6-K
Table of Contents

 

 

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

January 30, 2014

 

 

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 January 30, 2014 regarding “Ericsson reports fourth quarter and full year results 2013”

 

 

 


Table of Contents

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.

 

TELEFONAKTIEBOLAGET LM ERICSSON (publ)

By:

  /s/ NINA MACPHERSON
  Nina Macpherson
  Senior Vice President and
  General Counsel

By:

  /s/ HELENA NORRMAN
  Helena Norrman
  Senior Vice President
  Corporate Communications

Date: January 30, 2014


Table of Contents

LOGO

ERICSSON fourth QUARTER REPORT 2013


Table of Contents

Ericsson fourth quarter and full year report 2013

JANUARY 30, 2014

FOURTH QUARTER HIGHLIGHTS

 

    Sales of SEK 67.0 b., flat YoY.

 

    Sales for comparable units and adjusted for FX, increased 4% YoY.

 

    Operating income incl. JV of SEK 9.1 (-3.8) b. with operating margin of 13.5% (-5.7%), including a one-time charge of SEK -0.4 b. related to the acquisition of Airvana

 

    Net income SEK 6.4 (-6.3) b.

 

    Successfully closed an IPR cross license agreement with Samsung on FRAND terms. Impact on net sales of SEK 4.2 b., on operating income of SEK 4.2 b. and on net income of SEK 3.3 b. included in all numbers.

 

    EPS diluted SEK 1.97 (-1.99). EPS Non-IFRS SEK 2.42 (-1.40).

 

    Cash flow from operating activities of SEK 14.6 (15.7) b.

 

    Segment Modems was consolidated as of October 1, 2013

FULL YEAR HIGHLIGHTS

 

    Sales of SEK 227.4 b., flat YoY.

 

    Sales for comparable units and adjusted for FX, up 5% YoY.

 

    Operating income incl. JV was SEK 17.8 (10.5) b. with an operating margin of 7.8% (4.6%).

 

    Net income SEK 12.2 (5.9) b.

 

    All numbers include effects of the IPR cross license agreement with Samsung with impact on net sales of SEK 4.2 b., on operating income of SEK 4.2 b. and on net income of SEK 3.3 b.

 

    EPS diluted SEK 3.69 (1.78). EPS Non-IFRS SEK 5.62 (3.55).

 

    Cash flow from operating activities of SEK 17.4 (22.0) b.

 

    Proposed dividend for 2013 of SEK 3.00 (2.75) per share.

 

SEK b.

   Q4
2013
    Q4
2012
    YoY
Change
    Q3
2013
    QoQ
Change
    Full year
2013
    Full year
20122)
    Full year
Change
 

Net sales

     67.0        66.9        0     53.0        27     227.4        227.8        0

Of which Networks

     34.8        35.3        -1     26.7        30     117.7        117.3        0

Of which Global Services

     27.2        28.0        -3     24.0        13     97.4        97.0        0

Of which Support Solutions

     5.1        3.6        41     2.4        117     12.2        13.5        -9

Of which Modems

     0.0        —          —          —          —          0.0        —          —     

Gross margin

     37.1     31.1     —          32.0     —          33.6     31.6     —     

Operating income excl JV

     9.1        4.8        90     4.3        112     18.0        22.2        -19

Operating margin excl JV

     13.5     7.1     —          8.1     —          7.9     9.7     —     

Networks

     17     8     —          10     —          10     6     —     

Global Services

     8     6     —          8     —          6     6     —     

Support Solutions

     37     8     —          -5     —          12     9     —     

Operating income incl JV

     9.1        -3.8 3)      —          4.2        115     17.8        10.5 3)      71

Operating margin incl JV

     13.5     -5.7     —          8.0     —          7.8     4.6     —     

Net income

     6.4        -6.3 3)      —          3.0        114     12.2        5.9 3)      105

EPS diluted, SEK

     1.97        -1.99        —          0.90        119     3.69        1.78        107

EPS (Non-IFRS), SEK1)

     2.42        -1.40        —          1.31        85     5.62        3.55        58

Cash flow from operating activities

     14.6        15.7        -7     1.5        —          17.4        22.0        -21

Net cash, end of period

     37.8        38.5        -2     24.7        53     37.8        38.5        -2

 

1)  EPS, diluted, excl. restructuring, amortizations and write-downs of acquired intangible assets
2)  Including gain from divestment of Sony Ericsson of SEK 7.7 b
3)  Including a charge related to ST-Ericsson of SEK -8.0 b

 

Ericsson Fourth Quarter Report 2013

   1


Table of Contents

Comments from Hans vestberg, PResident and ceo

 

“Ericsson’s sales for comparable units, adjusted for FX, grew 5% for the full year. I am pleased that we have successfully closed the IPR cross-licensing agreement with Samsung. Our industry is built on scale and a strong tradition of sharing technologies through licensing on fair, reasonable and non-discriminatory (FRAND) terms. The agreement shows the value of our R&D investments and enables both companies to continue to innovate and bring new technologies to the market,” says Hans Vestberg, President and CEO of Ericsson (NASDAQ:ERIC).

“Our focus on profitability started to pay off and operating margin for the group gradually improved in 2013, despite significant currency headwind, driven primarily by improvements in Networks and Network Rollout.

The business mix, with a higher share of coverage projects than capacity projects, started to shift towards more capacity during the year. As anticipated, sales came under some pressure during the quarter. As previously communicated, the major reason behind this development is the two large mobile broadband coverage projects, which peaked in North America in the first half of 2013 and the impact from reduced activity in Japan.

While executing on the large rollout projects in the US, we have also strengthened our professional services position and capabilities. For the full year Global Services accounted for the majority of the region’s sales and we are today the market leader in both telecom services and mobile infrastructure in one of the world’s most advanced and dynamic ICT markets.

The LTE tenders in China continue and so far the two major operators that have made their vendor selections have chosen Ericsson. During the quarter, sales in China improved as a result of deliveries to the ongoing mobile broadband coverage projects.

In the fourth quarter Ericsson continued to grow in some of its European key markets. During the last years we have strengthened our position in Europe through the network modernization projects. These projects have been delivered according to plan and the major part of the negative margin impact from these projects is now behind us. Over time, we expect the telecom industry in Europe to improve driven by macroeconomic development and a recent investment announcement made by one of the large operators.

During 2013 Ericsson executed on a number of strategic initiatives to both manage the ongoing technology transition in the industry and to transform the company for future business opportunities. We have solidified our core business as well as taken important steps to build a leadership position in new and targeted key areas. This includes consolidating the modems business and the acquisition of the IPTV business Mediaroom from Microsoft. We will gradually increase resource and capital allocation in these areas as well as in IP, Cloud, OSS and BSS.

The long-term fundamentals in the industry remain attractive and with our ongoing strategic initiatives we are well positioned to continue to support our customers in a transforming ICT market.

We have worked diligently to improve working capital and we ended the year with a strong cash flow of SEK 17.4 (22.0) b. and a full-year cash conversion of 79%, above the target of 70%, giving Ericsson a solid balance sheet to continue to execute on our strategy. The Board of Directors proposes a dividend for 2013 of SEK 3.00 (2.75) per share, an increase by 9%,” concludes Vestberg.

 

 

Ericsson Fourth Quarter Report 2013

   2


Table of Contents

Financial highlights

INCOME STATEMENT

 

LOGO

 

IMPACT OF SAMSUNG IPR AGREEMENT

On January 27, 2014, Ericsson and Samsung reached an agreement on global patent licenses between the two companies. The cross license agreement covers patents relating to GSM, UMTS, and LTE standards for both networks and handsets.

The agreement includes an initial payment and ongoing royalty payments from Samsung to Ericsson for the term of the new multi-year license agreement.

The initial payment contributed to net sales with SEK 4.2 b., operating income of SEK 4.2 b. and net income of SEK 3.3 b. in the fourth quarter. Ericsson expects that the initial payment will impact Ericsson’s operating cash flow in the beginning of 2014. This specific agreement impacts Segments Networks and Support Solutions. Numbers excluding the Samsung agreement:

 

SEK b. (excl Samsung agreement)

   Q4 2013     Full year
2013
 

Net sales

     62.8        223.2   

Of which Networks

     31.8        114.8   

Of which Global Services

     27.2        97.4   

Of which Support Solutions

     3.8        11.0   

Of which Modems

     0.0        0.0   

Gross margin

     32.9     32.3

Operating income excl JV

     4.9        13.8   

Operating margin excl JV

     7.7     6.2

Networks

     9     7

Global Services

     8     6

Support Solutions

     16     2

Operating income incl JV

     4.9        13.6   

Operating margin incl JV

     7.7     6.1

Net income

     3.2        8.9   

EPS diluted, SEK

     0.96        2.68   

EPS (Non-IFRS), SEK

     1.42        4.61   

FOURTH QUARTER

Sales for comparable units, adjusted for FX, increased 4% YoY. The Samsung agreement impacted sales by SEK 4.2 b. Sales increased in China and Russia, while Networks sales in North America and overall sales in Japan declined. CDMA sales in North America, as well as GSM sales in China, continued to decline.

Including the Samsung agreement, reported sales increased, 27% QoQ. Mobile broadband deliveries in China increased, while there were lower project activities in North America and Japan.

Licensing revenues grew in the quarter both YoY and QoQ, also excluding the Samsung agreement.

Restructuring charges amounted to SEK 1.0 (1.7) b., mainly driven by continued execution of the service delivery strategy.

Gross margin increased YoY to 37.1% (31.1%), due to the Samsung agreement, reduced negative effect from network modernization projects in Europe and continued business mix improvements. The QoQ gross margin improvement from 32.0% was driven by the same factors. Large LTE coverage projects in China impacted hardware margins negatively. The share of services sales was 41% (42%), a decline by -4%-points QoQ.

 

 

Ericsson Fourth Quarter Report 2013

   3


Table of Contents

Total operating expenses amounted to SEK 16.1 (16.4) b. Operating expenses, excluding the added modems business, the one-time charge related to the acquisition of Airvana, the acquired Mediaroom operations and restructuring charges, were down -6% YoY and R&D expenses, adjusted for the same items, were down -9%. The modems business added cost of SEK -0.5 b. and the one-time charge related to Airvana amounted to SEK -0.4 b.

R&D expenses amounted to SEK 8.9 (9.2) b. and selling, general and administrative expenses (SG&A) amounted to SEK 7.2 (7.1) b.

Other operating income and expenses were flat YoY and amounted to SEK 0.3 b. The re-evaluation effect for new hedges taken in 2013 was SEK 0.1 b. For these new hedges hedge accounting is not applied (see Accounting Policies). In the third quarter there was a positive re-evaluation effect for new hedges of SEK 0.8 b.

Operating income, including JV, increased to SEK 9.1 (-3.8) b. The fourth quarter 2012 included a non-cash charge related to ST-Ericsson of SEK -8.0 b. Operating margin, including JV, was 13.5% (-5.7%). Currency had an overall negative impact on operating income YoY.

Financial net amounted to SEK -0.1 (-0.1) b. and declined QoQ from SEK 0.1 b., mainly related to foreign exchange currency revaluation effects. Tax costs were SEK -2.5
(-2.4) b.

Net income increased to SEK 6.4 (-6.3) b. The Samsung agreement had a positive effect of SEK 3.3 b.

EPS diluted was SEK 1.97 (-1.99).

EPS Non-IFRS was SEK 2.42 (-1.40).

 

 

Ericsson Fourth Quarter Report 2013

   4


Table of Contents

FULL YEAR

Full year reported sales were flat and amounted to SEK 227.4 (227.8) b. During the year sales were negatively impacted by strong currency headwind and lower sales in North East Asia, driven by lower GSM investments in China combined with lower project activity in Japan and South Korea. In North America the CDMA sales declined by -50% to SEK 4.2 (8.4) b. For comparable units, adjusted for FX, full year sales increased 5%.

Revenues for IPR and licensing were SEK 10.6 (6.6) b. the Samsung agreement contributed with SEK 4.2 b.

With a large share of coverage projects in the beginning of the year and with slightly improved business mix from the second quarter, the commodity mix remained stable compared to last year. Software represented 24% (23%), hardware 34% (35%) and services 42% (42%) of total sales in 2013.

Restructuring charges amounted to SEK 4.5 (3.4) b., mainly related to continued execution of the service delivery strategy and headcount reductions in Sweden. The proactive work to drive efficiency and cost reductions continues.

Gross margin increased for the full year to 33.6% (31.6%), due to the agreement with Samsung, reduced negative effect from network modernization projects in Europe and improved business mix. The Global Services share of Group sales was flat at 43%.

Total operating expenses were basically flat and amounted to SEK 58.5 (58.9) b. During the fourth quarter expenses related to the modem business added SEK -0.5 b. to operating expenses. A one-time charge related to the acquisition of Airvana impacted the operating expenses negatively by SEK -0.4 b. Excluding restructuring charges, the operating expenses were down -2% compared to 2012. R&D expenses amounted to SEK 32.2 (32.8) b. and selling, general and administrative expenses (SG&A) amounted to SEK 26.3 (26.0) b.

During 2014, R&D expenses, excluding expenses related to Modems, Mediaroom and restructuring, are expected to increase somewhat, mainly due to investments in IP.

