Actionable news
0
All posts from Actionable news
Actionable news in ERIC: Ericsson,

Report of foreign issuer [Rules 13a-16 and 15d-16]

T ELEFONAKTIEBOLAGET LM E RICSSON (publ)
By:

/s/ NINA MACPHERSON

Nina Macpherson
Senior Vice President and
General Counsel
By:

/s/ HELENA NORRMAN

Helena Norrman
Senior Vice President
Corporate Marketing & Communications Officer

FIRST QUARTER HIGHLIGHTS

Read more

(page)

Sales as reported decreased by -2% YoY. Sales, adjusted for comparable units and currency, decreased by -1% YoY. 3
Sales declined following weak development in Europe and a weak macro-economic environment in some emerging markets. 3
Sales grew in North America, Mainland China and in South East Asia. 3
IPR licensing revenues grew YoY, mainly driven by recently signed contracts which included certain one-time items. 3
Gross margin declined to 33.3% (35.4%), mainly due to lower margins in Global Services, higher share of mobile broadband coverage projects in parts of Asia and lower software sales in IP and core networks. 3
Operating margin increased to 6.7% (4.0%) YoY, driven by improvements in Networks, partly offset by lower profitability in Global Services. 4
In addition to the SEK 9 b. global cost and efficiency program, measures were started in the quarter to adapt the operations to current mobile broadband project volumes. Therefore, the estimate for 2016 restructuring charges increases to SEK 4-5 b. from previous SEK 3-4 b. 3
The company today announces structural changes to further accelerate strategy execution and drive efficiency and growth harder across the company. 2
Cash flow from operating activities was SEK -2.4 (-5.9) b. 9

SEK b.

Q1
2016
Q1
2015
YoY
change
Q4
2015
QoQ
change

Net sales

52.2 53.5 -2 % 73.6 -29 %

Sales growth adj. for comparable units and currency

-1 % -28 %

Gross margin

33.3 % 35.4 % 36.3 %

Gross margin excluding restructuring charges

33.9 % 36.3 % 36.6 %

Operating income

3.5 2.1 63 % 11.0 -69 %

Operating income excluding restructuring charges

4.1 2.7 50 % 11.7 -65 %

Operating margin

6.7 % 4.0 % 15.0 %

Operating margin excluding restructuring charges

7.9 % 5.1 % 16.0 %

Net income

2.1 1.5 45 % 7.0 -70 %

EPS diluted, SEK

0.60 0.40 50 % 2.15 -72 %

EPS (Non-IFRS), SEK 1)

0.87 0.77 13 % 2.50 -65 %

Cash flow from operating activities

-2.4 -5.9 -60 % 21.9 -111 %

Net cash, end of period 2)

36.5 39.7 -8 % 41.2 -11 %

Sales, adjusted for comparable units and currency, were stable YoY. Growth in North America, Mainland China and South East Asia was offset by weak development in Europe and some emerging markets. Profitability increased YoY, driven by improvements in Networks while Global Services had a challenging quarter.

Business

Segment Networks sales declined slightly YoY. A continued weak macro-economic environment impacted sales negatively in some emerging markets in the Middle East and Latin America. In addition, sales in Europe were down primarily driven by completion of mobile broadband projects in 2015. Mobile broadband sales in North America and South East Asia grew and the fast pace of 4G deployments in Mainland China continued. IPR licensing revenues grew YoY, mainly driven by recently signed contracts which included certain one-time items. Software sales in IP and core networks declined.

Sales in segment Global Services declined YoY. This was mainly due to lower Network Rollout activities in Europe and Latin America. Professional Services sales were stable with growth in Consulting and Systems Integration driven by transformation projects and stable Managed Services sales with 21 contracts signed in the quarter.

Sales in Support Solutions increased YoY due to higher IPR licensing revenues. The underlying demand remains strong in OSS and BSS as data growth and increased focus on customer experience drives operators to transform their OSS and BSS solutions.

Profitability

Gross margin declined despite higher IPR licensing revenues. The main reasons were lower margins in Global Services, a higher share of mobile broadband coverage projects in parts of Asia and lower software sales in IP and core networks. Operating margin increased YoY to 6.7% (4.0%), driven by reduced operating expenses and a positive currency effect.

