Ericsson
STKM : ERIC
NASDAQ : ERIC

April 27, 2011 03:19 ET

Ericsson Reports First Quarter Results

STOCKHOLM, SWEDEN--(Marketwire - Apr 27, 2011) -



                                       First               Fourth
                                      quarter              quarter

SEK b.                        2011(1)  2010(2)  Change 2010(2)  Change

Net sales                         53.0     45.1    17%     62.8   -16%

Gross margin                     38.5%    38.5%      -    36.6%      -

EBITA margin
excl JVs                         14.1%    12.8%      -    15.3%      -

Operating income
excl JVs                           6.3      4.5    39%      8.4   -25%

Operating margin
excl JVs                         11.9%    10.1%      -    13.4%      -

Ericsson's share
in earnings in JVs                -0.5     -0.3      -     -0.3      -

Income after
financial items                    5.8      4.1    41%      7.8   -26%

Net income                         4.1      1.3   220%      4.4    -7%

EPS diluted, SEK                  1.27     0.39      -     1.34      -

EPS diluted, excl.
amortizations and write-downs
of acquired intangibles, SEK      1.52     0.87    75%     1.65    -8%

Adjusted operating
cash flow(3)                      -2.1      3.0      -     16.2      -

Cash flow from
operations                        -2.9      2.3      -     15.2      -

(1)  All numbers for 2011 are stated incl. restructuring charges
(2)  All numbers for 2010, excl. EPS, Net income and Cash flow from
     operations, are stated excl. restructuring charges. For details see
     section on restructuring under Financial Statements and Additional
     Information
(3)  Cash flow from operations excl. restructuring cash outlays that have
     been provided for

"Group sales in the quarter increased by 17% year-over-year driven by continued strong demand for mobile broadband and especially for the multi-standard radio base station RBS 6000," says Hans Vestberg, President and CEO of Ericsson (NASDAQ: ERIC). "Sales for comparable units, adjusted for currency and hedging, increased 25% year-over-year. Net income improved from SEK 1.3 b to SEK 4.1 b. mainly related to increased profitability in segment Networks. Cash flow in the quarter amounted to SEK -2.9 (2.3) b. impacted by higher level of work in progress in the regions and continued ramp up of production.

The increase in Group sales was driven by segment Networks where revenues grew 35% year-over-year with an EBITA margin of 20%. The strong demand for mobile broadband resulted in five out of ten regions showing growth year-over-year. Countries with especially strong growth were the US, India, Japan, Korea and Russia. China had continued good momentum for 2G.

Segment Global Services sales decreased -4% year-over-year primarily due to currency exchange rate effects. In local currencies Professional Services grew 3%. EBITA margin decreased to 7% in the quarter mainly due to lower profitability in Network Rollout. Managed Services was flat compared to the first quarter 2010, but grew 11% year-over-year in local currencies driven by a number of new smaller contracts. Segment Multimedia sales were flat year-over-year while EBITA margin dropped to -7%, mainly due to product mix. Our joint ventures showed mixed performance. Sony Ericsson contributed with a profit before tax of SEK 0.1 b. while ST-Ericsson's loss amounted to SEK -0.6 b.

Sales in the first quarter were not impacted by the devastating earthquake and tsunami in Japan. Our global supply chain of components is partly dependent on Japan and we estimate delays in delivery of certain products. We have taken a number of actions to mitigate the effects to secure that we limit the impact on our customers. These activities include finding and integrating alternative components in our products as well as increasing volumes with second source suppliers. Effects will also depend on Japan's overall recovery but our best estimate is that we will be able to deliver the majority of these volumes before end of third quarter 2011.

During 2010 we continued to gain market shares in 3G and at least maintained our market shares in 4G/LTE of more than 50%. While GSM will continue to exist for many years, we will see the bulk of investments shifting to 3G/WCDMA and 4G/LTE. In services we increased the market share and we continue to be the leading provider in the industry," concludes Hans Vestberg.

FINANCIAL HIGHLIGHTS

Income statement and cash flow

Sales in the quarter amounted to SEK 53.0 (45.1) b., up 17% year-over-year and down -16% sequentially. Sales for comparable units, adjusted for currency exchange rate effects and hedging, increased 25% year-over-year.

A one-off revenue from the sale of patents of SEK 0.3 b. positively impacted sales and margins in the first quarter. Reported numbers for the first quarter 2010 exclude restructuring charges of SEK 2.2 b., while reported numbers for the first quarter 2011 include restructuring charges of SEK 0.4 b.