Other operating income and expenses decreased to SEK 0.1 (9.0) b. During the year, one-time charges related to the divestment of ACS and the exiting of the telecom and power cable operations of SEK -0.9 b. impacted other operating income negatively. For new hedges taken in 2013 hedge accounting is not applied. The total re-evaluation effect for 2013 hedges on other operating income was SEK 0.5 b. In 2012, other operating income included a gain related to the divestment of Sony Ericsson of SEK 7.7 b. and to Multimedia brokering (IPX) of SEK 0.2 b.

Ericsson’s share in earnings of JV and associated companies was SEK -0.1 (-11.7) b. In 2012 a non-cash charge of SEK -8.0 b. related to ST-Ericsson was made.

Operating income, including JV, increased to SEK 17.8 (10.5) b., positively impacted by improved gross margin and no negative effect from ST-Ericsson. Operating income was negatively impacted by one-time charges of SEK -1.3 b. related to the divestment of ACS, the exiting of the telecom and power cable operations and the acquisition of Airvana. Operating margin, including JV, was 7.8% (4.6%). Operating income including JV and excluding the Samsung agreement was SEK 13.6 b. with an operating margin of 6.1%. 2012 included a gain of SEK 7.7 b. related to the divestment of Sony Ericsson.

Financial net amounted to SEK -0.7 (-0.3) b. The difference is mainly attributable to lower interest net as an effect of lower interest rates during 2013 compared to in 2012.

The tax rate for 2013 was 29% compared to 42% in 2012, positively impacted by product and market mix and the change in corporate tax rate in Sweden. Tax costs were SEK -4.9 (-4.2) b.

Net income increased to SEK 12.2 (5.9) b., positively impacted by the Samsung agreement by SEK 3.3 b.

EPS diluted was SEK 3.69 (1.78). EPS Non-IFRS was SEK 5.62 (3.55).

 

 

Ericsson Fourth Quarter Report 2013

   5


Table of Contents

BALANCE SHEET AND OTHER PERFORMANCE INDICATORS – FOURTH QUARTER

 

LOGO

 

FOURTH QUARTER

All comparisons relating to balance sheet items are QoQ.

Trade receivables increased to SEK 71.0 (64.9) b. driven by QoQ sales increase and the Samsung agreement.

Inventory decreased to SEK 22.8 (28.1) b., positively impacted by improved business mix and efficiency measures.

Cash, cash equivalents and short-term investments amounted to SEK 77.1 (60.7) b. The net cash position increased by SEK 13.1 b. to SEK 37.8 (24.7) b., primarily due to higher earnings and improved working capital.

In November, a USD 684 million European Investment Bank (EIB) loan was disbursed. The loan agreement was signed in October 2012 and the loan supports Ericsson’s R&D. The loan will mature in November 2020. The existing SEK 4 b. loan, with original maturity in July 2015, was repaid in January 2014.

During the quarter, approximately SEK 1.4 b. of provisions was utilized, of which SEK 0.3 b. were related to restructuring. Additions of SEK 0.9 b. were made, of which SEK 0.4 b. related to restructuring. Reversals of SEK 0.6 b. were made. Cash outlays of SEK 1.3 b. remain to be made from the restructuring provision.

Cash flow from operating activities was SEK 14.6 (15.7) b. YoY with no impact from the Samsung agreement.

The total number of employees increased QoQ to 114,340 (113,989).

FULL YEAR

Compared to December 31, 2012, trade receivables increased from SEK 63.7 b. to 71.0 b. mainly due to the Samsung agreement. Days sales outstanding (DSO) increased from 86 to 97 days.

Inventory decreased from SEK 28.8 b. to 22.8 b., positively impacted by improved business mix and efficiency measures.

Inventory turnover days (ITO) improved from 73 to 62 days. Accounts payable days decreased from 57 to 53 days.

During the year, Ericsson concluded the following refinancing activities to extend the average debt maturity profile:

 

  In June, a EUR 313 million bond was repaid

 

  In June, Ericsson refinanced a USD 2 b. Revolving Credit Facility (RCF). The new facility is a five year facility with two one-year extension options

 

  In November, a USD 684 million European Investment Bank (EIB) loan was disbursed. The loan agreement was signed in October 2012 and the loan supports R&D activities. The loan will mature in November 2020.

A SEK 4 b. EIB loan, with original maturity in July 2015, was repaid in January 2014.

Provisions amounted to SEK 5.4 (8.6) b. by end of the year. The reduction was mainly due to utilization of the 2012 ST-Ericsson provision.

Cash flow from operations was positive at SEK 17.4 (22.0) b. driven by improved working capital. There was no impact on cash flow from the Samsung agreement.

 

 

Ericsson Fourth Quarter Report 2013

   6


Table of Contents

Cash, cash equivalents and short-term investments amounted to SEK 77.1 (76.7) b. The net cash position decreased from SEK 38.5 b to 37.8 b. Cash conversion for the full year 2013 ended at 79%.

Capital expenditures amounted to SEK 4.5 b., 2% of net sales. Annual capital expenditures are normally around 2% of sales. This corresponds to the needs for keeping and maintaining current capacity level, including the introduction of new technology and methods.

For the full year, the net number of employees increased by 4,085 to 114,340 (110,255), of which

3,293 in services and 741 in R&D. In 2013, 5,377 people joined Ericsson through acquisitions and through managed services contracts. At the same time approximately 12,000 employees left Ericsson, reflecting natural attrition rate and ongoing company transformation.

The Board of Directors proposes a dividend for 2013 of SEK 3.00 (2.75), reflecting earnings and balance sheet structure in 2013, as well as coming years’ business plans and expected economic development, in accordance with Ericsson’s dividend policy.

 

 

Ericsson Fourth Quarter Report 2013

   7


Table of Contents

Segment results

NETWORKS

 

LOGO

 

SEK b.

   Q4
2013
    Q4
2012
    YoY
Change
    Q3
2013
    QoQ
Change
    Full year
2013
    Full year
2012
    Change  

Network sales

     34.8        35.3        -1     26.7        30     117.7        117.3        0

Operating income

     5.9        2.8        108     2.6        129     11.3        7.1        60

Operating margin

     17     8     —          10     —          10     6     —     

 

FOURTH QUARTER

Sales for comparable units, adjusted for FX, increased 3% YoY. The increase is related to the Samsung agreement. As previously communicated, lower sales in North America and Japan, where large mobile broadband coverage projects are coming to an end, had a negative impact on sales. Coverage projects in China and Russia did not fully offset this decrease. GSM investments in China, CDMA and circuit-switched core continued their structural decline following operators’ transition to LTE. CDMA sales declined -57% YoY and increased 16% QoQ to SEK 1.1 b. The Samsung agreement added sales of SEK 2.9 b.

Sales in North East Asia, Latin America and Middle East showed a strong development QoQ.

The demand for the multi-application router, SSR 8000, continues. 96 SSR contracts have been signed to date, of which 18 new in the quarter, including six for fixed networks. As operators are preparing for Voice over LTE (VoLTE), including video communication and other service enhancements, the need for upgrades in the legacy voice network is increasing.

Operating margin increased to 17% (8%) driven by the Samsung agreement, improved business mix, positive effects from cost adaptations and portfolio streamlining. During the quarter the European network modernization projects continued to improve and were not dilutive to margins. Lower sales, negative currency effects and a one-time charge of SEK -0.4 b., related to the Airvana acquisition, impacted operating margin negatively. Excluding the Samsung agreement, operating margin was 9%.

Restructuring charges amounted to SEK -0.3 (-0.9) b.

 

 

Ericsson Fourth Quarter Report 2013

   8


Table of Contents

FULL YEAR

Sales for comparable units, adjusted for FX, increased 5%, primarily due to the Samsung agreement, increased sales in Latin America, Europe and the Middle East. This was partly offset by lower sales in North America, where CDMA related sales declined by -50%. North East Asia sales declined as an effect of lower project activities in Japan and South Korea and lower GSM investments in China. At the end of the year there was solid demand for our IMS and data layered architecture UDC (User Data Consolidation). However, this was not enough to offset the continued structural decline in circuit-switched core.

Operators’ focus on improving network performance and new service opportunities were the main drivers

for LTE and mobile broadband investments throughout the year. The positive customer feedback on the new small-cell product Radio Dot System is a demonstration of our innovation leadership.

Operating margin gradually improved during the year and ended at 10% (6%) for the full year. This was a result of the Samsung agreement, reduced negative effect from network modernization projects in Europe, improved business mix and strong focus on improving profitability. Restructuring charges amounted to SEK -2.2 (-1.3) b. This was primarily related to reductions of operations in Sweden and dismantling of the CDMA operations. Operating margin excluding the Samsung agreement was 7%.

 

 

Ericsson Fourth Quarter Report 2013

   9


Table of Contents

GLOBAL SERVICES

 

LOGO

 

SEK b.

   Q4
2013
    Q4
2012
    YoY
Change
    Q3
2013
    QoQ
Change
    Full year
2013
    Full year
2012
    Change  

Global Services sales

     27.2        28.0        -3     24.0        13     97.4        97.0        0

Of which Professional Services

     18.8        18.9        -1     16.2        16     66.4        67.1        -1

Of which Managed Services

     6.6        6.8        -3     6.3        5     25.5        25.2        1

Of which Network Rollout

     8.4        9.2        -8     7.7        8     31.0        30.0        4

Operating income

     2.1        1.8        18     1.8        15     6.2        6.2        -1

Of which Professional Services

     2.6        2.8        -5     2.3        15     9.0        9.1        -1

Of which Network Rollout

     -0.5        -1.0        46     -0.5        -15     -2.8        -2.9        1

Operating margin

     8     6     —          8     —          6     6     —     

Professional Services

     14     15     —          14     —          14     14     —     

Network Rollout

     -6     -11     —          -6     —          -9     -10     —     

FOURTH QUARTER

 

Sales growth for comparable units, adjusted for FX, was 1% YoY. Demand for consulting and systems integration services was strong in the quarter as operators focus on improving network performance and increasing their operational efficiency. Network Rollout sales continued to decline as a result of lower coverage project activity.

Global Services sales growth QoQ was driven by Professional Services, where Consulting and System Integration as well as Network Design and Optimization showed strong development.

Global Services operating margin improved YoY to 8% (6%), primarily due to higher Network Rollout margins. However, Network Rollout margin continued to be negative in the quarter mainly due to the network modernization projects in Europe. Professional Services showed stable margin at 14% (15%).

Restructuring charges amounted to SEK -0.6 (-0.6) b.

 

 

Ericsson Fourth Quarter Report 2013

   10


Table of Contents

FULL YEAR

 

Reported sales for Global Services were flat in comparison to a strong 2012. Growth for comparable units, adjusted for FX, was 5%. Network Rollout reported sales grew 4% driven by high coverage project activities, primarily in North America. Professional Services sales grew, adjusted for FX, supported by strong development in region North America and India.

Global services operating margin was 6% (6%). Network Rollout margin gradually improved during the year due to the declining dilutive effect from the European network modernization projects as well as the ongoing efficiency programs. Professional Services operating margin was 14% (14%).

Restructuring charges amounted to SEK -2.0 (-1.9) b. for the full year.

There is a growing momentum for IT-related business in the market. With acquisitions such as TeleOss (Thailand), Devoteam (France) and TelcoCell (Canada) Ericsson has further strengthened its capabilities and market position. Currently there is 16,000 Consulting and Systems Integration professionals.

 

 

Other information

   Q4
2013
     Q3
2013
     Q2
2013
     Q1
2013
     Full year
2013
 

Number of signed Managed Services contracts

     25         19         19         21         84   

Of which expansions/extensions

     10         8         5         8         31   

Number of signed significant consulting & systems integration contracts1)

     9         6         8         8         31   

Number of subscribers in networks managed by Ericsson, end of period2)

     1 b.         1 b.         1 b.         ~ 950 m.         1 b.   

Of which in network operations contracts

     600 m.         600 m.         600 m.         550 m.         600 m.   

Number of Ericsson services professionals, end of period

     64,000         64,000         64,000         61,000         64,000   

 

1)  In the areas of OSS and BSS, IP, Service Delivery Platforms and data center build projects.
2)  The figure includes network operations contracts and field operation contracts.

 

Ericsson Fourth Quarter Report 2013

   11


Table of Contents

SUPPORT SOLUTIONS

 

LOGO

 

SEK b.

   Q4
2013
    Q4
2012
    YoY
Change
    Q3
2013
    QoQ
Change
    Full year
2013
    Full year
2012
    Change  

Support Solutions sales

     5.1        3.6        41     2.4        117     12.2        13.5        -9

Operating income

     1.9        0.3        —          -0.1        —          1.5        1.2        27

Operating margin

     37     8     —          -5     —          12     9     —     

FOURTH QUARTER

 

Sales growth for comparable units, adjusted for FX, increased 35% YoY as a result of the Samsung agreement. Sales QoQ increased 117% driven by the Samsung agreement, the acquired Mediaroom business this in combination with strong software license revenue. The Samsung agreement added sales of SEK 1.3 b.

Segment sales are characterized by the fluctuations between quarters in software volumes. This, in combination with investments in the next generation of cloud-adopted solutions, and the high proportion of fixed costs in software business creates uneven distributed margins that is impacted by the variation in sales volumes.

Operating margin increased YoY to 37% (8%) positively impacted by the Samsung agreement. Operating margin excluding the Samsung agreement was 16% as a result of high software license sales, portfolio streamlining and efficiencies.

Operating margin increased QoQ, driven by the Samsung agreement and higher sales volumes.

FULL YEAR

Sales growth for comparable units, adjusted for FX, was 0%. The development was primarily driven by portfolio changes and decline in sales of TV compression technology while OSS and BSS showed stable development. The Samsung agreement had an overall positive impact on sales.