Segment Networks operating margin improved through higher profitability in Radio supported by growth in IPR licensing revenues. Global Services had a challenging quarter partly due to lower mobile broadband coverage activities, leading to temporarily larger losses in Network Rollout. In addition, Professional Services margin declined as a large number of systems integration transformation projects are in a start-up phase.

We ended the quarter with a negative cash flow from operating activities of SEK -2.4 b. which is a significant improvement compared with a year ago. As cash flow is volatile between quarters it should be viewed on a full-year basis. Our full-year cash conversion target of more than 70% remains.

When announcing the year-end results 2015, we presented three focus areas for 2016. The first focus area relates to our Core business where we will capture business opportunities in 4G and extend our leadership in 5G. At the Mobile World Congress (MWC) in Barcelona in March, we demonstrated our 5G leadership both technically and commercially through 21 customer contracts as well as industry and academia research cooperation.

The second focus area for 2016 is to improve profitability in the targeted growth areas. Sales in these areas showed growth mainly driven by professional services. We will continue to put stronger focus on software sales and recurring business to increase profitability.

The third focus area for 2016 is to improve cost and efficiency in order to stay competitive across the entire business.

The global cost and efficiency program is progressing according to plan and contributed with savings of SEK 0.5 b. in operating expenses in the quarter. We are confident in our ability to achieve net annual savings of SEK 9 b. during 2017 compared with 2014.

In the quarter, we began to take additional measures beyond the SEK 9 b. cost and efficiency program. Hence, we are adapting our operations to current mobile broadband project volumes, which primarily impacts service delivery. The additional measures are reflected in an increased estimate for the 2016 restructuring charges.

Structural changes

We are today announcing structural changes to further accelerate strategy execution and drive efficiency and growth even harder across the company. We will create a leaner, more fit for purpose, organization to cater to the needs of different customer segments and to faster capture market opportunities. As 5G, the Internet of Things and Cloud drive the next phase of industry development, the time is right to make this change.

The new structure will have five business units and one dedicated customer group for Industry & Society, in line with the company focus on core business, targeted growth areas and cost and efficiency. The changes will make it easier for our customers to do business with us, whether they are operators, media companies or other industries.

We are not satisfied with our overall growth and profitability development over the past years and I am convinced this will make us more competitive and enable us to grow both our company and our earnings.

SEK b.

Q1
2016
Q1
2015
YoY
change
Q4
2015
QoQ
change

Net sales

52.2 53.5 -2 % 73.6 -29 %

Of which Networks

25.8 26.4 -2 % 37.3 -31 %

Of which Global Services

23.0 23.9 -4 % 30.7 -25 %

Of which Support Solutions

3.4 3.1 10 % 5.6 -40 %

Of which Modems

0.1

Gross income

17.4 19.0 -8 % 26.7 -35 %

Gross margin (%)

33.3 % 35.4 % 36.3 %

Research and development expenses

-7.5 -8.5 -12 % -7.9 -6 %

Selling and administrative expenses

-6.7 -7.1 -6 % -8.0 -16 %

Other operating income and expenses

0.3 -1.2 0.3 7 %

Operating income

3.5 2.1 63 % 11.0 -69 %

Operating margin

6.7 % 4.0 % 15.0 %

for Networks

11 % 2 % 19 %

for Global Services

3 % 7 % 8 %

for Support Solutions

7 % 3 % 30 %

for Modems

0 %

Financial net

-0.5 -0.1 -0.7 -36 %

Taxes

-0.9 -0.6 45 % -3.3 -73 %

Net income

2.1 1.5 45 % 7.0 -70 %

Restructuring charges

-0.6 -0.6 3 % -0.7 -10 %

Sales as reported decreased by -2% YoY. Sales, adjusted for comparable units and currency, decreased by -1%.

Segment Networks sales declined slightly YoY. A weak macro-economic environment impacted sales negatively in some emerging markets in the Middle East and Latin America. In addition, sales in Europe were down primarily driven by completion of mobile broadband projects in 2015. Mobile broadband sales in North America grew and the fast pace of 4G deployments in Mainland China continued. IPR licensing revenues grew YoY, mainly driven by recently signed contracts which included certain one-time items. Software sales in IP and core networks declined.