Gross margin in the quarter was flat year-over-year at 38.5% (38.5%), and was up from 36.6% sequentially. The business mix from second half of 2010, with expansions and upgrades, has prevailed in the quarter. This, in combination with strong sales in segment Networks and continued efficiency gains, have impacted gross margin positively.

3G volumes in India were high, which affected margins negatively. The negative margin effects from network modernization projects, which we indicated in the fourth quarter 2010, have partly materialized in the quarter.

R&D expenses amounted to SEK 8.0 (7.3) b., an increase by 10% Year-over-year. The increase is a result of the planned higher investments in radio, such as TD-LTE and IP as well as the acquired LG-Ericsson operations. Selling and general administrative expenses (SG&A) amounted to SEK 6.4 (5.9) b., an increase by 10% year-over-year, representing 12% of sales. This is mainly a result of the acquired LG-Ericsson operations and a growing number of LTE trials. Total operating expenses amounted to SEK 14.4 (13.1) b.

Other operating income and expenses were flat, SEK 0.3 (0.3) b. in the quarter.

Operating income, excluding joint ventures, increased 39% to SEK 6.3 (4.5) b. in the quarter. Operating margin improved to 11.9% (10.1%) year-over-year mainly due to the volume increase.

Ericsson's share in earnings of joint ventures, before tax, amounted to SEK -0.5 (-0.3) b., compared to SEK -0.3 b. in the fourth quarter 2010. Sony Ericsson contributed with a profit of SEK 0.1 b. while ST-Ericsson's loss amounted to SEK -0.6 b.

Financial net amounted to SEK 0.0 (-0.2) b. in the quarter. Financial net improved slightly sequentially from SEK -0.3 b. due to higher short-term interest rates and a high cash position.

Net income amounted to SEK 4.1 (1.3) b. The improvements are mainly a result of increased sales volumes and improved profitability in Networks.

Earnings per share were SEK 1.27 (0.39) in the quarter. Earnings per share excluding amortizations and write-downs of acquired intangibles were SEK 1.52 (0.87) in the first quarter.

Adjusted operating cash flow was SEK -2.1 (3.0) b. in the quarter. Cash flow from operations amounted to SEK -2.9 (2.3) b. mainly due to higher inventories and a payment of SEK 1.1 (0.9) b. to pension funds. Cash outlays for restructuring amounted to SEK 0.8 (0.7) b. in the quarter. Cash outlays of SEK 2.5 b. remain to be made.

Balance sheet and other performance indicators

                                Mar 31 Dec 31 Sep 30 June 30 Mar 31
SEK b.                            2011   2010   2010    2010   2010

Net cash                          48.2   51.3   35.7    25.8   38.5

Interest-bearing
liabilities and post-employment
benefits                          34.8   35.9   40.4    41.8   39.3

Trade receivables                 60.6   61.1   57.8    69.4   62.7

   Days sales
outstanding                        101     88    109     133    117

Inventory                         32.1   29.9   30.3    29.4   24.1

   Of which
egional inventory                 21.1   18.7   19.1    18.3   14.0

   Inventory days                   87     74     82      81     75

Payable days                        70     62     62      61     59

Customer
financing, net                     4.2    4.4    3.5     3.1    2.9

Return on
capital employed                   13%    10%     8%      6%     5%

Equity ratio                       53%    52%    52%     51%    53%

Trade receivables decreased sequentially by SEK 0.5 b. to SEK 60.6 (61.1) b. due to the strong SEK and lower seasonal decline in sales. Days sales outstanding (DSO) decreased from 117 to 101 days year-over-year as a result of higher sales and strong collections.

Inventory increased sequentially by SEK 2.2 b. to SEK 32.1 (29.9) b. The higher inventory level year-over-year is reflecting higher level of work in progress in the regions and continued ramp up of production. Inventory turnover days increased from 74 to 87 days.

Goodwill decreased SEK 1.4 b. to SEK 25.8 (27.2) b. due to a stronger SEK.

Cash, cash equivalents and short-term investments amounted to SEK 83.0 (87.2) b. The net cash position decreased sequentially by SEK 3.1 b. to SEK 48.2 (51.3) b., mainly due to negative cash flow.

During the quarter, approximately SEK 1.1 b. of provisions were utilized, of which SEK 0.8 b. related to restructuring. Additions of SEK 1.3 b. were made, of which SEK 0.1 b. related to restructuring. Reversals of SEK 0.1 b. were made. Provisions will fluctuate over time depending on business mix, market mix as well as technology shifts.