Operating margin increased to 12% (9%) due to the Samsung agreement. Lower sales and a charge of SEK -0.3 b. related to the divestment of ACS had a negative impact on margin.

Demand for OSS and BSS continued to be strong. Customer interest to partner with vendors that can address an end-to-end suite of OSS and BSS solutions increased. The overall segment is positively impacted by growth in mobile broadband as this requires improved user experience. With its complete OSS and BSS offerings Ericsson is well positioned to take on the role.

During the year, the acquisition of Microsoft’s TV solution business Mediaroom was completed, strengthening Ericsson’s position in the growing TV and media management market. Service providers increasingly have premium content as part of their overall mix, fueled by TV-on demand and multiscreen. Content anywhere, anytime and on any device is a trend that drives growth together with increasing access to content and bundled packages. This is one of the main drivers of the sharp increase of video traffic in the networks. As a consequence, service providers and network owners need solutions to make networks video centric and efficient for video delivery.

The number of subscriptions served by Ericsson’s charging and billing solutions was 2.1 billion at the end of the year.

 

 

Ericsson Fourth Quarter Report 2013

   12


Table of Contents

MODEMS

 

SEK b.

   Q4
2013
     Q4
2012
     YoY
Change
     Q3
2013
     QoQ
Change
     Full year
2013
     Full year
2012
     Change  

Modems sales

     0.0         —           —           —           —           0.0         —           —     

Operating income

     -0.5         —           —           —           —           -0.5         —           —     

Operating margin

     —           —           —           —           —           —           —           —     

 

FROM ST-ERICSSON TO SEGMENT MODEMS

ST-Ericsson was created in 2008 as a joint venture between Ericsson and STMicroelectronics. Early 2013 the parents agreed to split up and close the joint venture.

Ericsson decided to take over the design, development and sales of the thin LTE multi-mode modem solutions as it is seen as an important part for the Ericsson vision of 50 billion connected devices in the Networked Society. The ambition is to be among the top three suppliers in the thin-modem market.

The company ST-Ericsson is winding down and all businesses have been transferred to parents or divested. In 2012 Ericsson made a provision of SEK 3.3 b., related to the ongoing implementation of strategic options at hand.

Ericsson now has a highly focused thin-modem operation with industry-leading technology and intellectual property. A new segment was established as of October 1, 2013, and the modems business is now consolidated into Ericsson.

FOURTH QUARTER

Segment Modems generated an operating loss of SEK 0.5 b. in the quarter, primarily related to R&D expenses. In the quarter the new product M7450 was released for commercial use and the work with OEMs is ongoing to get M7450 based products on the market. Chipset production has started.

Operating expenses for the modems business in 2014 is estimated to approximately SEK 2.6 b.

 

 

Ericsson Fourth Quarter Report 2013

   13


Table of Contents

Regional sales overview

 

     Fourth quarter 2013                            
            Global      Support             Change     Full year         

SEK b.

   Networks      Services      Solutions      Total      YoY     QoQ     2013      Change  

North America

     5.3         7.4         1.0         13.8         -19     -5     59.3         5

Latin America

     3.5         2.9         0.3         6.7         4     27     22.0         0

Northern Europe and Central Asia

     2.3         1.3         0.1         3.7         23     25     11.6         2

Western and Central Europe

     2.1         2.9         0.2         5.2         -4     19     18.5         6

Mediterranean

     2.9         3.9         0.3         7.1         0     25     24.2         4

Middle East

     3.0         2.3         0.6         5.9         17     35     17.4         12

Sub-Saharan Africa

     1.3         1.1         0.2         2.6         -28     -4     10.0         -11

India

     1.2         0.7         0.1         2.0         23     54     6.1         -5

North East Asia

     6.0         2.5         0.2         8.6         -16     43     27.4         -24

South East Asia and Oceania

     2.4         1.7         0.2         4.3         -5     18     15.8         5

Other1)

     4.8         0.4         2.0         7.2         141     226     15.0         22
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

Total

     34.8         27.2         5.1         67.0         0     27     227.4         0
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

 

1)  Region “Other” includes licensing revenues, sales of telecom cables, broadcast services, power modules and other businesses. The acquired Technicolor Broadcast Service Division is reported in region “Other”. Multimedia brokering (IPX) was part of region “Other” and divested end Q312. The power cable business was divested in Q313.

 

North America

Networks sales continued to decline QoQ as a result of the two large mobile broadband coverage projects which peaked in first half of 2013. However, business fundamentals remain positive. Increased smartphone penetration, mobile broadband consumption and 4G device lineup remain drivers for network expansion. Network evolution has driven strong professional services business.

Networks sales declined for the full year with a strong first half while second half was weaker as a result of the two large mobile broadband coverage projects that peaked in the first half of 2013. While executing on the large rollout projects in the US, Ericsson has also strengthened its professional services position and capabilities. For the full year Global Services accounted for the majority of the region’s sales.

Latin America

Sales increased in the quarter driven by operator investments in 3G network quality and LTE rollouts.

LTE deployments ramped up after a slow start and together with 3G network quality investments drove sales growth for the full year 2013. However, macroeconomic development in mainly Brazil and Mexico continued to slow down during the year.

Northern Europe and Central Asia

Sales growth YoY and QoQ was driven by 2G/3G/4G equipment sales and deployments in Russia. Professional Services developed well following increased network quality focus across the region.

Full year sales growth was mainly driven by Networks sales in Russia. Operators continued to show high interest in OSS and BSS.

Western and Central Europe

In the quarter network modernization projects progressed according to plan and LTE deployment to the installed base continued.

The full year sales growth was driven by network modernization projects in several countries and also by a high activity level in managed services.

Mediterranean

Modernization projects in France and LTE deployments in Spain offset lower investments in Italy, resulting in stable sales YoY.

Sales in 2013 grew, driven by 3G deployments in Northwest Africa and modernization projects.

 

 

Ericsson Fourth Quarter Report 2013

   14


Table of Contents

Middle East

Sales grew both YoY and QoQ. LTE is being deployed in the region but still represents a small share of Networks sales. There is continued demand for Professional Services, both System Integration and Managed Services, as operators seek network performance quality and operational efficiencies. Political unrest prevails in several countries.

Sales for the full year grew, driven by increased investments in mobile broadband.

Sub-Saharan Africa

Operators continue to focus on improving capacity on 2G and 3G networks to improve quality of services. However, sales were negatively impacted by reduced deployment pace in Nigeria and South Africa. Professional services growth is fueled by continued good demand for managed services.

For the full year 2013 sales volumes came from 2G and 3G deployment and managed services, although the deployment pace slowed down in the fourth quarter. Long-term industry fundamentals remain positive as mobile broadband and smartphone penetration is still at low levels.

India

Sales grew both YoY and QoQ mainly due to network capacity increases with one recently signed contract. During 2014 uncertainty is expected to remain until spectrum auctions are completed and the presidential election period is concluded.

For the full year 2013, sales were negatively impacted by poor macroeconomic environment and delays in regulatory legislation. Global Services grew largely due to an increase in Managed Services.

North East Asia

Sales declined YoY. Japan continued to be negatively impacted by currency and reduced activity as completion of a major project is getting closer. During the quarter, sales in China improved as a result of deliveries to the ongoing mobile broadband coverage projects, contributing to growth QoQ.

Sales for the full year declined. Japan was negatively impacted by currency and reduced activity. GSM in China structurally declined whilst LTE deployments commenced in the fourth quarter. In Japan, KDDI has selected Ericsson as one of the prime vendors to deploy its LTE system and evolved packet core network.

South East Asia and Oceania

Sales in the region declined YoY as a result of certain major projects which peaked in Australia and Indonesia during the fourth quarter of 2012. Sales grew sequentially in all segments as a result of 3G coverage and capacity projects as well as increased activities in BSS and TV and Media.

Sales grew in 2013 with 3G deployments in Thailand and LTE deployments in Singapore and Australia. In Indonesia major capacity projects were finalized. Smartphone penetration continues to increase from a low level.

Other

Sales were strong YoY, positively impacted by the Samsung agreement. Sales were negatively impacted by the exit from the telecom and power cable business which had a negative impact on YoY comparison. Licensing revenues grew in the quarter both YoY and QoQ, also excluding the Samsung agreement.

Full year sales increased positively impacted by the Samsung agreement but negatively impacted by the divestment of IPX in Q312 and the exit of the telecom and power cable business. Sales of broadcast services, telecom cables, power modules and other businesses are also included in “Other”.

 

 

Ericsson Fourth Quarter Report 2013

   15


Table of Contents

Parent company information

 

Income after financial items was SEK 7.2 (-4.9) b.

Major changes in the Parent Company’s financial position for the year; increased cash, cash equivalents and short-term investments of SEK 1.1 b, decreased current and non-current receivables from subsidiaries of SEK 7.1 b and decreased current and non-current liabilities to subsidiaries of SEK 5.2 b. At the end of the quarter, cash, cash equivalents and short-term investments amounted to SEK 58.5 (57.4) b. During the quarter LME signed a loan of USD 0.7 b. with the European Investment Bank (EIB). During the year, a dividend payment of SEK 8.9 b., was made.

In accordance with the conditions of the long-term variable compensation program (LTV) for Ericsson employees, 2,974,951 shares from treasury stock were sold or distributed to employees during the fourth quarter. The holding of treasury stock at December 31, 2013, was 73,968,178 Class B shares.

 

 

Ericsson Fourth Quarter Report 2013

   16


Table of Contents

Dividend, AGM and annual report

 

Dividend proposal

The Board of Directors will propose to the Annual General Meeting a dividend of SEK 3.00 (2.75) per share, representing some SEK 9.9 (8.9) b., and April 16, 2014, as the record day for payment of dividend. The dividend is reflecting 2013 year’s earnings and balance sheet structure, as well as coming years’ business plans and expected economic development.

Ericsson Annual General Meeting

The Annual General Meeting of shareholders will be held on April 11, 2014, 15.00 (CET) at Stockholm Waterfront Congress Centre, Stockholm, Sweden.

Annual Report

The annual report will be made available on our website www.ericsson.com and at the Ericsson headquarters, Torshamnsgatan 21, Kista, Stockholm, Sweden, during the first weeks of March.

 

 

Ericsson Fourth Quarter Report 2013

   17


Table of Contents

Other information

 

Patent infringement lawsuit against Micromax

In March 2013, Ericsson filed a patent infringement lawsuit in the Indian Delhi High Court against Micromax, seeking damages and an injunction. Ericsson alleged that Micromax products, compliant with the 2G/3G standard, infringe eight of Ericsson’s Indian patents. Ericsson had before that made numerous attempts to sign a license agreement with the company on Fair, Reasonable and Non-discriminatory (FRAND) terms. As part of its defense, Micromax filed in November 2013 a complaint with the Competition Commission of India (CCI) and the CCI has decided to refer the case to the Director General’s Office for an in-depth investigation.

Hexatronic acquires Ericsson’s telecom cable business in Hudiksvall

On December 1, 2013, Ericsson finalized the divestment of its telecom cable business in Hudiksvall, Sweden, to Hexatronic. The divestment was made pursuant to an agreement that was signed between the two companies on October 31, 2013. The divestment is made as a business transfer and the new company within the Hexatronic Group will be named Hexatronic Cables & Interconnect Systems AB.

85 former Ericsson employees were transferred to Hexatronic and will work within the fiber- and submarine cables business and an additional 30 employees within the production of interconnect until it is finalized.

Samsung litigation and agreement

In November 2012, Ericsson filed two patent infringement lawsuits in the US District Court for the Eastern District of Texas against Samsung. Ericsson seeked damages and an injunction. Ericsson also asked the Court to adjudge that Samsung breached its commitment to license any standard-essential patents it owns on fair, reasonable, and non-discriminatory terms and to declare Samsung’s allegedly standard essential patents to be unenforceable. In March 2013, Samsung filed its answers and counterclaims in the Ericsson suits (above) in Texas, USA.

In November 2012, Ericsson also filed a complaint with the US International Trade Commission (ITC) seeking an exclusion order blocking Samsung from importing certain products into the US. In December 2012, Samsung filed a complaint with the ITC seeking an exclusion order blocking Ericsson from import of certain products into the US.

Initial determinations in both ITC investigations were expected in late January 2014.

On January 27, 2014, Ericsson announced that an agreement had been signed with Samsung on global patent licenses between the two companies. The cross license agreement covers patents relating to GSM, UMTS, and LTE standards for both networks and handsets.

Ericsson is committed to licensing its standard-essential patents on fair, reasonable and non-discriminatory (FRAND) terms for the benefit of the industry. It believes that licensing according to FRAND principles strikes the appropriate balance between incentivizing companies to innovate and contribute technology to open standards and maintaining the overall royalty rates at a reasonable level to allow new entrants access to the market.

The agreement ends the complaints made by both companies against each other before ITC as well as the lawsuits before the U.S. District Court for the Eastern District of Texas.

The agreement includes an initial payment and ongoing royalty payments from Samsung to Ericsson for the term of the new multi-year license agreement.

 

 

Ericsson Fourth Quarter Report 2013

   18


Table of Contents

Assessment of risk environment

 

Ericsson’s operational and financial risk factors and uncertainties along with our strategies and tactics to mitigate risk exposures or limit unfavorable outcomes are described in our Annual Report 2012. Compared to the risks described in the Annual Report 2012, no material, new or changed risk factors or uncertainties have been identified in the year.