Sales dropped in segment Global Services YoY. This was mainly due to lower Network Rollout activities in Europe and Latin America. Professional Services sales were stable with growth in Consulting and Systems Integration driven by transformation projects. Managed Services sales were stable with 21 contracts signed in the quarter.

Sales in Support Solutions increased YoY due to higher IPR licensing revenues. Software sales in OSS and BSS declined. However, the underlying demand remains strong in OSS and BSS as data growth and increased focus on customer experience drives operators to transform their OSS and BSS solutions.

Group sales as reported decreased by -29% QoQ following a seasonally strong Q4 and lower IPR licensing revenues.

Gross margin declined YoY despite higher IPR licensing revenues and increased capacity sales in North America. Lower margin in Global Services, higher share of mobile broadband coverage projects in parts of Asia and lower software sales in IP and core networks impacted gross margin negatively.

Gross margin declined sequentially, mainly due to lower IPR licensing revenues, higher share of services sales and lower margin in Global Services.

Restructuring charges and cost and efficiency program

Restructuring charges were stable YoY and declined QoQ.

The global cost and efficiency program is progressing according to plan. The target remains, to achieve net annual savings of SEK 9 b. during 2017 relative to 2014.

In the quarter, the company began to take additional measures beyond the cost and efficiency program, impacting primarily service delivery. With current visibility, total restructuring charges for 2016 are estimated to be SEK 4-5 b. compared with previous estimate of SEK 3-4 b.

Operating expenses

Operating expenses decreased to SEK 14.2 (15.6) b. due to increased capitalization of development expenses, savings related to the cost and efficiency program and reduced amortizations of intangible assets. Savings related to the cost and efficiency program were SEK 0.5 b. YoY.

Other operating income and expenses

Other operating income and expenses improved YoY. The revaluation and realization effects of currency hedge contracts were SEK 0.2 b. This is to be compared with SEK -0.1 b. in Q4 2015 and SEK -1.4 b. in Q1 2015.

The main part of the currency hedge contract balance is in USD. The SEK strengthened against the USD between Dec 31, 2015 (SEK/USD rate 8.40) and March 31, 2016 (SEK/USD rate 8.10).

Operating income

Operating income increased YoY, supported by reduced operating expenses, a positive effect from currency hedge contracts and increased IPR licensing revenues. The increase in operating income was partly offset by a lower gross income.

Operating income decreased QoQ due to lower sales, lower IPR licensing revenues and lower gross margin. The decrease in operating income was partly offset by reduced operating expenses.

Financial net

Financial net decreased YoY mainly due to negative revaluation effects of foreign currency. Financial net improved QoQ following lower financial expenses.

The tax rate was stable YoY and declined slightly QoQ.

Net income and EPS

Net income and EPS diluted increased YoY following higher operating income and decreased QoQ. EPS diluted was SEK 0.60 (0.40), EPS (Non-IFRS) was SEK 0.87 (0.77).

Employees

The number of employees on March 31, 2016 was 115,300 compared with 116,281 on Dec 31, 2015. Reductions as part of the global cost and efficiency program continued. However, the number of Ericsson services professionals remained unchanged at 66,000 on March 31, 2016.

The discontinuation of the modems business was completed in Q3 2015.

First quarter 2016 Change

SEK b.

Networks Global
Services
Support
Solutions
Total YoY QoQ

North America

6.3 6.1 0.8 13.2 8 % -23 %

Latin America

2.0 1.8 0.2 4.0 -12 % -34 %

Northern Europe and Central Asia

1.3 0.8 0.1 2.2 -18 % -22 %

Western and Central Europe

1.3 2.5 0.1 4.0 -17 % -26 %

Mediterranean

1.5 2.7 0.1 4.3 -14 % -38 %

Middle East

1.4 1.9 0.3 3.6 -21 % -41 %

Sub-Saharan Africa

0.9 1.1 0.2 2.1 -2 % -26 %

India

1.3 1.2 0.2 2.7 -24 % -15 %

North East Asia

3.5 1.9 0.1 5.6 -7 % -37 %

South East Asia and Oceania

3.2 1.9 0.1 5.2 22 % -2 %

Other 1)

3.1 1.1 1.2 5.4 43 % -40 %

Total

25.8 23.0 3.4 52.2 -2 % -29 %

Sales grew in comparison with a weak first quarter 2015, driven by increased mobile broadband capacity investments to cater to mobile data traffic growth. The need for ICT transformation remains and is creating opportunities in Support Solutions and Professional Services.