Total number of employees at the end of the quarter amounted to approximately 91,500 (86,500), an increase by 1,200 from December 31, 2010. In the quarter, some 300 individuals joined Ericsson through acquisitions and approximately 1,000 related to our services business, mainly in Brazil, India and China. Main reductions were made in countries in Western Europe.

SEGMENT RESULTS

Networks

                          First                Fourth
                         quarter               quarter

SEK b.             2011(1)  2010(2)  Change  2010(2)  Change

Networks sales       33.2     24.7    35%     36.4     -9%

EBITA margin(3)       20%      16%      -      18%      -

Operating margin      17%      12%      -      16%      -

(1)   All numbers for 2011 are stated incl. restructuring charges
(2)   All numbers for 2010 are stated excl. restructuring charges
(3)   EBITA - Earnings before interest, tax, amortizations and write-downs
      of acquired intangibles

Networks' sales in the quarter were SEK 33.2 (24.7) b. The increase of 35% year-over-year was an effect of high mobile broadband sales. Sales were negatively impacted by a strong SEK. Sequentially sales decreased -9%.

Sales of the multi-standard radio base station RBS 6000 continued to be high as well as of packet-core, IP-routers and microwave based backhaul. CDMA and GSM showed good growth year-over-year and LG-Ericsson performed well also this quarter. GSM demand is primarily driven by capacity needs in countries such as China and India. In China, GSM/EDGE is also used as fall back for mobile broadband coverage.

EBITA margin in the quarter increased year-over-year to 20% (16%) and from 18% sequentially. The increase was driven by increased volumes, business mix with expansions and upgrades and continued efficiency gains.

In Europe the captured network modernization deals will give us an estimated market share increase of approximately three percentage points in the combined 2G/3G market.



Global Services

                               First                  Fourth
                              quarter                 quarter

SEK b.                2011(1)  2010(2)  Change     2010(2)  Change

Global Services sales     17.4     18.1    -4%       22.9    -24%

   Of which
Professional Services     12.6     13.3    -5%       16.7    -25%

   Of which
Managed Services           4.9      4.9     1%        5.4     -8%

   Of which
Network Rollout            4.9      4.8     0%        6.2    -21%

EBITA margin(3))            7%      12%      -        13%       -

   Of which
Professional Services      13%      16%      -        16%       -

Operating margin            7%      11%      -        12%       -

   Of which
Professional Services      12%      15%      -        15%       -

(1)  All numbers for 2011 are stated incl. restructuring charges
(2)  All numbers for 2010 are stated excl. restructuring charges
(3)  EBITA - Earnings before interest, tax, amortizations and write-downs
     of acquired intangibles

Global Services sales in the quarter were SEK 17.4 (18.1) b. a decrease of -4% year-over-year, and -24% sequentially. The year-over-year decline is primarily a result of currency exchange rate effects.

Professional Services sales were SEK 12.6 (13.3) b. in the quarter, a decrease of -5% year-over-year and by -25% sequentially, negatively impacted by a low level of integration projects. Managed Services sales increased by 1% year-over-year to SEK 4.9 (4.9) b. and were down -8% sequentially. Currency adjusted sales of Professional Services increased 3% and Managed Services sales increased 11%. Demand for managed services and transformational OSS/BSS projects continued to be high.

Network Rollout sales amounted to SEK 4.9 (4.8) b. in the quarter, flat year-over-year and -21% sequentially. Since network rollout typically lags equipment sales with 6-9 months, sales were negatively impacted by the industry wide component shortage in 2010.

Global Services' EBITA margin decreased in the quarter, both year-over-year and sequentially. It was impacted by a loss in Network Rollout following large 3G rollouts in India with low margins and the effects of supply constraints in 2010.

EBITA margin for Professional Services decreased to 13% (16%) year-over-year and sequentially due to lower proportion of product near systems integration business and with a percentage point negative impact from restructuring during the first quarter.

During the quarter nine new managed services contracts were signed of which five were extensions or expansions.

Ericsson provides support for networks that serve more than two billion subscribers worldwide. The total number of subscribers in networks managed by Ericsson is more than 800 million, of which 450 million in network operation contracts and 350 million in field maintenance.