Risk factors and uncertainties in focus short-term for the Parent Company and the Ericsson Group include:

 

    Potential negative effects on operators’ willingness to invest in network development due to uncertainty in the financial markets and a weak economic business environment, or reduced consumer telecom spending, or increased pressure on us to provide financing;

 

    Uncertainty regarding the financial stability of suppliers, for example due to lack of financing;

 

    Effects on gross margins and/or working capital of the product mix in the Networks segment between sales of upgrades and expansions (mainly software) and new buildouts of coverage (mainly hardware);

 

    Effects on gross margins of the product mix in the Global Services segment including proportion of new network buildouts and share of new managed services deals with initial transition costs;

 

    A continued volatile sales pattern in the Support Solutions segment or variability in our overall sales seasonality could make it more difficult to forecast future sales;

 

    Effects of the ongoing industry consolidation among our customers as well as between our largest competitors, e.g. with postponed investments and intensified price competition as a consequence;
    Changes in foreign exchange rates, in particular USD, JPY and EUR;

 

    Political unrest or instability in certain markets;

 

    Effects on production and sales from restrictions with respect to timely and adequate supply of materials, components and production capacity and other vital services on competitive terms;

 

    Natural disasters and other events, affecting business, production, supply and transportation.

Ericsson stringently monitors the compliance with all relevant trade regulations and trade embargos applicable to dealings with customers operating in countries where there are trade restrictions or trade restrictions are discussed. Moreover, Ericsson operates globally in accordance with Group policies and directives for business ethics and conduct.

Stockholm, January 30, 2014

Telefonaktiebolaget LM Ericsson (publ)

Org. Nr. 556016-0680

Board of Directors

Date for next report: April 23, 2014

 

 

Ericsson Fourth Quarter Report 2013

   19


Table of Contents

Auditor’s Review report

 

Introduction

We have reviewed this report for the period January 1, 2013, to December 31, 2013, 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 Swedish Annual Accounts Act. Our responsibility is to express a conclusion on this interim report based on our review.

Scope of review

We conducted our review in accordance with the International Standard on Review Engagements ISRE 2410, Review of Interim Report Performed by the Independent Auditor of the Entity. 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 International Standards on Auditing (ISA) and other generally accepted auditing standards in Sweden. The procedures performed in a review do not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

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 30, 2014

PricewaterhouseCoopers AB

Peter Nyllinge

Authorized Public Accountant

Auditor in Charge

 

 

Ericsson Fourth Quarter Report 2013

   20


Table of Contents

Editor’s note

 

Ericsson invites media, investors and analysts to a press conference at the Ericsson Studio, Grönlandsgången 4, Stockholm, at 09.00 (CET), January 30, 2014. An analysts, investors and media conference call will begin at 14.00 (CET).

Live webcast 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

Video material will be published during the day on www.ericsson.com/press

For further information, please contact:

Helena Norrman, Senior Vice President, Communications Phone: +46 10 719 34 72

E-mail: investor.relations@ericsson.com or media.relations@ericsson.com

Telefonaktiebolaget LM Ericsson (publ)

Org. number: 556016-0680

Torshamnsgatan 23

SE-164 83 Stockholm

Phone: +46 10 719 00 00

www.ericsson.com

Investors

Peter Nyquist, Vice President,

Investor Relations

Phone: +46 10 714 64 49, +46 70 575 29 06

E-mail: peter.nyquist@ericsson.com

Stefan Jelvin, Director,

Investor Relations

Phone: +46 10 714 20 39, +46 70 986 02 27

E-mail: stefan.jelvin@ericsson.com

Åsa Konnbjer, Director,

Investor Relations

Phone: +46 10 713 39 28, +46 73 082 59 28

E-mail: asa.konnbjer@ericsson.com

Rikard Tunedal, Director,

Investor Relations

Phone: +46 10 714 54 00, +46 761 005 400

E-mail: rikard.tunedal@ericsson.com

Media

Ola Rembe, Vice President,

External Communications

Phone: +46 10 719 97 27, +46 73 024 48 73

E-mail: media.relations@ericsson.com

Corporate Communications

Phone: +46 10 719 69 92

E-mail: media.relations@ericsson.com

 

 

Ericsson Fourth Quarter Report 2013

   21


Table of Contents

Safe harbor statement

 

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.

 

 

Ericsson Fourth Quarter Report 2013

   22


Table of Contents

Financial statements and additional information

 

Financial statements
24    Consolidated income statement
24    Statement of comprehensive income
25    Consolidated balance sheet
26    Consolidated statement of cash flows
27    Consolidated statement of changes in equity
28    Consolidated income statement—isolated quarters
29    Consolidated statement of cash flows—isolated quarters
30    Parent Company income statement
30    Parent Company balance sheet

Additional information

31    Accounting policies
32    Accounting policies (continued)
33    Net sales by segment by quarter
33    Sales growth for comparable units, adjusted for currency effects and hedging
34    Operating income by segment by quarter
34    Operating margin by segment by quarter
35    EBITA by segment by quarter
35    EBITA margin by segment by quarter
36    Net sales by region by quarter
37    Net sales by region by quarter (cont.)
37    Top 5 countries in sales
38    Net sales by region by segment
39    Provisions
39    Information on investments in assets subject to depreciation, amortizations, impairment and write-downs
39    Reconciliation table, non-IFRS measurements
40    Other information
40    Number of employees
41    Restructuring charges by function
41    Restructuring charges by segment
 

 

Ericsson Fourth Quarter Report 2013

   23


Table of Contents

CONSOLIDATED INCOME STATEMENT

 

     Oct - Dec           Jan - Dec        

SEK million

   2012     2013     Change     2012     2013     Change  

Net sales

     66,936        67,032        0     227,779        227,376        0

Cost of sales

     -46,133        -42,171        -9     -155,699        -151,005        -3
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross income

     20,803        24,861        20     72,080        76,371        6

Gross margin (%)

     31.1     37.1       31.6     33.6  

Research and development expenses

     -9,247        -8,902        -4     -32,833        -32,236        -2

Selling and administrative expenses

     -7,139        -7,223        1     -26,023        -26,273        1
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses

     -16,386        -16,125        -2     -58,856        -58,509        -1

Other operating income and expenses

     345        328          8,965 1)      113     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Operating income before shares in earnings of JV and associated companies

     4,762        9,064        90     22,189        17,975        -19

Operating margin before shares in earnings of JV and associated companies (%)

     7.1     13.5       9.7     7.9  

Shares in earnings of JV and associated companies

     -8,565        -9        -100     -11,731        -130        -99
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     -3,803        9,055          10,458        17,845        71

Financial income

     438        184          1,708        1,346     

Financial expenses

     -512        -327          -1,984        -2,093     
  

 

 

   

 

 

     

 

 

   

 

 

   

Income after financial items

     -3,877        8,912          10,182        17,098        68

Taxes

     -2,378        -2,468          -4,244        -4,924     
  

 

 

   

 

 

     

 

 

   

 

 

   

Net income

     -6,255        6,444          5,938        12,174        105
  

 

 

   

 

 

     

 

 

   

 

 

   

 

 

 

Net income attributable to:

            

—Stockholders of the Parent Company

     -6,462        6,410          5,775        12,005     

—Non-controlling interests

     207        34          163        169     

Other information

            

Average number of shares, basic (million)

     3,219        3,230          3,216        3,226     

Earnings per share, basic (SEK) 2)

     -2.01        1.98          1.80        3.72     

Earnings per share, diluted (SEK) 2)

     -1.99        1.97          1.78        3.69     

STATEMENT OF COMPREHENSIVE INCOME

 

     Oct - Dec      Jan - Dec  

SEK million

   2012      2013      2012      2013  

Net income

     -6,255         6,444         5,938         12,174   

Other comprehensive income

           

Items that will not be reclassified to profit or loss

           

Remeasurements of defined benefits pension plans incl. asset ceiling

     800         983         -451         3,214   

Revaluation of other investments in shares and participations

           

Fair value remeasurement

     4         1         6         71   

Tax on items that will not be reclassified to profit or loss

     0         -362         -59         -1,235   

Items that may be reclassified to profit or loss

           

Cash flow hedges

           

Gains/losses arising during the period

     602         -14         1,668         251   

Reclassification adjustments for gains/losses included in profit or loss

     -353         -124         -568         -1,072   

Adjustments for amounts transferred to initial carrying amount of hedged items

     —              92         0   

Changes in cumulative translation adjustments

     143         777         -3,947         -1,687   

Share of other comprehensive income on JV and associated companies

     -463         32         -486         -14   

Tax on items that may be reclassified to profit or loss

     -548         26         -363         179   

Total other comprehensive income, net of tax

     185         1,319         -4,108         -293   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total comprehensive income

     -6,070         7,763         1,830         11,881   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total comprehensive income attributable to:

           

Stockholders of the Parent Company

     -6,284         7,704         1,716         11,712   

Non-controlling interests

     214         59         114         169   

 

1)  Includes gain on sale of Sony Ericsson SEK 7.7 billion in Q1 2012
2)  Based on Net income attributable to stockholders of the Parent Company

 

Ericsson Fourth Quarter Report 2013

   24


Table of Contents

CONSOLIDATED BALANCE SHEET

 

     Dec 31      Sep 30      Dec 31  

SEK million

   2012      2013      2013  

ASSETS

        

Non-current assets

        

Intangible assets

        

Capitalized development expenses

     3,840         3,540         3,348   

Goodwill

     30,404         31,611         31,544   

Intellectual property rights, brands and other intangible assets

     15,202         13,319         12,815   

Property, plant and equipment

     11,493         11,230         11,433   

Financial assets

        

Equity in JV and associated companies

     2,842         2,675         2,568   

Other investments in shares and participations

     386         520         505   

Customer finance, non-current

     1,290         1,052         1,294   

Other financial assets, non-current

     3,964         4,586         5,684   

Deferred tax assets

     12,321         11,074         9,103   
  

 

 

    

 

 

    

 

 

 
     81,742         79,607         78,294   

Current assets

        

Inventories

     28,802         28,089         22,759   

Trade receivables

     63,660         64,905         71,013   

Customer finance, current

     4,019         2,191         2,094   

Other current receivables

     20,065         20,198         17,941   

Short-term investments

     32,026         25,505         34,994   

Cash and cash equivalents

     44,682         35,163         42,095   
  

 

 

    

 

 

    

 

 

 
     193,254         176,051         190,896   

Total assets

     274,996         255,658         269,190   
  

 

 

    

 

 

    

 

 

 

EQUITY AND LIABILITIES

        

Equity

        

Stockholders’ equity

     136,883         132,382         140,204   

Non-controlling interest in equity of subsidiaries

     1,600         1,568         1,419   
  

 

 

    

 

 

    

 

 

 
     138,483         133,950         141,623   

Non-current liabilities

        

Post-employment benefits 1)

     9,503         10,385         9,825   

Provisions, non-current

     211         268         222   

Deferred tax liabilities

     3,120         3,050         2,650   

Borrowings, non-current

     23,898         21,745         22,067   

Other non-current liabilities

     2,377         2,204         1,459   
  

 

 

    

 

 

    

 

 

 
     39,109         37,652         36,223   

Current liabilities

        

Provisions, current

     8,427         6,146         5,140   

Borrowings, current

     4,769         3,849         7,388   

Trade payables

     23,100         19,237         20,502   

Other current liabilities 1)

     61,108         54,824         58,314   
  

 

 

    

 

 

    

 

 

 
     97,404         84,056         91,344   

Total equity and liabilities

     274,996         255,658         269,190   
  

 

 

    

 

 

    

 

 

 

Of which interest-bearing liabilities and post-employment benefits

     38,170         35,979         39,280   

Of which net cash

     38,538         24,689         37,809   

Assets pledged as collateral

     520         2,552         2,556   

Contingent liabilities

     613         606         657   

 

1) The provision for the Swedish special payroll taxes, amounting to SEK 1.8 (1.8) billion, which was previously included in Other current liabilities, has been re-classified as pension liability in line with the implementation of IAS19R on January 1, 2013

 

Ericsson Fourth Quarter Report 2013

   25


Table of Contents

CONSOLIDATED STATEMENT OF CASH FLOWS

 

     Oct - Dec      Jan - Dec  

SEK million

   2012      2013      2012     2013  

Operating activities

          

Net income

     -6,255         6,444         5,938        12,174   

Adjustments to reconcile net income to cash

          

Taxes

     2,049         2,096         -1,140        -1,323   

Earnings/dividends in JV and associated companies

     8,707         138         11,769        258   

Depreciation, amortization and impairment losses

     2,779         2,744         9,889        10,137   

Other

     -366         1,101         -7,441        756   
  

 

 

    

 

 

    

 

 

   

 

 

 
     6,914         12,523         19,015        22,002   

Changes in operating net assets

          

Inventories

     3,418         5,337         2,752        4,868   

Customer finance, current and non-current

     -1,377         -163         -1,259        1,809   

Trade receivables

     -2,280         -4,910         -1,103        -8,504   

Trade payables

     1,140         860         -1,311        -2,158   

Provisions and post-employment benefits

     379         -1,731         -1,920        -3,298   

Other operating assets and liabilities, net

     7,497         2,693         5,857        2,670   
  

 

 

    

 

 

    

 

 

   

 

 

 
     8,777         2 086         3,016        -4,613   

Cash flow from operating activities

     15,691         14 609         22,031        17,389   

Investing activities

          

