3,183			1,494			5,696			4,036			2,889			1,345
Multimedia		582			741			481			314			829			255			142			98
Phones		7,108			4,822			3,085			1,621			5,852			3,605			1,631			670
Unallocated 1)		-119			-248			-167			-58			2,269			2,668			-373			-169
Total		39,009			28,998			21,408			10,014			43,344			29,092			18,590			8,621
EBITDA MARGIN BY SEGMENT BY QUARTER
		2007									Q1			2006
As percentage of net sales, isolated quarters		Q4			Q3			Q2						Q4			Q3 2)			Q2			Q1
Networks		15	%		13	%		24	%		23	%		26	%		14	%		24	%		24	%
Professional Services		16	%		17	%		16	%		16	%		16	%		13	%		17	%		16	%
Multimedia		-3	%		6	%		5	%		9	%		13	%		4	%		1	%		3	%
Phones 3)		—			—			—			—			—			—			—			—
Unallocated 3)		—			—			—			—			—			—			—			—
Total		18	%		17	%		24	%		24	%		26	%		25	%		22	%		22	%
		2007									0703			2006
As percentage of net sales, Year to Date		0712			0709			0706						0612			0609 2)			0606			0603
Networks		19	%		20	%		24	%		23	%		22	%		21	%		24	%		24	%
Professional Services		16	%		16	%		16	%		16	%		15	%		15	%		16	%		16	%
Multimedia		4	%		7	%		7	%		9	%		6	%		3	%		2	%		3	%
Phones 3)		—			—			—			—			—			—			—			—
Unallocated 3)		—			—			—			—			—			—			—			—
Total		21	%		22	%		24	%		24	%		24	%		23	%		22	%		22	%

 

1)	“Unallocated” consists mainly of costs for corporate staffs, non-operational capital gains and losses and the Defense business divested in 2006

2)	Including restructuring charges of SEK 2.9 b. and capital gains of SEK 3.0 b.

3)	Calculation not applicable

 

21

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NET SALES BY MARKET AREA BY QUARTER

 

SEK million
		2007									Q1			2006
Isolated quarters		Q4			Q3			Q2						Q4			Q3			Q2			Q1
Western Europe 1)		15,396			12,341			12,440			12,508			17,166			11,676			12,852			11,488
Central & Eastern Europe, Middle East & Africa **		14,256			11,957			11,468			10,980			14,331			10,860			11,796			9,426
North America		4,324			2,980			3,012			3,106			3,960			2,895			3,726			5,281
Latin America		6,750			4,240			4,083			3,310			4,803			4,206			3,819			3,652
Asia Pacific **		13,734			12,027			16,616			12,252			13,951			11,634			12,575			9,724
Total 2)		54,460			43,545			47,619			42,156			54,211			41,271			44,768			39,571
1) Of which Sweden		2,453			1,946			2,055			1,941			2,287			1,882			2,008			1,632
2) Of which EU *		17,575			13,643			13,977			13,783			18,705			13,040			14,834			12,404
		2007									Q1			2006
Sequential change (%)		Q4			Q3			Q2						Q4			Q3			Q2			Q1
Western Europe 1)		25	%		-1	%		-1	%		-27	%		47	%		-9	%		12	%		-8	%
Central & Eastern Europe, Middle East & Africa **		19	%		4	%		4	%		-23	%		32	%		-8	%		25	%		-23	%
North America		45	%		-1	%		-3	%		-22	%		37	%		-22	%		-29	%		3	%
Latin America		59	%		4	%		23	%		-31	%		14	%		10	%		5	%		-39	%
Asia Pacific **		14	%		-28	%		36	%		-12	%		20	%		-7	%		29	%		-1	%
Total 2)		25	%		-9	%		13	%		-22	%		31	%		-8	%		13	%		-13	%
1) Of which Sweden		26	%		-5	%		6	%		-15	%		22	%		-6	%		23	%		-6	%
2) Of which EU *		29	%		-2	%		1	%		-26	%		43	%		-12	%		20	%		-14	%
		2007									Q1			2006
Year over year change (%)		Q4			Q3			Q2						Q4			Q3			Q2			Q1
Western Europe 1)		-10	%		6	%		-3	%		9	%		37	%		22	%		30	%		15	%
Central & Eastern Europe, Middle East & Africa **		-1	%		10	%		-3	%		16	%		17	%		18	%		18	%		10	%
North America		9	%		3	%		-19	%		-41	%		-22	%		-36	%		-42	%		58	%
Latin America		41	%		1	%		7	%		-9	%		-20	%		-18	%		-14	%		3	%
Asia Pacific **		-2	%		3	%		32	%		26	%		43	%		47	%		64	%		60	%
Total 2)		0	%		6	%		6	%		7	%		19	%		14	%		16	%		26	%
1) Of which Sweden		7	%		3	%		2	%		19	%		31	%		44	%		28	%		9	%
2) Of which EU *		-6	%		5	%		-6	%		11	%		29	%		23	%		38	%		14	%
		2007									0703			2006
Year to date		0712			0709			0706						0612			0609			0606			0603
Western Europe 1)		52,685			37,289			24,948			12,508			53,182			36,016			24,340			11,488
Central & Eastern Europe, Middle East & Africa **		48,661			34,405			22,448			10,980			46,413			32,082			21,222			9,426
North America		13,422			9,098			6,118			3,106			15,862			11,902			9,007			5,281
Latin America		18,383			11,633			7,393			3,310			16,480			11,677			7,471			3,652
Asia Pacific **		54,629			40,895			28,868			12,252			47,884			33,933			22,299			9,724
Total 2)		187,780			133,320			89,775			42,156			179,821			125,610			84,339			39,571
1) Of which Sweden		8,395			5,942			3,996			1,941			7,809			5,522			3,640			1,632
2) Of which EU *		58,978			41,403			27,760			13,783			58,983			40,278			27,238			12,404
		2007									0703			2006
YTD year over year change (%)		0712			0709			0706						0612			0609			0606			0603
Western Europe 1)		-1	%		4	%		2	%		9	%		27	%		22	%		23	%		15	%
Central & Eastern Europe, Middle East & Africa **		5	%		7	%		6	%		16	%		16	%		16	%		15	%		10	%
North America		-15	%		-24	%		-32	%		-41	%		-18	%		-17	%		-8	%		58	%
Latin America		12	%		0	%		-1	%		-9	%		-14	%		-11	%		-6	%		3	%
Asia Pacific **		14	%		21	%		29	%		26	%		52	%		57	%		62	%		60	%
Total 2)		4	%		6	%		6	%		7	%		18	%		18	%		21	%		26	%
1) Of which Sweden		8	%		8	%		10	%		19	%		28	%		26	%		19	%		9	%
2) Of which EU *		0	%		3	%		2	%		11	%		26	%		25	%		26	%		14	%