                          First                 Fourth
                         quarter                quarter

SEK b.           2011(1)  2010(2)  Change   2010(2)  Change

Multimedia sales      2.3      2.3    -1%      3.5   -34%

EBITA margin(3)       -7%      -5%      -      16%      -

Operating margin     -15%     -13%      -      11%      -

(1) All numbers for 2011 are stated incl. restructuring charges
(2) All numbers for 2010 are stated excl. restructuring charges
(3) EBITA - Earnings before interest, tax, amortizations and write-downs of
    acquired intangibles

Multimedia sales in the quarter decreased -1% year-over-year and -34% sequentially. Sales of multimedia brokering (IPX) and revenue management were good. However, sales for TV solutions were weaker. EBITA margin amounted to -7% (-5%) due to lower volumes and product mix, partly offset by lower operating expenses.

Sony Ericsson

                           First             Fourth
                          quarter           quarter

EUR m.                2011  2010 Change    2010 Change

Number of
units shipped (m.)     8.1  10.5   -23%    11.2   -28%

Average selling
price (EUR)            141   134     5%     136     4%

Net sales            1,145 1,405   -19%   1,528   -25%

Gross margin           33%   31%      -     30%      -

Operating margin        2%    1%      -      3%      -

Income before taxes     15    18      -      35      -

Income before taxes,
excl restructuring
charges                 15    21      -      39      -

Net income              11    21      -       8      -

Operating cash flow   -353   -94      -    -128      -

Sony Ericsson is executing on its strategy to grow within the smartphone segment and during the quarter over 60% of total sales were smartphones. The company is experiencing some disruptions in its supply chain from the earthquake in Japan.

Cash flow from operating activities during the quarter was negative EUR 353 million, mainly due to inventory investments. New external borrowings of EUR 375 million were made in the quarter resulting in total borrowings of EUR 604 million on March 31, 2011. Total cash balances amounted to EUR 599 million. Guarantees from the Parent Company Telefonaktiebolaget LM Ericsson to Sony Ericsson Mobile Communications AB amounted to SEK 2.0 (1.1) b. in the quarter.

Sony Ericsson estimates that its market share for smartphones was approximately 5% in units and approximately 3% in value.

Ericsson's share in Sony Ericsson's income before tax was SEK 0.1 (0.1) b. in the quarter.

ST-Ericsson

                     First quarter     Fourth quarter

USD m.               2011 2010 Change     2010 Change

Net sales             444  606   -27%      577   -23%

Adjusted
operating income(1)  -149 -114      -     -119      -

Operating income     -178 -164      -     -171      -

Net income           -178 -154      -     -177      -
(1) Operating income adjusted for amortization of acquired intangibles and
restructuring charges

The company is currently in a shift from legacy to new products. The drop in legacy products was higher than expected during the quarter. Securing the successful execution and delivery of the new products to customers is critical for the long-term value of the company.

The operating loss increased sequentially primarily due to lower sales volumes. The company is taking additional action to improve internal efficiency in product development and further reductions of selling, general and administrative expenses.

The net financial position at March 31, 2011, was negative USD -195 (-82) million. For the second quarter ST-Ericsson expects net sales to decline sequentially primarily due to the ongoing decline in legacy products. By the end of the quarter ST-Ericsson had utilized USD 234 million of a short-term credit facility granted on a 50/50 basis by the parent companies. Ericsson is committed to financially support ST-Ericsson's execution of their new portfolio.

ST-Ericsson is reported in US GAAP. Ericsson's share in ST-Ericsson's income before tax, adjusted to IFRS, was SEK -0.6 (-0.5) b. in the quarter.

REGIONAL OVERVIEW

                    First quarter        Fourth quarter

Sales, SEK b.      2011 2010 Change     2010      Change

North America      13.2  9.5    39%     14.1         -6%

Latin America       4.0  4.0     1%      6.1        -34%

Northern Europe     3.4  2.3    46%      4.8        -30%
and Central Asia

Western and         4.8  5.2    -8%      5.9        -19%
Central Europe

Mediterranean       4.8  5.1    -5%      6.9        -31%

Middle East         3.1  3.9   -22%      4.6        -34%

Sub-Saharan Africa  2.2  2.4    -9%      2.0          9%

India               3.2  2.3    38%      2.8         11%

China and           8.6  5.0             9.5         -9%
North East Asia                 74%

South East Asia     3.1  3.5             3.9        -21%
and Oceania                    -12%

Other               2.6  1.9    37%      2.2         25%

Total              53.0 45.1    17%     62.8        -16%

North American sales increased 39% year-over-year and decreased -6% sequentially, negatively impacted by a strong SEK. Growth in the region was driven by continued data traffic increase. Capacity expansions are being carried out via the addition of new hardware as well as software upgrades along with associated services. Since iOS and Android-based devices have been introduced to the market these have become core drivers of traffic growth. In addition, LTE-equipped devices will be deployed in 2011.