Latin America

Mobile broadband investments continued to decline, impacted by local currency depreciation. However, mobile broadband investments in Mexico increased YoY.

Northern Europe and Central Asia

The mobile broadband investments in Russia continued to be weak. Professional Services grew, primarily in the Nordics, where managed services and ICT transformation were the main drivers.

Western and Central Europe

After a period of significant investments in network build-out, operators are moving focus to invest in capacity and quality in order to improve end-user experience. This resulted in a mobile broadband sales decline compared with last year. Professional services sales remained stable.

Mediterranean

Sales declined due to lower investments in mobile broadband infrastructure as major projects were completed. ICT transformation for TV & Media developed favorably.

Networks sales declined due to lower infrastructure investments, driven by a challenging macro-economic environment partly linked to lower oil prices.

Mobile broadband sales increased somewhat as certain markets are investing in network modernization and introduction of 4G. Global Services sales decreased, mainly as a result of de-scoping of managed services contracts in a few markets.

4G deployments started at the end of 2015, however, overall mobile broadband sales slowed as a result of delays in spectrum auctions and spectrum trading deals between operators. The positive development in Professional Services continued.

North East Asia

4G deployments in Mainland China continued as projected, while core network deployments were slower than a year ago. Japan had a strong quarter mainly due to fiscal year-end investments. In Korea, investments slowed further due to delayed spectrum auctions.

South East Asia and Oceania

Sales growth was primarily driven by mobile broadband expansion in Bangladesh. Professional Services developed favorably, mainly driven by Managed Services. Support Solutions developed positively, driven by OSS and BSS transformation projects, primarily in Australia.

IPR licensing revenues grew YoY, mainly driven by recently signed contracts which included certain one-time items.

SEK b.

Q1
2016
Q1
2015
YoY
change
Q4
2015
QoQ
change

Net sales

25.8 26.4 -2 % 37.3 -31 %

Sales growth adj. for comparable units and currency

-3 % -30 %

Operating income

2.7 0.6 362 % 7.2 -62 %

Operating income excluding restructuring charges

3.0 0.8 296 % 7.4 -59 %

Operating margin

11 % 2 % 19 %

Operating margin excluding restructuring charges

12 % 3 % 20 %

EBITA margin

11 % 5 % 21 %

Restructuring charges

-0.3 -0.2 71 % -0.3 14 %

Sales as reported decreased by -2% YoY mainly due to lower software sales in IP and core networks as well as lower mobile broadband investments in India following a delayed spectrum auction. In North America, mobile broadband sales grew driven by capacity investments. 4G deployments in Mainland China continued at a fast pace. IPR licensing revenue grew YoY.

Sales growth was strong in some emerging markets such as Mexico and Bangladesh. Other emerging markets, such as Brazil and parts of the Middle East, remained weak, negatively impacted by a weak macro-economic environment. Sales in Europe declined YoY as major projects were completed in 2015. Sales, adjusted for comparable units and currency, decreased by -3% YoY.

Sales decreased QoQ, following a seasonally strong Q4 2015. The decrease was mainly due to lower IPR licensing revenues and lower sales in Mainland China and in North America. Sequentially, the business mix was unchanged, with a large share of hardware sales.

In the quarter, Ericsson announced the acquisition of NodePrime, a software platform development company. The acquisition aims to strengthen Ericssons leadership in next- generation software-defined infrastructure.

Deliveries of Ericsson Radio System started at the end of 2015 and will scale to address all regions and ramp to larger volumes during the latter part of this year.

Operating income and margin

Operating income and margin increased YoY mainly due to higher IPR licensing revenues, lower operating expenses, higher mobile broadband capacity sales in North America and a positive effect from currency hedge contracts. This was partly offset by lower software sales in IP and core networks and a higher share of coverage business in emerging markets.

Sequentially, operating income and margin decreased due to lower sales and lower IPR licensing revenues.

The effect of currency hedge contracts was positive at SEK 0.2 (-1.1) b. in the quarter. In Q4 2015, the effect of currency hedge contracts was negative at SEK -0.2 b.

SEK b.