Investments in property, plant and equipment

     -1,326         -1 251         -5,429        -4,503   

Sales of property, plant and equipment

     252         179         568        378   

Acquisitions/divestments of subsidiaries and other operations, net

     120         -713         -2,077 1)      -2,682   

Product development

     -430         -182         -1,641        -915   

Other investing activities

     213         -1,195         1,540        -1,330   

Short-term investments

     -1,045         -8 262         2,151        -2,057   
  

 

 

    

 

 

    

 

 

   

 

 

 

Cash flow from investing activities

     -2,216         -11,424         -4,888        -11,109   

Cash flow before financing activities

     13,475         3 185         17,143        6,280   

Financing activities

          

Dividends paid

     1         -208         -8,632        -9,153   

Other financing activities

     -1,609         3 746         -753        -355   
  

 

 

    

 

 

    

 

 

   

 

 

 

Cash flow from financing activities

     -1,608         3 538         -9,385        -9,508   

Effect of exchange rate changes on cash

     -30         209         -1,752        641   

Net change in cash

     11,837         6 932         6,006        -2,587   

Cash and cash equivalents, beginning of period

     32,845         35 163         38,676        44,682   

Cash and cash equivalents, end of period

     44,682         42 095         44,682        42,095   

 

1) Includes payment of external loan of SEK -6.2 billion attributable to the acquisition of Telcordia in Q1 2012

 

Ericsson Fourth Quarter Report 2013

   26


Table of Contents

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

 

     Jan - Dec      Jan - Dec  

SEK million

   2012      2013  

Opening balance

     145,270         138,483   

Total comprehensive income

     1,830         11,881   

Sale/repurchase of own shares

     -93         90   

Stock issue

     159         —     

Stock purchase plan

     405         388   

Dividends paid

     -8,632         -9,153   

Transactions with non-controlling interests

     -456         -66   
  

 

 

    

 

 

 

Closing balance

     138,483         141,623   
  

 

 

    

 

 

 

 

Ericsson Fourth Quarter Report 2013

   27


Table of Contents

CONSOLIDATED INCOME STATEMENT – ISOLATED QUARTERS

 

     2012     2013  

Isolated quarters, SEK million

   Q1     Q2     Q3     Q4     Q1     Q2     Q3     Q4  

Net sales

     50,974        55,319        54,550        66,936        52,032        55,331        52,981        67,032   

Cost of sales

     -33,985        -37,611        -37,970        -46,133        -35,394        -37,412        -36,028        -42,171   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross income

     16,989        17,708        16,580        20,803        16,638        17,919        16,953        24,861   

Gross margin (%)

     33.3     32.0     30.4     31.1     32.0     32.4     32.0     37.1

Research and development expenses

     -8,016        -8,097        -7,473        -9,247        -7,877        -7,747        -7,710        -8,902   

Selling and administrative expenses

     -6,232        -6,855        -5,797        -7,139        -6,643        -6,629        -5,778        -7,223   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses

     -14,248        -14,952        -13,270        -16,386        -14,520        -14,376        -13,488        -16,125   

Other operating income and expenses

     7,749 1)      530        341        345        20        -1,040        805        328   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income before shares in earnings of JV and associated companies

     10,490        3,286        3,651        4,762        2,138        2,503        4,270        9,064   

Operating margin before shares in earnings of JV and associated companies (%)

     20.6     5.9     6.7     7.1     4.1     4.5     8.1     13.5

Shares in earnings of JV and associated companies

     -1,403        -1,208        -555        -8,565 2)      -32        -38        -51        -9   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     9,087        2,078        3,096        -3,803        2,106        2,465        4,219        9,055   

Financial income

     262        618        390        438        180        304        678        184   

Financial expenses

     -273        -924        -275        -512        -565        -606        -595        -327   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income after financial items

     9,076        1,772        3,211        -3,877        1,721        2,163        4,302        8,912   

Taxes

     -272        -567        -1,027        -2,378        -517        -647        -1,292        -2,468   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     8,804        1,205        2,184        -6,255        1,204        1,516        3,010        6,444   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to:

                

—Stockholders of the Parent Company

     8,950        1,110        2,177        -6,462        1,205        1,469        2,921        6,410   

—Non-controlling interests

     -146        95        7        207        -1        47        89        34   

Other information

                

Average number of shares, basic (million)

     3,212        3,215        3,217        3,219        3,222        3,224        3,227        3,230   

Earnings per share, basic (SEK) 3)

     2.79        0.35        0.68        -2.01        0.37        0.46        0.91        1.98   

Earnings per share, diluted (SEK) 3)

     2.76        0.34        0.67        -1.99        0.37        0.45        0.90        1.97   

 

1) Includes gain on sale of Sony Ericsson SEK 7.7 billion in Q1 2012
2)  Negatively impacted by a non-cash charge related to ST-Ericsson of SEK -8.0 billion in Q4 2012
3)  Based on Net income attributable to stockholders of the Parent Company

 

Ericsson Fourth Quarter Report 2013

   28


Table of Contents

CONSOLIDATED STATEMENT OF CASH FLOWS—ISOLATED QUARTERS

 

     2012      2013  

Isolated quarters, SEK million

   Q1     Q2      Q3      Q4      Q1      Q2      Q3      Q4  

Operating activities

                      

Net income

     8,804        1,205         2,184         -6,255         1,204         1,516         3,010         6,444   

Adjustments to reconcile net income to cash

                      

Taxes

     -1,118        -1,185         -886         2,049         -1,849         -689         -881         2,096   

Earnings/dividends in JV and associated companies

     1,290        1,193         579         8,707         33         37         50         138   

Depreciation, amortization and impairment losses

     2,315        2,401         2,394         2,779         2,411         2,436         2,546         2,744   

Other

     -7,022        -466         413         -366         -201         183         -327         1,101   
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     4,269        3,148         4,684         6,914         1,598         3,483         4,398         12,523   

Changes in operating net assets

                      

Inventories

     -59        43         -650         3,418         -1,426         600         357         5,337   

Customer finance, current and non-current

     282        —           -164         -1,377         260         912         800         -163   

Trade receivables

     3,722        -5,427         2,882         -2,280         -1,934         3,084         -4,744         -4,910   

Trade payables

     -2,713        1,717         -1,455         1,140         -2,948         518         -588         860   

Provisions and post-employment benefits

     -1,771        -353         -175         379         1,155         -1,752         -970         -1,731   

Other operating assets and liabilities, net

     -2,999        -492         1,851         7,497         325         -2,554         2,206         2,693   
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     -3,538        -4,512         2,289         8,777         -4,568         808         -2,939         2,086   

Cash flow from operating activities

     731        -1,364         6,973         15,691         -2,970         4,291         1,459         14,609   

Investing activities

                      

Investments in property, plant and equipment

     -1,648        -994         -1,461         -1,326         -1,196         -1,278         -778         -1,251   

Sales of property, plant and equipment

     309        -10         17         252         91         11         97         179   

Acquisitions/divestments of subsidiaries and other operations, net

     -1,730 1)      -110         -357         120         -136         -39         -1,794         -713   

Product development

     -251        -525         -435         -430         -282         -214         -237         -182   

Other investing activities

     195        -520         1,652         213         298         -203         -230         -1,195   

Short-term investments

     -3,999        8,133         -938         -1,045         -2,860         9,209         -144         -8,262   
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Cash flow from investing activities

     -7,124        5,974         -1,522         -2,216         -4,085         7,486         -3,086         -11,424   

Cash flow before financing activities

     -6,393        4,610         5,451         13,475         -7,055         11,777         -1,627         3,185   

Financing activities

                      

Dividends paid

     —          -8,252         -381         1         -61         -8,863         -21         -208   

Other financing activities

     -1,318        1,112         1,062         -1,609         92         -4,236         43         3,746   
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Cash flow from financing activities

     -1,318        -7,140         681         -1,608         31         -13,099         22         3,538   

Effect of exchange rate changes on cash

     -327        599         -1,994         -30         -214         2,357         -1,711         209   

Net change in cash

     -8,038        -1,931         4,138         11,837         -7,238         1,035         -3,316         6,932   

Cash and cash equivalents, beginning of period

     38,676        30,638         28,707         32,845         44,682         37,444         38,479         35,163   

Cash and cash equivalents, end of period

     30,638        28,707         32,845         44,682         37,444         38,479         35,163         42,095   

 

1)  Includes payment of external loan of SEK -6.2 billion attributable to the acquisition of Telcordia in Q1 2012

 

Ericsson Fourth Quarter Report 2013

   29


Table of Contents

PARENT COMPANY INCOME STATEMENT

 

     Oct - Dec      Jan - Dec  

SEK million

   2012      2013      2012      2013  

Net sales

     —           —           —           —     

Cost of sales

     —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Gross income

     —              —        

Operating expenses

     -375         -494         -931         -1,380   

Other operating income and expenses

     670         796         2,534         2,768   
  

 

 

    

 

 

    

 

 

    

 

 

 

Operating income

     295         302         1,603         1,388   

Financial net

     -15,685         2,735         -6,461         5,856   
  

 

 

    

 

 

    

 

 

    

 

 

 

Income after financial items

     -15,390         3,037         -4,858         7,244   

Transfers to (-) / from untaxed reserves

     -1,646         -142         -1,646         -142   

Taxes

     281         -36         -289         -247   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net income

     -16,755         2,859         -6,793         6,855   
  

 

 

    

 

 

    

 

 

    

 

 

 

STATEMENT OF COMPREHENSIVE INCOME

 

     Oct - Dec      Jan - Dec  

SEK million

   2012      2013      2012      2013  

Net income

     -16,755         2,859         -6,793         6,855   

Cash flow hedges

           

Gains/losses arising during the period

     —           —           -64         —     

Adjustments for amounts transferred to initial carrying amount of hegded items

     —           —           -139         —     

Revaluation of other investments in shares and participations

           

Fair value remeasurement

     —           69         —           69   

Tax on items reported directly in or transferred from equity

     —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Other comprehensive income, net of tax

     —           —           -203         —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total comprehensive income

     -16,755         2,928         -6,996         6,924   
  

 

 

    

 

 

    

 

 

    

 

 

 

PARENT COMPANY BALANCE SHEET

 

     Dec 31      Dec 31  

SEK million

   2012      2013  

ASSETS

     

Fixed assets

     

Intangible assets

     849         646   

Tangible assets

     535         571   

Financial assets

     99,530         94,741   
  

 

 

    

 

 

 
     100,914         95,958   

Current assets

     

Inventories

     55         7   

Receivables

     21,694         17,247   

Short-term investments

     31,491         34,520   

Cash and cash equivalents

     25,946         23,954   
  

 

 

    

 

 

 
     79,186         75,728   

Total assets

     180,100         171,686   
  

 

 

    

 

 

 

STOCKHOLDERS’ EQUITY, PROVISIONS AND LIABILITIES

     

Equity

     

Restricted equity

     48,018         48,018   

Non-restricted equity

     25,624         23,798   
  

 

 

    

 

 

 
     73,642         71,816   

Untaxed reserves

     288         —     

Provisions

     4,095         2,097   

Non-current liabilities

     48,763         44,491   

Current liabilities

     53,312         53,282   

Total stockholders’ equity, provisions and liabilities

     180,100         171,686   
  

 

 

    

 

 

 

Assets pledged as collateral

     520         553   

Contingent liabilities

     16,719         15,999   
  

 

 

    

 

 

 

 

Ericsson Fourth Quarter Report 2013

   30


Table of Contents

Accounting policies

The Group

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 IFRS Interpretations Committee (IFRIC). The accounting policies adopted are consistent with those of the annual report for the year ended December 31, 2012, and should be read in conjunction with that annual report.

Change of hedge accounting

Due to cost efficiency reasons Ericsson has changed the hedge accounting.

Ericsson hedges highly probable forecast transactions related to sales and purchases with the purpose to limit the impact related to currency fluctuations on these forecasted transactions. This will not be changed.

Ericsson has, however, decided to discontinue hedge accounting for this type of hedges. Until 2012 Ericsson applied cash flow hedge accounting for highly probable forecast transactions. Revaluation of these hedges (incepted prior to January 1, 2013) are prior to release reported under “Other comprehensive income”, (OCI), and is at release recycled to sales, cost of sales and R&D expenses respectively.

As from 2013, revaluation of new hedges (inception as from January 1, 2013) are reported under “Other operating income and expenses” in the Income statement.

As from January 1, 2013, the Company has applied the following new or amended IFRSs and IFRICs:

Amendment to IAS 1, “Financial statement presentation”, regarding Other comprehensive income. The main change resulting from this amendment is a requirement for entities to group items presented in “other comprehensive income”, (OCI), on the basis of whether they are potentially recycled to profit or loss subsequently (reclassification adjustments). The amendment does not address which items are presented in OCI.

Amendment to IAS 19, “Employee benefits”, eliminates the corridor approach and calculates finance costs on a net funding basis. The Company implemented the immediate and full recognition of actuarial gains/losses in other “Other comprehensive income”, (OCI), in 2006, meaning that the corridor method has not been applied by the Company as from that date and therefore the transition to the revised IAS 19 has not had an effect on the present obligation. The main issue to address is the implementation of the net interest cost/gain, which integrates the interest cost and expected return on assets to be based on a common discount rate. An analysis of fiscal year 2012 in relation to this amendment indicated an impact on pension costs for 2012 with an increase of approximately SEK 0.4 (–0.1) billion. The Company also needs to address the taxes to be incorporated into the defined benefit obligation. This amendment relates to the Swedish special payroll taxes to be reclassified from “Other current liabilities” to “Post-employment benefits” with an estimated amount of SEK 1.8 (1.8) billion as per December 31, 2012 *. The amendment also includes additional disclosure requirements on yearly financial and demographic assumptions, sensitivity analysis, duration and multi-employer plans.