 

*)	For the purpose of comparison, 2006 has been restated including Bulgaria and Romania which entered into the European Union as from 2007

**)	2006 has been restated including Pakistan and Afghanistan in Asia Pacific instead of in Central and Eastern Europe, Middle East and Africa

 

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TOP 10 MARKETS IN SALES

 

Sales		YTD Share of total sales			Q4 Share of iso. total sales
CHINA		7	%		7	%
UNITED STATES		6	%		7	%
INDIA		6	%		4	%
ITALY		5	%		6	%
SPAIN		5	%		4	%
SWEDEN		4	%		5	%
UNITED KINGDOM		4	%		3	%
INDONESIA		3	%		3	%
JAPAN		3	%		3	%
BRAZIL		3	%		4	%

EXTERNAL NET SALES BY MARKET AREA BY SEGMENT

 

SEK million
		Professional
Oct - Dec 2007		Networks			Services			Multimedia			Total
Western Europe		8,291			4,888			2,217			15,396
Central & Eastern Europe, Middle East & Africa *		10,580			2,547			1,129			14,256
North America		3,016			980			328			4,324
Latin America		4,938			1,354			458			6,750
Asia Pacific *		10,633			2,365			736			13,734
Total		37,458			12,134			4,868			54,460
Share of Total		69	%		22	%		9	%		100	%
		Professional
Year to date 2007		Networks			Services			Multimedia			Total
Western Europe		28,085			17,287			7,313			52,685
Central & Eastern Europe, Middle East & Africa *		36,435			8,305			3,921			48,661
North America		8,392			3,965			1,065			13,422
Latin America		12,972			4,274			1,137			18,383
Asia Pacific *		43,101			9,061			2,467			54,629
Total		128,985			42,892			15,903			187,780
Share of Total		69	%		23	%		8	%		100	%

 

*)	2006 has been restated including Pakistan and Afghanistan in Asia Pacific instead of in Central and Eastern Europe, Middle East and Africa

TRANSACTIONS WITH SONY ERICSSON MOBILE COMMUNICATIONS

 

		2007						Q1		2006
SEK million		Q4		Q3		Q2				Q4		Q3		Q2		Q1
Revenues from Sony Ericsson		1,930		1,242		1,411		1,160		1,198		1,069		737		960
Purchases from Sony Ericsson		39		11		232		51		62		28		20		63
Receivables from Sony Ericsson		932		132		178		116		479		811		515		398
Liabilities to Sony Ericsson		204		1,357		2,464		3,720		108		65		59		183
Dividends from Sony Ericsson		—		1,388		2,561		—		—		—		—		1,160
PROVISIONS
		2007						Q1		2007
SEK million		Q4		Q3		Q2				0712		0709		0706		0703
Opening balance		10,357		11,675		12,291		13,882		13,882		13,882		13,882		13,882
Additions		1,710		874		1,056		1,519		5,159		3,449		2,575		1,519
Cost incurred		-1,215		-1,341		-1,276		-2,476		-6,308		-5,093		-3,752		-2,476
Reversal of excess amounts		-1,401		-668		-1,006		-675		-3,750		-2,349		-1,681		-675
Reclassification, translation difference and other		275		-183		610		41		743		468		651		41
Closing balance		9,726		10,357		11,675		12,291		9,726		10,357		11,675		12,291