Q1
2016
Q1
2015
YoY
change
Q4
2015
QoQ
change

Net sales

23.0 23.9 -4 % 30.7 -25 %

Of which Professional Services

17.9 18.1 -1 % 23.1 -22 %

Of which Managed Services

7.4 7.5 -2 % 8.2 -10 %

Of which Network Rollout

5.1 5.8 -12 % 7.6 -33 %

Sales growth adj. for comparable units and currency

0 % -23 %

Operating income

0.6 1.7 -62 % 2.5 -75 %

Of which Professional Services

1.3 2.1 -39 % 2.7 -52 %

Of which Network Rollout

-0.6 -0.4 52 % -0.2 257 %

Operating margin

3 % 7 % 8 %

for Professional Services

7 % 12 % 12 %

for Network Rollout

-13 % -7 % -2 %

Operating income excluding restructuring charges

1.0 2.1 -54 % 2.7 -65 %

Operating margin excluding restructuring charges

4 % 9 % 9 %

EBITA margin

4 % 8 % 9 %

Restructuring charges

-0.3 -0.4 -25 % -0.2 48 %

Sales as reported decreased -4% YoY, with a decline in Network Rollout due to lower mobile broadband coverage activities in Europe and Latin America. Professional Services sales were stable with growth in Consulting and Systems Integration driven by transformation projects. Managed Services sales were stable with 21 contracts signed in the quarter. Sales, adjusted for comparable units and currency, were flat YoY.

Sales decreased by -25% QoQ following a strong Q4.

Operating income and margin

Operating income decreased YoY in Global Services with reduced profitability in both Network Rollout and Professional Services.

While the underlying profitability in Network Rollout remained stable, lower volumes in mobile broadband rollout led to temporary losses due to under-absorption of resources.

Professional Services margin declined as a large number of systems integration transformation projects are in a start-up phase.

To improve profitability, additional measures are being taken to adapt the service delivery operations to current mobile broadband project volumes.

Q1
2016
Q1
2015
Full year
2015

Number of signed Managed Services contracts

21 27 101

Number of signed significant consulting & systems integration contracts 1)

13 13 66

SEK b.

Q1
2016
Q1
2015
YoY
change
Q4
2015
QoQ
change

Net sales

3.4 3.1 10 % 5.6 -40 %

Sales growth adj. for comparable units and currency

5 % -39 %

Operating income

0.2 0.1 190 % 1.7 -86 %

Operating income excluding restructuring charges

0.3 0.1 1.9

Operating margin

7 % 3 % 30 %

Operating margin excluding restructuring charges

8 % 3 % 34 %

EBITA margin

15 % 10 % 34 %

Restructuring charges

0.0 0.0 16 % -0.2 -90 %

Sales as reported increased 10% YoY, due to higher IPR licensing revenues. Software sales in OSS and BSS declined due to lower software licenses sales in the quarter. The overall transition of business models, from traditional telecom software licenses to recurrent license revenue deals, continues. The underlying demand remains strong in OSS and BSS as data growth and increased focus on customer experience drives operators to transform their OSS and BSS solutions.

TV & Media sales were flat YoY with contribution from the recent acquisition of Envivio, a global leader in software-based video encoding. In the IP transformation of the media industry there is a high level of engagement around next-generation TV and Media platforms. Ericsson is well positioned through the cloud-based video storage and TV platform solutions.

Sales, adjusted for comparable units and currency, increased by 5%.

Sales declined QoQ following a seasonally strong Q4.

SEK b.

Q1
2016
Q1
2015
Q4
2015

Net income reconciled to cash

3.6 3.1 11.0

Changes in operating net assets

-6.0 -9.0 10.9

Cash flow from operating activities

-2.4 -5.9 21.9

Cash flow from investing activities

-1.0 -2.1 -12.8

Cash flow from financing activities

0.1 0.9 -0.7

Net change in cash and cash equivalents

-4.3 -5.7 6.3

Cash conversion (%)

-65 % -188 % 200 %

Cash flow from operating activities was SEK -2.4 (-5.9) b. Compared with last year, cash flow from operating activities has improved despite payouts of short-term variable compensation (such payouts were made in the second quarter last year). The improvement is mainly related to stable pace of deployments in Mainland China, capacity sales in North America and higher IPR licensing payments.

Cash outlays of SEK 0.5 b. related to restructuring charges were made in the quarter.