Latin America sales increased 1% year-over-year and decreased -34% sequentially. Demand for mobile broadband is increasing in the region, driven by mobile data traffic. At the same time, there are rural expansion projects, driving demand for voice related products and services. LTE trials are ongoing across the region.

Northern Europe and Central Asia sales increased 46% year-over-year and decreased -30% sequentially. The year-over-year increase is mainly driven by build out of mobile broadband coverage in Russia where mobile data traffic shows triple-digit growth. Russia was strong also in the first quarter, spurred by network rollouts with large operators such as Vimpelcom and MTS.

Western and Central Europe sales decreased -8% year-over-year and -19% sequentially due to somewhat cautious spending by major operators while preparing for network modernization projects. Deployment of multi-standard radio base stations has commenced as part of the network modernization program that Ericsson is delivering to Telefónica O2 UK along with the continued supply of core network infrastructure. In Germany LTE roll-out to Vodafone continues.

Mediterranean sales decreased -5% year-over-year and -31% sequentially, negatively impacted by the political unrest in North Africa as well as the general economic situation in Spain, Portugal and Greece. Modernization projects started in Spain and Italy. Managed services developed favorably in the quarter due to new and extended contracts in Spain. Tenders for 4G/LTE spectrum have been or will soon be initiated in Spain, Portugal and Italy.

Middle East sales decreased -22% year-over-year and -34% sequentially, impacted by political unrest in the region. 2G declined in the quarter, while sales of mobile broadband continued to increase across the region. Mobile broadband volumes are now almost on par with 2G volumes. 4G/LTE is expected to be rolled out in parts of the Gulf region later this year. Managed services increased both year-over-year and sequentially while revenue management, consulting and systems integration as well as network rollout had a weak quarter.

Sub-Saharan Africa sales decreased by -9% year-over-year, but increased sequentially by 9%. The sequential improvement is primarily due to 2G expansions. Services had a weaker quarter due to delayed deliveries affecting network rollouts and the continued slow development for revenue management.

India sales increased 38% year-over-year and 11% sequentially. Growth was driven by 3G deployments also comparing to low level investments during first half of 2010 awaiting 3G licenses. BWA license holders are currently deciding on vendors for their TD-LTE networks where initial roll-outs are expected later in the year.

China and North East Asia sales increased 74% year-over-year and was down -9% sequentially. The year-over-year increase is mainly related to growth in mobile broadband in Japan, 2G expansions in China and added sales from LG-Ericsson. In Japan data traffic has doubled over the last 18 months and in Korea it has increased 11 times in the last 12 months. Ericsson is one of the vendors selected for a large-scale TD-LTE trial with China Mobile.

South East Asia and Oceania sales decreased -12% year-over-year and -21% sequentially. Operators' investments in mobile broadband are not yet compensating for drop in 2G sales. Mobile data services are different levels of maturity across the region. However, data traffic grows both in volumes and subscribers. Multimedia showed good development in the quarter due to the first sales of revenue management solutions for data traffic.

Other includes sales of for example embedded modules, cables, power modules as well as licensing and IPR.

MARKET DEVELOPMENT

Growth rates are based on Ericsson and market estimates

Mobile infrastructure market

The global mobile infrastructure market slightly declined in the range of mid-single digits in USD terms in 2010. During the third quarter in 2010, the market conditions improved and growth picked up in the fourth quarter 2010.

Ericsson mobile infrastructure market share, including the Nortel acquisition, increased 2010 in USD terms. The CDMA business, acquired from Nortel, increased market shares in USD terms, driven by strong mobile broadband demand in North America. Measured in shipped radio base stations 2010, Ericsson increased its share of WCDMA/HSPA and strengthened its leading position within 4G/LTE. Due to the industry wide component shortage in 2010 Ericsson could not fully meet the demand for GSM. However, deliveries picked up in the first quarter 2011 and it is Ericsson's view that the company has at least maintained its market share also in GSM.

Data traffic uptake in mobile and fixed networks drives need for higher capacity in areas such as backhaul, aggregation, transport, and routing based on IP and Ethernet technologies. With operators' focus on increased network quality and efficiency, the ability to deal with high data volumes while maintaining telecom grade service levels is key. This enables operators to provide premium quality and differentiating offerings to the end users. This also drives demand for services targeting the operational efficiency of operators, such as consulting, including network optimization, systems integration and managed services.