Amendment to IFRS 7, “Financial instruments: Disclosures’ on asset and liability offsetting”. This amendment requires disclosure of gross amounts related to financial instruments for which offset has been made.

 

* See also footnote under the balance sheet.

 

Ericsson Fourth Quarter Report 2013

   31


Table of Contents

Accounting policies (continued)

 

IFRS 10, “Consolidated financial statements”. The objective of IFRS 10 is to establish principles for the presentation and preparation of consolidated financial statements when an entity controls one or more other entities to present consolidated financial statements. It defines the principle of control, and establishes control as the basis for consolidation. It sets out how to apply the principle of control to identify whether an investor controls an investee and therefore must consolidate the investee. An entity controls an investee if the entity has power over the investee, has the ability to use the power and is exposed to variable returns. It also sets out the accounting requirements for the preparation of consolidated financial statements.

IFRS 11, “Joint arrangements”, is a more realistic reflection of joint arrangements by focusing on the rights and obligations of the arrangement rather than its legal form. There are two types of joint arrangement: joint operations and joint ventures. Proportional consolidation of joint ventures is no longer allowed. The Company did not apply the proportionate consolidation method prior to 2013.

IFRS 12, “Disclosures of interests in other entities”, includes the disclosure requirements for all forms of interests in other entities, including joint arrangements, associates, structured entities and other off-balance sheet vehicles.

IFRS 13, “Fair value measurement”, does not extend the use of fair value accounting but provide guidance on how it should be applied where its use is already required or permitted by other standards within IFRS. This standard has also added disclosure requirements in IAS 34, Interim Financial Reporting regarding the disclosure for financial instruments.

IAS 27 (revised 2011), “Separate financial statements” includes the provisions on separate financial statements that are left after the control provisions of IAS 27 have been included in the new IFRS 10.

IAS 28 (revised 2011), “Associates and joint ventures” includes the requirements for joint ventures, as well as associates, to be equity accounted following the issue of IFRS 11.

None of the new or amended standards and interpretations has had any significant impact on the financial result or position of the Company. There is no significant difference between IFRS effective as per December 31, 2013 and IFRS as endorsed by the EU.

Disclosures required by the IASB on an interim basis as from 2013

Financial instruments carried at fair value

The fair value of the Company’s financial instruments, recognized at fair value, is determined based on quoted market prices or rates. Financial instruments, measured according to the category “Fair value through profit or loss” showed a net fair value measurement positive effect of SEK 1.2 billion. The amount is recognized in the balance sheet as per December 31, 2013.

Financial instruments carried at other than fair value

Book value for “Notes and bond loans” amounts to SEK 14.5 billion and fair value to SEK 14.7 billion. Fair values of “Current part of non-current borrowings”, “Other borrowings non-current” as well as “Other financial instruments” are not estimated to materially differ from book values.

For further information about valuation principles, please see Note C1, “Significant accounting policies” in the Annual Report of 2012.

 

Ericsson Fourth Quarter Report 2013   32


Table of Contents

NET SALES BY SEGMENT BY QUARTER

Segment ST-Ericsson was reported in 2012 in accordance with the equity method, thus no sales is included.

Segment Modems was consolidated as of October 1, 2013. No sales was reported in Q4, 2013.

 

     2012     2013  

Isolated quarters, SEK million

   Q1     Q2     Q3     Q4     Q1     Q2     Q3     Q4  

Networks

     27,314        27,766        26,939        35,266        28,133        28,142        26,655        34,769   

Global Services

     20,631        24,074        24,296        28,042        21,452        24,851        23,974        27,166   

Of which Professional Services

     14,884        16,947        16,388        18,873        14,626        16,773        16,229        18,767   

Of which Managed Services

     5,708        6,468        6,306        6,752        5,888        6,754        6,264        6,574   

Of which Network Rollout

     5,747        7,127        7,908        9,169        6,826        8,078        7,745        8,399   

Support Solutions

     3,029        3,479        3,315        3,628        2,447        2,338        2,352        5,097   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     50,974        55,319        54,550        66,936        52,032        55,331        52,981        67,032   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     2012     2013  

Sequential change, percent

   Q1     Q2     Q3     Q4     Q1     Q2     Q3     Q4  

Networks

     -18     2     -3     31     -20     0     -5     30

Global Services

     -24     17     1     15     -24     16     -4     13

Of which Professional Services

     -18     14     -3     15     -23     15     -3     16

Of which Managed Services

     -6     13     -3     7     -13     15     -7     5

Of which Network Rollout

     -35     24     11     16     -26     18     -4     8

Support Solutions

     -11     15     -5     9     -33     -4     1     117
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     -20     9     -1     23     -22     6     -4     27
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     2012     2013  

Year over year change, percent

   Q1     Q2     Q3     Q4     Q1     Q2     Q3     Q4  

Networks

     -18     -17     -17     6     3     1     -1     -1

Global Services

     18     26     19     4     4     3     -1     -3

Of which Professional Services

     18     26     11     4     -2     -1     -1     -1

Of which Managed Services

     16     37     19     12     3     4     -1     -3

Of which Network Rollout

     18     28     38     3     19     13     -2     -8

Support Solutions

     33     47     29     6     -19     -33     -29     40
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     -4     1     -2     5     2     0     -3     0
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     2012     2013  

Year to date, SEK million

   Jan - Mar     Jan - Jun     Jan - Sep     Jan - Dec     Jan - Mar     Jan - Jun     Jan - Sep     Jan - Dec  

Networks

     27,314        55,080        82,019        117,285        28,133        56,275        82,930        117,699   

Global Services

     20,631        44,705        69,001        97,043        21,452        46,303        70,277        97,443   

Of which Professional Services

     14,884        31,830        48,219        67,092        14,626        31,399        47,628        66,395   

Of which Managed Services

     5,708        12,176        18,482        25,234        5,888        12,642        18,906        25,480   

Of which Network Rollout

     5,747        12,875        20,782        29,951        6,826        14,904        22,649        31,048   

Support Solutions

     3,029        6,508        9,823        13,451        2,447        4,785        7,137        12,234   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     50,974        106,293        160,843        227,779        52,032        107,363        160,344        227,376   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
Year to date,    2012     2013  

year over year change, percent

   Jan - Mar     Jan - Jun     Jan - Sep     Jan - Dec     Jan - Mar     Jan - Jun     Jan - Sep     Jan - Dec  

Networks

     -18     -17     -17     -11     3     2     1     0

Global Services

     18     23     21     16     4     4     2     0

Of which Professional Services

     18     22     18     14     -2     -1     -1     -1

Of which Managed Services

     16     26     24     20     3     4     2     1

Of which Network Rollout

     18     23     29     20     19     16     9     4

Support Solutions

     33     40     36     26     -19     -26     -27     -9
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     -4     -1     -1     0     2     1     0     0
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

SALES GROWTH FOR COMPARABLE UNITS, ADJUSTED FOR CURRENCY EFFECTS

 

     2012     2013  

Sequential change, percent

   Q1     Q2     Q3     Q4     Q1     Q2     Q3     Q4  

Networks

     -19     -1     0     33     -17     0     -3     31

Global Services

     -25     15     3     16     -20     17     -2     13

Support Solutions

     -25     13     -3     21     -30     -5     3     102
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     -22     6     1     24     -19     6     -2     27
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
Isolated quarter,    2012     2013  

Year over year change, percent

   Q1     Q2     Q3     Q4     Q1     Q2     Q3     Q4  

Networks

     -18     -20     -17     9     7     8     4     3

Global Services

     14     18     16     4     9     9     3     1

Support Solutions

     12     16     4     4     -3     -19     -15     35
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     -6     -6     -4     5     7     7     3     4
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
Year to date,    2012     2013  

year over year change, percent

   Jan -Mar     Jan - Jun     Jan - Sep     Jan - Dec     Jan -Mar     Jan - Jun     Jan - Sep     Jan - Dec  

Networks

     -18     -19     -18     -12     7     7     6     5

Global Services

     14     16     16     12     9     9     7     5

Support Solutions

     12     14     10     9     -3     -12     -13     0
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     -6     -6     -5     -2     7     7     5     5
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

Ericsson Fourth Quarter Report 2013

   33


Table of Contents

OPERATING INCOME BY SEGMENT BY QUARTER

 

     2012     2013  

Isolated quarters, SEK million

   Q1     Q2      Q3      Q4     Q1      Q2      Q3      Q4  

Networks

     1,649        1,255         1,341         2,812        1,565         1,335         2,557         5,861   

Global Services

     1,267        1,362         1,835         1,762        726         1,564         1,808         2,087   

Of which Professional Services

     1,908        2,142         2,293         2,768        1,837         2,285         2,279         2,628   

Of which Network Rollout

     -641        -780         -458         -1,006        -1,111         -721         -471         -541   

Support Solutions

     -28        420         480         278        -29         -283         -113         1,880   

Modems

     —          —           —           —          —           —           —           -543   

Unallocated 1)

     -97        -43         6         -133        -156         -151         -33         -230   
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Subtotal Segments excluding Sony Ericsson and ST-Ericsson

     2,791        2,994         3,662         4,719        2,106         2,465         4,219         9,055   

Sony Ericsson

     7,691 2)      347         -1         -11        —           —           —           —     

ST-Ericsson

     -1,395        -1,263         -565         -8,511 3)      —           —           —           —     
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Subtotal Sony Ericsson and ST-Ericsson

     6,296        -916         -566         -8,522        —           —           —           —     
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Total

     9,087        2,078         3,096         -3,803        2,106         2,465         4,219         9,055   
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 
     2012     2013  

Year to date, SEK million

   Jan -Mar     Jan -Jun      Jan -Sep      Jan -Dec     Jan -Mar      Jan -Jun      Jan -Sep      Jan -Dec  

Networks

     1,649        2,904         4,245         7,057        1,565         2,900         5,457         11,318   

Global Services

     1,267        2,629         4,464         6,226        726         2,290         4,098         6,185   

Of which Professional Services

     1,908        4,050         6,343         9,111        1,837         4,122         6,401         9,029   

Of which Network Rollout

     -641        -1,421         -1,879         -2,885        -1,111         -1,832         -2,303         -2,844   

Support Solutions

     -28        392         872         1,150        -29         -312         -425         1,455   

Modems

     —          —           —           —          —           —           —           -543   

Unallocated 1)

     -97        -140         -134         -267        -156         -307         -340         -570   
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Subtotal Segments excluding Sony Ericsson and ST-Ericsson

     2,791        5,785         9,447         14,166        2,106         4,571         8,790         17,845   

Sony Ericsson

     7,691 2)      8,038         8,037         8,026        —           —           —           —     

ST-Ericsson

     -1,395        -2,658         -3,223         -11,734 3)      —           —           —           —     
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Subtotal Sony Ericsson and ST-Ericsson

     6,296        5,380         4,814         -3,708        —           —           —           —     
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Total

     9,087        11,165         14,261         10,458        2,106         4,571         8,790         17,845   
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

OPERATING MARGIN BY SEGMENT BY QUARTER

 

As percentage of net sales,    2012     2013  

isolated quarters

   Q1     Q2     Q3     Q4     Q1     Q2     Q3     Q4  

Networks

     6     5     5     8     6     5     10     17

Global Services

     6     6     8     6     3     6     8     8

Of which Professional Services

     13     13     14     15     13     14     14     14

Of which Network Rollout

     -11     -11     -6     -11     -16     -9     -6     -6

Support Solutions

     -1     12     14     8     -1     -12     -5     37

Modems

     —          —          —          —          —          —          —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Subtotal excluding Sony Ericsson and ST-Ericsson

     5     5     7     7     4     4     8     14
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
As percentage of net sales,    2012     2013  

Year to date

   Jan - Mar     Jan - Jun     Jan - Sep     Jan - Dec     Jan - Mar     Jan - Jun     Jan - Sep     Jan - Dec  

Networks

     6     5     5     6     6     5     7     10

Global Services

     6     6     6     6     3     5     6     6

Of which Professional Services

     13     13     13     14     13     13     13     14

Of which Network Rollout

     -11     -11     -9     -10     -16     -12     -10     -9

Support Solutions

     -1     6     9     9     -1     -7     -6     12

Modems

     —          —          —          —          —          —          —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Subtotal excluding Sony Ericsson and ST-Ericsson

     5     5     6     6     4     4     5     8
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

1)  “Unallocated” consists mainly of costs for corporate staff, non-operational capital gains and losses
2)  Includes gain on sale of Sony Ericsson SEK 7.7 billion in Q1 2012
3)  Negatively impacted by a non-cash charge related to ST-Ericsson of SEK -8.0 billion in Q4 2012

 

Ericsson Fourth Quarter Report 2013

   34


Table of Contents

EBITA BY SEGMENT BY QUARTER

 

     2012     2013  

Isolated quarters, SEK million

   Q1     Q2      Q3      Q4     Q1      Q2      Q3      Q4  

Networks

     2,343        1,994         2,075         3,595        2,302         2,074         3,320         6,525   

Global Services

     1,464        1,594         2,050         1,974        942         1,783         2,043         2,342   