Cash flow from investing activities was impacted by investments in property, plant and equipment of SEK -1.5 b., related to continued investments in Global ICT centers . In addition capitalized development expenses of SEK -1.2 b. were made. Cash flow from financing activities amounted to SEK 0.1 b in the quarter.

Working capital KPIs, number of days

Jan-Mar
2016
Jan-Dec
2015
Jan-Sep
2015
Jan-Jun
2015
Jan-Mar
2015

Sales outstanding (target: <90)

108 87 113 112 125

Inventory (target:<65)

80 64 72 74 82

Payable (target:>60)

58 53 55 57 64

SEK b.

Mar 31
2016
Mar 31
2015
Dec 31
2015

+ Short-term investments

25.1 30.8 26.0

+ Cash and cash equivalents

35.9 35.3 40.2

Gross cash

61.0 66.1 66.3

- Interest bearing liabilities

24.5 26.3 25.1

Net cash

36.5 39.7 41.2

Equity

145.6 149.1 147.4

Total assets

280.3 303.0 284.4

Capital turnover (times)

1.1 1.1 1.3

Return on capital employed (%)

6.9 % 5.8 % 11.6 %

Equity ratio (%)

52.0 % 49.2 % 51.8 %

Return on equity (%)

5.4 % 3.6 % 9.3 %

Net cash decreased by SEK 4.7 b. in the quarter as a result of increased working capital and investing activities. Total net cash position was SEK 36.5 b.

The definition of Net cash was changed to exclude post-employment benefits. For a definition, see accounting policies page 24. Post-employment benefits were SEK 25.7 b. compared with SEK 22.7 b. Dec 31, 2015, following lower discount rates.

The average maturity of long-term borrowings as of March 31, 2016, was 4.5 years, compared with 5.6 years 12 months earlier.

Income after financial items was SEK 0.4 (1.9) b. The decrease was mainly due to lower recognized dividends from subsidiaries than a year ago.

Major changes in the Parent Companys financial position for the period; decreased cash, cash equivalents and short-term investments of SEK 4.0 b. and decreased current and non-current liabilities to subsidiaries of SEK 4.9 b. At the end of the quarter, cash, cash equivalents and short-term investments amounted to SEK 44.7 (49.6) b.

The Parent Company has recognized dividends from subsidiaries of SEK 0.2 b. in the quarter.

In accordance with the conditions of the long-term variable compensation program (LTV) for Ericsson employees, 3,065,164 shares from treasury stock were distributed to employees or sold during the first quarter. The holding of treasury stock at March 31, 2016, was 46,302,477 Class B shares.

Ericsson and Adaptix have reached a settlement agreement resolving all of the remaining pending litigations

As disclosed in the 2015 Annual Report, Ericsson is involved in several patent infringement lawsuits against Adaptix Inc. who has filed several suits in the Eastern District of Texas in the US and the Tokyo District Court in Japan, alleging that Ericsson infringe patents assigned to Adaptix.

In January 2016, the Tokyo District Court found that Ericsson did not infringe the asserted patent. As Adaptix did not appeal within the term for appeal to the High Court, the judgment became final. In March 2016, Adaptix and Ericsson reached a settlement agreement, resolving all of the remaining pending litigations.

Patent infringement lawsuit against Micromax

As previously reported, Ericsson filed in 2013 a patent infringement lawsuit in the Delhi High Court against Indian handset company Micromax. As part of its defense, Micromax filed a complaint with the Competition Commission of India (CCI) which the CCI referred to the Director Generals Office for an in-depth investigation. In January 2014, the CCI opened another investigation against Ericsson based on claims made by Intex Technologies (India) Limited. Ericsson has challenged CCIs jurisdiction in these cases before the Delhi High Court. On March 30, 2016, the Delhi High Court issued an order finding that the CCI has jurisdiction. Ericsson is appealing that order to the Division Bench of the Delhi High Court.

Ericsson to acquire NodePrime to accelerate software-defined infrastructure

On April 5, 2016, Ericsson announced its intention to further invest in NodePrime to acquire 100% of its operations and talents based in San Francisco. NodePrimes platform is already integrated in Ericsson Hyperscale Datacenter System 8000. The platform enables data-driven automated decisions, driving complex, massive-scale configuration. The acquisition is strategic to Ericssons cloud offering.