Telecom services market

The global telecom services market showed positive growth in mid-single digits in USD terms in 2010, mainly driven by continued strong growth in managed services. Operators' focus on efficiency drives interest in exploring business models such as managed operations, network sharing and network IT transformation. Estimates show that only around 35-40% of addressable operator network operating expenditure is spent externally on telecom services today leaving significant continued opportunities, particularly for managed services.

End user drivers

Global mobile penetration is 79% and total mobile subscriptions have reached 5.5 billion. India and China accounted for about 48% of the estimated 190 million net additions during the first quarter, adding around 65 and 30 million respectively. Indonesia and Vietnam were third and fourth countries in terms of net additions. India has now passed 800 million subscriptions and the US has passed 300 million subscriptions.

Global fixed broadband subscriptions grew by 14 million new subscriptions to reach 523 million during the fourth quarter 2010, mainly boosted by strong growth in DSL in China. DSL represents more than 60% of all fixed broadband subscriptions.

                             First                 Full          | Ericsson
                Unit        quarter                year          | forecast
                                                                 |
                        2010 2011 Change 2006 2007 2008 2009 2010|     2011
Mobile                                                           |
subscriptions  Billion   4.8 ~5.5   ~16%  2.7  3.3  4.0  4.6 ~5.3|     ~6.1
-----------------------------------------------------------------+---------
Net additions   Million  160 ~190   ~17%  500  620  660  640 ~720|     ~730
                                                                 |
Mobile                                                           |
broadband(1)    Million  420 ~670   ~57%   55  130  220  370  600|   ~1,000
                                                                 |
Net additions   Million   50   70   ~35%   30   70   90  160 ~320|     ~450
-----------------------------------------------------------------+---------
(1)  Mobile broadband includes handset and mobile PC for the following
     technologies: HSPA, LTE, CDMA2000 EVDO, TD-SCDMA and WiMax

Ericsson findings, based on measurements in live networks, show that global mobile data traffic more than doubled in 2010 and mobile data traffic is forecasted to almost double annually over the next few years, driven by 24/7 connectivity and end user demand for bandwidth. Increased proliferation of devices such as smartphones, tablets and laptops will impact the traffic going forward. The traffic forecast could be subject to change if operators start to implement traffic shaping and caps to a larger degree.

To cater for the increased surge for mobile data services, mobile networks are being built-out across the world and WCDMA networks now cover more than 35% of the world's population. Almost all of these networks have also launched HSPA. At the moment, more than 65% of the commercial HSPA networks have been upgraded, at least partly, to a peak speed of 7.2 Mbps or above. Operators are continuously upgrading to higher speeds and around 6% of the HSPA networks have launched services with 42 Mbps peak speed, currently the highest HSPA speed that is commercially available. In addition, Ericsson has as the first vendor demonstrated 84 and 168 Mbps based on commercial network equipment. Building wider coverage to reach further into the remaining 65% of the population, the availability of affordable handsets, as well as the surge for mobile broadband services and faster speeds, will drive continued strong uptake of HSPA.

Tiered pricing for mobile broadband is now a reality, as many operators today have evolved beyond flat-rate unlimited data models and introduced segmented price plans, such as volume, time or speed based plans. Segmented data price plans intend to attract a wide variety of data users and differentiate the offering, in order to maximize data revenues and to grow service revenues. Many operators in mature mobile broadband markets have today more than offset the decline in voice revenues, not uncommon in mature markets, with increasing data revenues.

In average, a smartphone generates approximately 10 times more traffic compared to a normal feature phone, while a mobile PC user generates 100 times more traffic than a feature phone. There are indications of higher than average per-smartphone traffic in the US networks, however traffic profiles per user do vary considerably between networks and markets.

Yearly WCDMA/HSPA radio access network investments passed GSM investments in 2009, eight years after the 3G introduction in Western Europe. It will remain the dominant access technology for many years to come, in terms of global investment, despite the fact that 4G/LTE is being rolled out and launched. Coexistence of GSM, WCDMA/HSPA, CDMA2000 and 4G/LTE and increasing number of frequency bands pave the way for investments in multi-standard solutions and networks modernization.