Of which Professional Services

     2,086        2,320         2,438         2,925        2,009         2,443         2,466         2,820   

Of which Network Rollout

     -622        -726         -389         -951        -1,067         -660         -423         -478   

Support Solutions

     236        608         624         427        118         -132         38         2,076   

Modems

     —          —           —           —          —           —           —           -499   

Unallocated 1)

     -96        -42         6         -131        -155         -150         -32         -229   
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Subtotal Segments excluding Sony Ericsson and ST-Ericsson

     3,947        4,154         4,755         5,865        3,207         3,575         5,369         10,215   

Sony Ericsson

     7,691  2)      347         -1         -11        —           —           —           —     

ST-Ericsson

     -1,395        -1,263         -565         -8,511  3)      —           —           —           —     
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Subtotal Sony Ericsson and ST-Ericsson

     6,296        -916         -566         -8,522        —           —           —           —     
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Total

     10,243        3,238         4,189         -2,657        3,207         3,575         5,369         10,215   
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 
     2012     2013  

Year to date, SEK million

   Jan - Mar     Jan - Jun      Jan - Sep      Jan - Dec     Jan - Mar      Jan - Jun      Jan - Sep      Jan - Dec  

Networks

     2,343        4,337         6,411         10,007        2,302         4,376         7,696         14,221   

Global Services

     1,464        3,058         5,108         7,082        942         2,725         4,768         7,110   

Of which Professional Services

     2,086        4,406         6,845         9,769        2,009         4,452         6,918         9,738   

Of which Network Rollout

     -622        -1,348         -1,736         -2,687        -1,067         -1,727         -2,150         -2,628   

Support Solutions

     236        844         1,468         1,895        118         -14         24         2,100   

Modems

     —          —           —           —          —           —           —           -499   

Unallocated 1)

     -96        -138         -132         -263        -155         -305         -337         -566   
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Subtotal Segments excluding Sony Ericsson and ST-Ericsson

     3,947        8,101         12,856         18,721        3,207         6,782         12,151         22,366   

Sony Ericsson

     7,691 2)      8,038         8,037         8,026        —           —           —           —     

ST-Ericsson

     -1,395        -2,658         -3,223         -11,734  3)      —           —           —           —     
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Subtotal Sony Ericsson and ST-Ericsson

     6,296        5,380         4,814         -3,708        —           —           —           —     
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Total

     10,243        13,481         17,670         15,013        3,207         6,782         12,151         22,366   
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

EBITA MARGIN BY SEGMENT BY QUARTER

 

As percentage of net sales,    2012     2013  

isolated quarters

   Q1     Q2     Q3     Q4     Q1     Q2     Q3     Q4  

Networks

     9     7     8     10     8     7     12     19

Global Services

     7     7     8     7     4     7     9     9

Of which Professional Services

     14     14     15     15     14     15     15     15

Of which Network Rollout

     -11     -10     -5     -10     -16     -8     -5     -6

Support Solutions

     8     17     19     12     5     -6     2     41

Modems

     —          —          —          —          —          —          —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Subtotal excluding Sony Ericsson and ST-Ericsson

     8     8     9     9     6     6     10     15
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
As percentage of net sales,    2012           2013        

year to date

   Jan - Mar     Jan - Jun     Jan - Sep     Jan - Dec     Jan - Mar     Jan - Jun     Jan - Sep     Jan - Dec  

Networks

     9     8     8     9     8     8     9     12

Global Services

     7     7     7     7     4     6     7     7

Of which Professional Services

     14     14     14     15     14     14     15     15

Of which Network Rollout

     -11     -10     -8     -9     -16     -12     -9     -8

Support Solutions

     8     13     15     14     5     0     0     17

Modems

     —          —          —          —          —          —          —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Subtotal excluding Sony Ericsson and ST-Ericsson

     8     8     8     8     6     6     8     10
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

1)  “Unallocated” consists mainly of costs for corporate staff, non-operational capital gains and losses
2)  Includes gain on sale of Sony Ericsson SEK 7.7 billion in Q1 2012
3)  Negatively impacted by a non-cash charge related to ST-Ericsson of SEK -8.0 billion in Q4 2012

 

Ericsson Fourth Quarter Report 2013

   35


Table of Contents

NET SALES BY REGION BY QUARTER

 

     2012     2013  

Isolated quarters, SEK million

   Q1     Q2     Q3     Q4     Q1     Q2     Q3     Q4  

North America

     12,775        12,987        14,037        16,950        15,773        15,341        14,453        13,772   

Latin America

     4,822        5,243        5,424        6,517        4,374        5,565        5,294        6,749   

Northern Europe & Central Asia 1) 2)

     2,292        3,358        2,697        2,998        2,283        2,708        2,949        3,678   

Western & Central Europe 2)

     4,306        4,094        3,630        5,448        4,349        4,522        4,399        5,215   

Mediterranean 2)

     4,620        6,214        5,401        7,064        5,271        6,159        5,659        7,067   

Middle East

     3,157        3,701        3,637        5,061        3,160        3,978        4,386        5,914   

Sub Saharan Africa

     2,200        2,791        2,800        3,558        2,131        2,653        2,693        2,572   

India

     1,421        1,700        1,737        1,602        1,606        1,279        1,280        1,973   

North East Asia

     9,154        8,423        8,373        10,246        6,054        6,642        6,053        8,649   

South East Asia & Oceania

     3,374        3,674        3,505        4,515        4,129        3,758        3,617        4,283   

Other 1) 2)

     2,853        3,134        3,309        2,977        2,902        2,726        2,198        7,160   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     50,974        55,319        54,550        66,936        52,032        55,331        52,981        67,032   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

1) Of which in Sweden

     834        1,282        1,649        1,268        1,020        1,276        798        1,333   

2) Of which in EU

     9,502        11,201        10,604        12,923        9,782        10,816        10,111        12,835   
     2012     2013  

Sequential change, percent

   Q1     Q2     Q3     Q4     Q1     Q2     Q3     Q4  

North America

     14     2     8     21     -7     -3     -6     -5

Latin America

     -31     9     3     20     -33     27     -5     27

Northern Europe & Central Asia 1) 2)

     -39     47     -20     11     -24     19     9     25

Western & Central Europe 2)

     -18     -5     -11     50     -20     4     -3     19

Mediterranean 2)

     -44     35     -13     31     -25     17     -8     25

Middle East

     -39     17     -2     39     -38     26     10     35

Sub Saharan Africa

     -32     27     0     27     -40     24     2     -4

India

     -7     20     2     -8     0     -20     0     54

North East Asia

     -16     -8     -1     22     -41     10     -9     43

South East Asia & Oceania

     -16     9     -5     29     -9     -9     -4     18

Other 1) 2)

     -14     10     6     -10     -3     -6     -19     226
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     -20     9     -1     23     -22     6     -4     27
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

1) Of which in Sweden

     -8     54     29     -23     -20     25     -37     67

2) Of which in EU

     -29     18     -5     22     -24     11     -7     27
     2012     2013  

Year-over-year change, percent

   Q1     Q2     Q3     Q4     Q1     Q2     Q3     Q4  

North America

     -3     5     16     51     23     18     3     -19

Latin America

     20     6     -10     -7     -9     6     -2     4

Northern Europe & Central Asia 1) 2)

     -32     -26     -24     -21     0     -19     9     23

Western & Central Europe 2)

     -10     -6     -21     3     1     10     21     -4

Mediterranean 2)

     -4     12     3     -14     14     -1     5     0

Middle East

     3     4     0     -3     0     7     21     17

Sub Saharan Africa

     -1     26     11     11     -3     -5     -4     -28

India

     -55     -39     -24     5     13     -25     -26     23

North East Asia

     6     -7     -13     -6     -34     -21     -28     -16

South East Asia & Oceania

     9     21     -6     13     22     2     3     -5

Other 1) 2)

     9     27     49     -10     2     -13     -34     141
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     -4     1     -2     5     2     0     -3     0
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

1) Of which in Sweden

     -10     16     75     40     22     0     -52     5

2) Of which in EU

     -5     9     4     -4     3     -3     -5     -1

 

Ericsson Fourth Quarter Report 2013

   36


Table of Contents

NET SALES BY REGION BY QUARTER (continued)

 

     2012     2013  

Year to date, SEK million

   Jan - Mar     Jan - Jun     Jan - Sep     Jan - Dec     Jan - Mar     Jan - Jun     Jan - Sep     Jan - Dec  

North America

     12,775        25,762        39,799        56,749        15,773        31,114        45,567        59,339   

Latin America

     4,822        10,065        15,489        22,006        4,374        9,939        15,233        21,982   

Northern Europe & Central Asia 1) 2)

     2,292        5,650        8,347        11,345        2,283        4,991        7,940        11,618   

Western & Central Europe 2)

     4,306        8,400        12,030        17,478        4,349        8,871        13,270        18,485   

Mediterranean 2)

     4,620        10,834        16,235        23,299        5,271        11,430        17,089        24,156   

Middle East

     3,157        6,858        10,495        15,556        3,160        7,138        11,524        17,438   

Sub Saharan Africa

     2,200        4,991        7,791        11,349        2,131        4,784        7,477        10,049   

India

     1,421        3,121        4,858        6,460        1,606        2,885        4,165        6,138   

North East Asia

     9,154        17,577        25,950        36,196        6,054        12,696        18,749        27,398   

South East Asia & Oceania

     3,374        7,048        10,553        15,068        4,129        7,887        11,504        15,787   

Other 1) 2)

     2,853        5,987        9,296        12,273        2,902        5,628        7,826        14,986   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     50,974        106,293        160,843        227,779        52,032        107,363        160,344        227,376   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

1) Of which in Sweden

     834        2,116        3,765        5,033        1,020        2,296        3,094        4,427   

2) Of which in EU

     9,502        20,703        31,307        44,230        9,782        20,598        30,709        43,544   
Year to date,    2012     2013  

year-over-year change, percent

   Jan - Mar     Jan - Jun     Jan - Sep     Jan - Dec     Jan - Mar     Jan - Jun     Jan - Sep     Jan - Dec  

North America

     -3     1     6     16     23     21     14     5

Latin America

     20     13     4     0     -9     -1     -2     0

Northern Europe & Central Asia 1) 2)

     -32     -29     -27     -25     0     -12     -5     2

Western & Central Europe 2)

     -10     -8     -13     -8     1     6     10     6

Mediterranean 2)

     -4     5     4     -2     14     6     5     4

Middle East

     3     4     2     1     0     4     10     12

Sub Saharan Africa

     -1     13     12     12     -3     -4     -4     -11

India

     -55     -48     -41     -34     13     -8     -14     -5

North East Asia

     6     0     -5     -5     -34     -28     -28     -24

South East Asia & Oceania

     9     15     7     9     22     12     9     5

Other1) 2)

     9     18     27     15     2     -6     -16     22
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     -4     -1     -1     0     2     1     0     0
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

1) Of which in Sweden

     -10     4     27     30     22     9     -18     -12

2) Of which in EU

     -5     2     3     1     3     -1     -2     -2

TOP 5 COUNTRIES IN SALES

 

     Q4     Jan - Dec  

Country

   2012     2013     2012     2013  

UNITED STATES

     26     21     25     26

JAPAN

     7     3     8     6

CHINA

     6     7     6     5

ITALY

     4     4     4     3

KOREA

     2     8     3     3

 

Ericsson Fourth Quarter Report 2013   37


Table of Contents

NET SALES BY REGION BY SEGMENT

Revenue from Telcordia is reported 50/50 between segments Global Services and Support Solutions. In the regional dimension, all of Telcordia sales is reported in Support Solutions, except for North America where it is split 50/50.

IPX was divested Q3 2012. For the first nine months of 2012, IPX was included in Support Solutions and region Other.