 

23

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ERICSSON

OTHER INFORMATION

 

		Oct - Dec						Jan - Dec
		2007			2006			2007			2006
Number of shares and earnings per share
Number of shares, end of period (million)		16,132			16,132			16,132			16,132
Of which A-shares (million)		1,309			1,309			1,309			1,309
Of which B-shares (million)		14,823			14,823			14,823			14,823
Number of treasury shares, end of period (million)		232			251			232			251
Number of shares outstanding, basic, end of period (million)		15,900			15,881			15,900			15,881
Numbers of shares outstanding, diluted, end of period (million)		15,974			15,953			15,974			15,953
Average number of treasury shares (million)		236			256			242			262
Average number of shares outstanding, basic (million)		15,896			15,877			15,891			15,871
Average number of shares outstanding, diluted (million) 1)		15,970			15,949			15,964			15,943
Earnings per share, basic (SEK)		0.35			0.61			1.37			1.65
Earnings per share, diluted (SEK)1)		0.35			0.61			1.37			1.65
Ratios
Equity ratio, percent		—			—			55.1	%		56.2	%
Capital turnover (times)		1.3			1.6			1.2			1.3
Accounts receivable turnover (times)		3.7			4.4			3.4			3.9
Inventory turnover (times)		5.8			5.4			5.2			5.2
Return on equity, percent		17.1	%		33.7	%		17.2	%		23.7	%
Return on capital employed, percent		19.6	%		36.2	%		20.9	%		27.4	%
Days Sales Outstanding		—			—			102			85
Payable days		43			52			57			54
Payment readiness, end of period		—			—			64,678			67,454
Payment readiness, as percentage of sales		—			—			34.4	%		37.5	%
Exchange rates used in the consolidation
SEK / EUR - average rate		—			—			9.24			9.27
- closing rate		—			—			9.45			9.04
SEK / USD - average rate		—			—			6.74			7.38
- closing rate		—			—			6.43			6.85
SEK million
Other
Additions to property, plant and equipment		1,656			929			4,319			3,827
- Of which in Sweden		366			288			1,250			999
Additions to capitalized development expenses		359			373			1053			1,353
Capitalization of development expenses, net		-292			-258			-1,334			-1,166
Amortization of development expenses		651			631			2,387			2,519
Depreciation of property, plant and equipment and amortization of other intangible assets		1,756			1,436			5,976			4,997
Total depreciation and amortization		2,407			2,067			8,363			7,516
Export sales from Sweden		29,399			26,039			102,486			98,694

 

1)	Potential ordinary shares are not considered when their conversion to ordinary shares would increase earnings per share

ERICSSON PLANNING ASSUMPTIONS FOR YEAR 2008

Research and development expenses

We estimate R&D expenses for the full year to be at about the same runrate level as in the second half of 2007. The estimate includes amortizations/write-downs of intangible assets related to major acquisitions previously made. However, currency effects may cause this to change.

Tax rate

We estimate the tax rate for the full year 2008 to be around 30%.

Capital expenditures

Excluding acquisitions, the capital expenditures in relation to sales are not expected to be significantly different in 2008, remaining at roughly two percent of sales.

Utilization of provisions

The expected utilization of provisions for year 2008 will be stated in the Annual report.

 

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ACQUISITION OF LHS AG

As per October 1, 2007, Ericsson purchased 87% of the shares in LHS AG.

The acquisition has been accounted for using the purchase method of accounting, as defined in IFRS 3 Business Combinations. As prescribed under this method, Ericsson has allocated the total purchase price to assets acquired and liabilities assumed based on their fair values. The fair values have been determined by applying generally accepted principles and procedures.

Had the acquisition of LHS been made as per January 1, 2007, additional net sales of SEK 657 million would have been recognized and the operating income would have been reduced by SEK 17 million.

Allocation of purchase consideration

 

		SEK b.
Intangible assets subject to amortization

 

Customer relations						0.8
Other, mainly technology						0.4
		Subtotal				1.2
Deferred tax asset						0.3
Goodwill						1.3
		Subtotal				1.6
Other assets						0.6
Total assets						3.4
Liabilities
Current liabilities						0.2
Deferred tax liability						0.4
		Subtotal				0.6
Minority interest						0.1
Net assets acquired						2.7

The determination of purchase consideration allocation and fair values of assets acquired and liabilities assumed is based on preliminary appraisal; therefore, these values may be subject to minor adjustments.

The main reasons for that part of the acquisition costs are recognized as goodwill, representing 39% of total assets acquired, are that strong future synergies are estimated.

 

Cash flow effects
Total cash purchase consideration		2.7
Less acquired cash and cash equivalents		0.3
Net cash outflow from the acquisition		2.4

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Date: February 1^st, 2008