PARENT COMPANY INFORMATION

Income after financial items was SEK 3.1 (-0.6) b. The increase in financial net, year-over-year, is mainly due to Group internal dividends. Major changes in the Parent Company's financial position for the first quarter include; decreased cash, cash equivalents and short-term investments of SEK 2.2 b. and decreased current and non-current liabilities to subsidiaries of SEK 1.8 b. At the end of the quarter cash, cash equivalents and short-term investments amounted to SEK 69.4 (71.6) b. Guarantees to Sony Ericsson Mobile Communications AB are reported as contingent liabilities and amounted to SEK 2.0 (1.1) b. By the end of the quarter ST-Ericsson had utilized USD 117 million of a short-term credit facility.

In accordance with the conditions of the long-term variable compensation program (LTV) for Ericsson employees, 2,625,812 shares from treasury stock were sold or distributed to employees during the first quarter. The holding of treasury stock at March 31, 2011, was 70,462,703 Class B shares.

ANNUAL GENERAL MEETING OF SHAREHOLDERS

The Annual General Meeting of shareholders (AGM) decided, as previously announced and in accordance with the proposal by the Board of Directors, on a dividend payment of SEK 2.25 per share for 2010 and with April 18, 2011, as the date of record for the dividend. The total dividend payment amounts to SEK 7.2 (6.4) b.

In accordance with the proposal by the Nomination Committee, Leif Johansson was elected new Chairman of the Board of Directors and Jacob Wallenberg was elected new member of the Board of Directors, replacing Marcus Wallenberg.

In accordance with the Board of Directors' proposals, the AGM resolved the implementation of LTV 2011 (Long Term Variable compensation), with the same structure as previous programs but with new performance criteria in the executive performance stock plan.

The AGM also resolved on transfer of shares for implementation of LTV 2011. In addition, the AGM resolved the transfer of treasury stock for previously decided LTV programs.

The AGM resolved in accordance with the Board of Directors' proposal, on an amendment of the object's of the company in the Articles of Association (§ 2), to adjust to the Company's strategy to expand into new industry segments, such as governments, health industry, transport, utilities and mobile money. For more details, seewww.ericsson.com/investors

OTHER INFORMATION

Completion of acquisition of Nortel's Multiservice Switch business

On March 11, 2011, Ericsson announced the completion of the asset purchase agreement to acquire Nortel's Multiservice Switch business. The acquisition gives Ericsson access to a strong product portfolio and installed base in the data segment while ensuring the supply of the platform for the recently acquired CDMA and GSM units.

The closing follows the announcement on September 25, 2010, that Ericsson was entering into an asset purchase agreement for substantially all of the assets of Nortel's Multiservice Switch business.

Acquisition of assets from Telenor Connexion

On April 19, 2011, Ericsson announced the acquisition of Telenor Connexion's machine-to-machine (M2M) technology platform. The acquisition is in line with Ericsson's ambition to drive the market for M2M communication, adding valuable technology and know-how from Telenor Connexion.

Telenor Connexion will also be first customer on Ericsson's Device Connection Platform, a service allowing operators to offer M2M connection beyond smartphones and laptops.

The acquisition is not subject to approval from authorities but to contractual agreements before closing.

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 2010. Compared to the risks described in the Annual Report 2010, no material new or changed risk factors or uncertainties have been identified in the quarter.

Risk factors and uncertainties in focus during the forthcoming six-month period for the Parent Company and the Ericsson Group include:

--  Potential negative effects on operators' willingness to invest in
    network development due to a continued uncertainty in the financial
    markets and a weak economic business environment as well as uncertainty
    regarding the financial stability of suppliers, for example due to
    lack for borrowing facilities, or reduced consumer telecom spending,
    or increased pressure on us to provide financing;
--  Effects on gross margins and/or working capital of the product mix in
    the Networks segment between sales of software, upgrades and extensions
    as well as break-in contracts;
--  Effects on gross margins of the product mix in the Global Services
    segment including proportion of new network build-outs and share of new
    managed services deals with initial transition costs;
--  A continued volatile sales pattern in the Multimedia 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 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, effecting production, supply and transportation.

Ericsson conducts business in certain countries which are subject to trade restrictions or which are focused on by certain investors. We stringently follow all relevant regulations and trade embargos applicable to us in our dealings with customers operating in such countries. Moreover, Ericsson operates globally in accordance with Group level policies and directives for business ethics and conduct. In no way should our business activities in these countries be construed as supporting a particular political agenda or regime. We have activities in such countries mainly due to that certain customers with multi-country operations put demands on us to support them in all their markets.