 

     Q4 2013, SEK million     Jan - Dec 2013, SEK million  
     Net-
works
    Global
Services
    Support
Solutions
    Total     Net-
works
    Global
Services
    Support
Solutions
    Total  

North America

     5,322        7,422        1,028        13,772        28,518        28,230        2,591        59,339   

Latin America

     3,541        2,912        296        6,749        11,303        9,531        1,148        21,982   

Northern Europe & Central Asia

     2,334        1,261        83        3,678        7,203        4,158        257        11,618   

Western & Central Europe

     2,052        2,935        228        5,215        7,624        10,253        608        18,485   

Mediterranean

     2,863        3,911        293        7,067        10,795        12,632        729        24,156   

Middle East

     3,011        2,329        574        5,914        8,499        7,599        1,340        17,438   

Sub Saharan Africa

     1,286        1,067        219        2,572        4,990        4,142        917        10,049   

India

     1,182        713        78        1,973        3,090        2,735        313        6,138   

North East Asia

     5,975        2,514        160        8,649        16,669        10,367        362        27,398   

South East Asia & Oceania

     2,375        1,744        164        4,283        8,914        6,362        511        15,787   

Other

     4,828        358        1,974        7,160        10,094        1,434        3,458        14,986   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

     34,769        27,166        5,097        67,032        117,699        97,443        12,234        227,376   

Share of Total

     52     40     8     100     52     43     5     100

 

     Q4 2013  

Sequential change, percent

   Net-
works
    Global
Services
    Support
Solutions
    Total  

North America

     -19     2     75     -5

Latin America

     28     26     38     27

Northern Europe & Central Asia

     18     38     63     25

Western & Central Europe

     19     15     81     19

Mediterranean

     12     32     124     25

Middle East

     34     29     77     35

Sub Saharan Africa

     -5     -5     0     -4

India

     109     5     105     54

North East Asia

     69     2     181     43

South East Asia & Oceania

     24     11     27     18

Other

     254     -1     316     226
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

     30     13     117     27
  

 

 

   

 

 

   

 

 

   

 

 

 
     Q4 2013  

Year over year change, percent

   Net-
works
    Global
Services
    Support
Solutions
    Total  

North America

     -43     9     28     -19

Latin America

     23     -10     -26     4

Northern Europe & Central Asia

     50     3     -60     23

Western & Central Europe

     -12     0     29     -4

Mediterranean

     4     -4     15     0

Middle East

     22     13     8     17

Sub Saharan Africa

     -37     -14     -23     -28

India

     32     23     -39     23

North East Asia

     -8     -31     26     -16

South East Asia & Oceania

     -6     -7     74     -5

Other

     146     -8     217     141
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

     -1     -3     40     0
  

 

 

   

 

 

   

 

 

   

 

 

 
     Jan - Dec 2013  

Year over year change, percent

   Net-
works
    Global
Services
    Support
Solutions
    Total  

North America

     -7     20     -5     5

Latin America

     16     -10     -30     0

Northern Europe & Central Asia

     14     -8     -46     2

Western & Central Europe

     24     -3     -14     6

Mediterranean

     14     -3     -6     4

Middle East

     26     4     -9     12

Sub Saharan Africa

     -22     6     -9     -11

India

     -13     11     -32     -5

North East Asia

     -26     -22     -30     -24

South East Asia & Oceania

     12     -3     1     5

Other

     28     17     10     22
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

     0     0     -9     0
  

 

 

   

 

 

   

 

 

   

 

 

 

 

Ericsson Fourth Quarter Report 2013

   38


Table of Contents

PROVISIONS

 

     2012      2013  

Isolated quarters, SEK million

   Q1      Q2      Q3      Q4      Q1      Q2      Q3      Q4  

Opening balance

     6,265         5,930         5,318         5,243         8,638         9,499         7,716         6,414   

Additions

     1,003         616         810         4,582         1,915         1,215         658         911   

Utilization/Cash out

     -980         -850         -664         -981         -758         -2,365         -1,534         -1,364   

Of which restructuring

     -401         -342         -160         -267         -324         -1,001         -457         -307   

Reversal of excess amounts

     -370         -453         -95         -155         -209         -586         -191         -575   

Reclassification, translation difference and other

     12         75         -126         -51         -87         -47         -235         -24   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Closing balance

     5,930         5,318         5,243         8,638         9,499         7,716         6,414         5,362   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     2012      2013  

Year to date, SEK million

   Jan - Mar      Jan - Jun      Jan - Sep      Jan - Dec      Jan - Mar      Jan - Jun      Jan - Sep      Jan - Dec  

Opening balance

     6,265         6,265         6,265         6,265         8,638         8,638         8,638         8,638   

Additions

     1,003         1,619         2,429         7,011         1,915         3,130         3,788         4,699   

Utilization/Cash out

     -980         -1,830         -2,494         -3,475         -758         -3,123         -4,657         -6,021   

Of which restructuring

     -401         -743         -903         -1,170         -324         -1,325         -1,782         -2,089   

Reversal of excess amounts

     -370         -823         -918         -1,073         -209         -795         -986         -1,561   

Reclassification, translation difference and other

     12         87         -39         -90         -87         -134         -369         -393   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Closing balance

     5,930         5,318         5,243         8,638         9,499         7,716         6,414         5,362   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

INFORMATION ON INVESTMENTS IN ASSETS SUBJECT TO DEPRECIATION, AMORTIZATION, IMPAIRMENT AND WRITE-DOWNS

 

     2012      2013  

Isolated quarters, SEK million

   Q1      Q2      Q3      Q4      Q1      Q2      Q3      Q4  

Additions

                       

Property, plant and equipment

     1,648         994         1,461         1,326         1,196         1,278         778         1,251   

Capitalized development expenses

     251         525         435         430         282         214         237         182   

IPR, brands and other intangible assets

     5,570         992         341         409         196         22         1,418         562   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     7,469         2,511         2,237         2,165         1,674         1,514         2,433         1,995   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Depreciation, amortization and impairment losses

                       

Property, plant and equipment

     914         982         1,035         1,081         1,008         983         1,008         1,210   

Capitalized development expenses

     245         259         265         555         303         342         388         374   

IPR, brands and other intangible assets, etc.

     1,156         1,160         1,094         1,143         1,100         1,111         1,150         1,160   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     2,315         2,401         2,394         2,779         2,411         2,436         2,546         2,744   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

RECONCILIATION TABLE, NON-IFRS MEASUREMENTS

CASH CONVERSION

  

     2012     2013  

Isolated quarters, SEK million

   Q1     Q2     Q3     Q4     Q1     Q2     Q3     Q4  

Net income

     8,804        1,205        2,184        -6,255        1,204        1,516        3,010        6,444   

Net income reconciled to cash

     4,269        3,148        4,684        6,914        1,598        3,483        4,398        12,523   

Cash flow from operating activities

     731        -1,364        6,973        15,691        -2,970        4,291        1,459        14,609   

Cash conversion

     17.1     -43.3     148.9     226.9     -185.9     123.2     33.2     116.7

NET CASH, END OF PERIOD

  

                       Dec 31     Mar 31     Jun 30     Sep 30     Dec 31  

SEK million

                     2012     2013     2013     2013     2013  

Cash and cash equivalents

           44,682        37,444        38,479        35,163        42,095   

+ Short term investments

           32,026        34,641        26,335        25,505        34,994   

- Borrowings, non-current

           23,898        23,638        22,471        21,745        22,067   

- Borrowings, current

           4,769        5,084        4,018        3,849        7,388   

- Post employment benefits

           9,503        11,132        10,907        10,385        9,825   

Net cash, end of period

           38,538        32,231        27,418        24,689        37,809   

 

Ericsson Fourth Quarter Report 2013

   39


Table of Contents

OTHER INFORMATION

 

     Oct - Dec     Jan - Dec  
     2012     2013     2012     2013  

Number of shares and earnings per share

        

Number of shares, end of period (million)

     3,305        3,305        3,305        3,305   

Of which class A-shares (million)

     262        262        262        262   

Of which class B-shares (million)

     3,043        3,043        3,043        3,043   

Number of treasury shares, end of period (million)

     85        74        85        74   

Number of shares outstanding, basic, end of period (million)

     3,220        3,231        3,220        3,231   

Numbers of shares outstanding, diluted, end of period (million)

     3,251        3,262        3,251        3,262   

Average number of treasury shares (million)

     86        75        76        79   

Average number of shares outstanding, basic (million)

     3,219        3,230        3,216        3,226   

Average number of shares outstanding, diluted (million) 1)

     3,251        3,261        3,247        3,257   

Earnings per share, basic (SEK)

     -2.01        1.98        1.80        3.72   

Earnings per share, diluted (SEK) 1)

     -1.99        1.97        1.78        3.69   

Earnings per share (Non-IFRS), diluted (SEK) 2)

     -1.77        2.22        2.74        4.69   

Earnings per share (Non-IFRS, excluding restructuring), diluted (SEK) 2)

     -1.40        2.42        3.55        5.62   

Ratios

        

Days sales outstanding

     —          —          86        97   

Inventory turnover days

     61        55        73        62   

Payable days

     45        43        57        53   

Equity ratio (%)

     —          —          50.4     52.6

Return on equity (%)

     -18.5     18.8     4.1     8.7

Return on capital employed (%)

     -7.5     21.1     6.7     10.7

Capital turnover (times)

     1.5        1.5        1.3        1.3   

Cash conversion %, end of period

     226.9     116.7     115.9     79.0

Payment readiness, end of period

     —          —          84,951        82,631   

Payment readiness, as percentage of sales

     —          —          37.3     36.3

Exchange rates used in the consolidation

        

SEK/EUR—average rate

     —          —          8.70        8.67   

—closing rate

     —          —          8.58        8.90   

SEK/USD—average rate

     —          —          6.73        6.52   

—closing rate

     —          —          6.51        6.46   

Other

        

Regional inventory, end of period,

     19,353        14,652        19,353        14,652   

Export sales from Sweden

     30,201        35,216        106,997        108,944   

 

1)  Potential ordinary shares are not considered when their conversion to ordinary shares would increase earnings per share
2)  Excluding amortizations and write-downs of acquired intangibles

NUMBER OF EMPLOYEES

 

     2012      2013  

End of period

   Mar 31      Jun 30      Sep 30      Dec 31      Mar 31      Jun 30      Sep 30      Dec 31  

North America

     16,281         15,872         15,486         15,501         15,404         15,047         14,825         14,931   

Latin America

     11,538         11,176         10,920         11,219         11,153         11,412         11,402         11,445   

Northern Europe & Central Asia 1)

     21,341         21,457         21,334         21,211         21,043         21,148         22,038         21,892   

Western & Central Europe

     10,900         10,837         11,897         11,257         11,118         11,235         11,612         11,530   

Mediterranean

     11,858         11,986         12,321         12,205         12,015         12,405         12,350         12,314   

Middle East

     4,361         4,231         4,065         3,992         3,951         3,951         3,766         3,752   

Sub Saharan Africa

     2,317         2,277         1,669         2,014         1,967         2,101         2,081         2,084   

India

     12,567         12,644         13,269         14,303         14,588         16,183         16,978         17,622   

North East Asia

     13,016         13,233         13,853         14,157         14,088         14,059         14,625         14,503   

South East Asia & Oceania

     4,372         4,382         4,400         4,396         4,321         4,264         4,312         4,267   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     108,551         108,095         109,214         110,255         109,648         111,805         113,989         114,340   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

1) Of which in Sweden

     17,767         17,890         17,768         17,712         17,550         17,264         18,008         17,858   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

Ericsson Fourth Quarter Report 2013

   40


Table of Contents

RESTRUCTURING CHARGES BY FUNCTION

 

     2012      2013  

Isolated quarters, SEK million

   Q1      Q2      Q3      Q4      Q1      Q2      Q3      Q4  

Cost of sales

     -496         -389         -455         -885         -698         -707         -600         -652   

Research and development expenses

     -19         -107         -33         -693         -552         -117         -64         -139   

Selling and administrative expenses

     -54         -98         -82         -136         -589         -110         -55         -170   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Subtotal Ericsson excluding ST-Ericsson

     -569         -594         -570         -1,714         -1,839         -934         -719         -961   

Share in ST-Ericsson charges

     -30         -190         -46         -46         —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     -599         -784         -616         -1,760         -1,839         -934         -719         -961   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     2012      2013  

Year to date, SEK million

   Jan -Mar      Jan - Jun      Jan -Sep      Jan -Dec      Jan -Mar      Jan -Jun      Jan -Sep      Jan -Dec  

Cost of sales

     -496         -885         -1,340         -2,225         -698         -1,405         -2,005         -2,657   

Research and development expenses

     -19         -126         -159         -852         -552         -669         -733         -872   

Selling and administrative expenses

     -54         -152         -234         -370         -589         -699         -754         -924   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Subtotal Ericsson excluding ST-Ericsson

     -569         -1,163         -1,733         -3,447         -1,839         -2,773         -3,492         -4,453   

Share in ST-Ericsson charges

     -30         -220         -266         -312         —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     -599         -1,383         -1,999         -3,759         -1,839         -2,773         -3,492         -4,453   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

RESTRUCTURING CHARGES BY SEGMENT

 

     2012      2013  

Isolated quarters, SEK million

   Q1      Q2      Q3      Q4      Q1      Q2      Q3      Q4  

Networks

     -87         -167         -94         -905         -1,251         -316         -299         -316   

Global Services

     -473         -415         -441         -601         -385         -586         -410         -616   

Of which Professional Services

     -358         -302         -305         -371         -270         -389         -290         -420   

Of which Network Rollout

     -115         -113         -136         -230         -115         -197         -120         -196   

Support Solutions

     -9         -12         -29         -196         -111         -34         -11         -30   

Unallocated

     —           —           -6         -12         -92         2         1         1   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Subtotal Ericsson excluding ST-Ericsson

     -569         -594         -570         -1,714         -1,839         -934         -719         -961   

ST-Ericsson

     -30         -190         -46         -46         —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     -599         -784         -616         -1,760         -1,839         -934         -719         -961   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     2012      2013  

Year to date, SEK million

   Jan - Mar      Jan - Jun      Jan - Sep      Jan - Dec      Jan - Mar      Jan - Jun      Jan - Sep      Jan - Dec  

Networks

     -87         -254         -348         -1,253         -1,251         -1,567         -1,866         -2,182   

Global Services

     -473         -888         -1,329         -1,930         -385         -971         -1,381         -1,997   

Of which Professional Services

     -358         -660         -965         -1,336         -270         -659         -949         -1,369   

Of which Network Rollout

     -115         -228         -364         -594         -115         -312         -432         -628   

Support Solutions

     -9         -21         -50         -246         -111         -145         -156         -186   

Unallocated

     —           —           -6         -18         -92         -90         -89         -88   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Subtotal Ericsson excluding ST-Ericsson

     -569         -1,163         -1,733         -3,447         -1,839         -2,773         -3,492         -4,453   

ST-Ericsson

     -30         -220         -266         -312         —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     -599         -1,383         -1,999         -3,759         -1,839         -2,773         -3,492         -4,453   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

Ericsson Fourth Quarter Report 2013

   41