Stockholm, April 27, 2011

Telefonaktiebolaget LM Ericsson (publ)

Hans Vestberg, President and CEO

Date for next report: July 21, 2011

AUDITORS' REVIEW REPORT

We have reviewed this report for the period January 1 to March 31, 2011, for Telefonaktiebolaget LM Ericsson (publ). The board of directors and the CEO are responsible for the preparation and presentation of this financial information in accordance with IAS 34 and the Annual Accounts Act. Our responsibility is to express a conclusion on this financial information based on our review.

We conducted our review in accordance with the Standard on Review Engagements SÖG 2410, Review of Interim Financial Information Performed by the Independent Auditor of the Entity, issued by FAR SRS. A review consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards of Auditing (ISA), and other generally accepted auditing practices. The procedures performed in a review do not enable us to obtain a level of assurance that would make us aware of all significant matters that might be identified in an audit. Therefore, the conclusion expressed based on a review does not give the same level of assurance as a conclusion expressed based on an audit.

Based on our review, nothing has come to our attention that causes us to believe that the interim report is not prepared, in all material respects, in accordance with IAS 34 and the Swedish Annual Accounts Act regarding the Group and with the Swedish Annual Accounts Act regarding the Parent Company.

Stockholm, April 27, 2011

PricewaterhouseCoopers AB

Peter Nyllinge

Authorized Public Accountant

EDITOR'S NOTE

To read the complete report with tables, please go to: www.ericsson.com/res/investors/docs/q-reports/2011/3month11-en.pdf

Ericsson invites media, investors and analysts to a press conference at the Ericsson Studio, Grönlandsgången 4, Stockholm, at 09.00 (CET), April 27, 2011.

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/broadcast_room

Disclosure Pursuant to the Swedish Securities Markets Act

Ericsson discloses the information provided herein pursuant to the Securities Markets Act. The information was submitted for publication at 07.30 CET, on April 27, 2011.

Safe Harbor Statement of Ericsson under the US Private Securities Litigation Reform Act of 1995;

All statements made or incorporated by reference in this release, other than statements or characterizations of historical facts, are forward-looking statements. These forward-looking statements are based on our current expectations, estimates and projections about our industry, management's beliefs and certain assumptions made by us. Forward-looking statements can often be identified by words such as "anticipates", "expects", "intends", "plans", "predicts", "believes", "seeks", "estimates", "may", "will", "should", "would", "potential", "continue", and variations or negatives of these words, and include, among others, statements regarding: (i) strategies, outlook and growth prospects; (ii) positioning to deliver future plans and to realize potential for future growth; (iii) liquidity and capital resources and expenditure, and our credit ratings; (iv) growth in demand for our products and services; (v) our joint venture activities; (vi) economic outlook and industry trends; (vii) developments of our markets; (viii) the impact of regulatory initiatives; (ix) research and development expenditures; (x) the strength of our competitors; (xi) future cost savings; (xii) plans to launch new products and services; (xiii) assessments of risks; (xiv) integration of acquired businesses; (xv) compliance with rules and regulations and (xvi) infringements of intellectual property rights of others.

In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. These forward-looking statements speak only as of the date hereof and are based upon the information available to us at this time. Such information is subject to change, and we will not necessarily inform you of such changes. These statements are not guarantees of future performance and are subject to risks, uncertainties and assumptions that are difficult to predict. Therefore, our actual results could differ materially and adversely from those expressed in any forward-looking statements as a result of various factors. Important factors that may cause such a difference for Ericsson include, but are not limited to: (i) material adverse changes in the markets in which we operate or in global economic conditions; (ii) increased product and price competition; (iii) reductions in capital expenditure by network operators; (iv) the cost of technological innovation and increased expenditure to improve quality of service; (v) significant changes in market share for our principal products and services; (vi) foreign exchange rate or interest rate fluctuations; and (vii) the successful implementation of our business and operational initiatives.

FIRST QUARTER REPORT 2011:

http://hugin.info/1061/R/1509318/444165.pdf

This announcement is distributed by Thomson Reuters on behalf of Thomson Reuters clients. The owner of this announcement warrants that:

(i) the releases contained herein are protected by copyright and other applicable laws; and

(ii) they are solely responsible for the content, accuracy and originality of the information contained therein.

Source: Ericsson via Thomson Reuters ONE

[HUG#1509318]

Contact Information

  • FOR FURTHER INFORMATION, PLEASE CONTACT

    Henry Stenson
    Senior Vice President, Communications
    Phone: +46 10 719 4044
    E-mail: Email Contact or Email Contact

    Investors

    Ase Lindskog
    Vice President, Head of Industry and Investor Relations
    Phone: +46 10 719 9725
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