Resolutions at the AGM

On April 13, 2016, Ericsson held its AGM in Stockholm. The proposed dividend of SEK 3.70 per share was approved by the AGM. In accordance with the proposal of the Nomination Committee, Leif Johansson was reelected Chairman of the Board of Directors.

Nora Denzel, Börje Ekholm, Ulf J. Johansson, Kristin Skogen Lund, Sukhinder Singh Cassidy, Hans Vestberg and Jacob Wallenberg were re-elected to the Board and Kristin S. Rinne and Helena Stjernholm were elected new Board members.

In accordance with the Board of Directors proposal, the AGM resolved to approve the Guidelines for remuneration to Group management.

Ericsson completed acquisition of Ericpol

On April 20, 2016, Ericsson completed the acquisition of Ericpols operations in Poland and Ukraine. Ericpol has been a supplier to Ericsson for over 20 years in the area of software development, during which time Ericsson has been Ericpols largest customer. Approximately 2,300 employees in Poland and Ukraine will join Ericsson. The closing follows the announcement on October 15, 2015 that Ericsson was entering into an agreement to purchase Ericpols Polish and Ukrainian operations.

Ericssons operational and financial risk factors and uncertainties are described in our Annual Report 2015.

Risk factors and uncertainties in focus short-term for the Parent Company and the Ericsson Group include, but are not limited to:

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, or delayed auctions of spectrums;
Effects on gross margins and/or working capital of the business mix in the Networks segment between capacity sales and new coverage build-outs;
Effects on gross margins of the business mix in the Global Services segment including proportion of new network build-outs and share of new managed services deals with initial transition costs;
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;
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;
No guarantees that specific restructuring or cost-savings initiatives will be sufficient, successful or executed in time to deliver any improvements in short-term earnings;

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, April 21, 2016

This report has not been reviewed by Telefonaktiebolaget LM Ericssons auditors.

Ericsson invites media, investors and analysts to a press conference at the Ericsson Studio, Grönlandsgången 4, Stockholm, at 09.00 (CET), April 21, 2016. A financial analyst, investor 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, Chief Marketing and Communications Officer

Org. number: 556016-0680

Torshamnsgatan 21

www.ericsson.com

Investors
Peter Nyquist, Vice President,
Head of 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,
Head of 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

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, managements 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.

Contents

Financial statements

Consolidated income statement

17

Statement of comprehensive income

17

Consolidated balance sheet

18

Consolidated statement of cash flows

19

Consolidated statement of changes in equity

20

Consolidated income statement isolated quarters

20

Consolidated statement of cash flows isolated quarters

21

Parent Company income statement

22

Parent Company statement of comprehensive income

22

Parent Company balance sheet

23

Additional information

Accounting policies

24

Net sales by segment by quarter

25

Sales growth adjusted for comparable units and currency

26

Operating income by segment by quarter

27

Operating margin by segment by quarter

27

EBITA by segment by quarter

28

EBITA margin by segment by quarter

28

Net sales by region by quarter

29

Net sales by region by quarter (cont.)

30

Top 5 countries in sales

30

Net sales by region by segment

31

Provisions

32

Information on investments

32

Reconciliation tables, non-IFRS measures

33

Other information

34

Number of employees

34

Restructuring charges by function

35

Restructuring charges by segment

35
Jan-Mar Jan-Dec

SEK million

2016 2015 Change 2015

Net sales

52,209 53,520 -2 % 246,920

Cost of sales

-34,819 -34,556 1 % -161,101

Gross income

17,390 18,964 -8 % 85,819

Gross margin (%)

33.3 % 35.4 % 34.8 %

Research and development expenses

-7,485 -8,487 -12 % -34,844

Selling and administrative expenses

-6,720 -7,131 -6 % -29,285

Operating expenses

-14,205 -15,618 -9 % -64,129

Other operating income and expenses

273 -1,240 153

Shares in earnings of JV and associated companies

17 27 -38

Operating income

3,475 2,133 63 % 21,805

Financial income

-89 684 525

Financial expenses

-377 -740 -2,458

Income after financial items

3,009 2,077 45 % 19,872

Taxes

-903 -623 -6,199

Net income

2,106 1,454 45 % 13,673

Net income attributable to:

Stockholders of the Parent Company

1,966 1,319 13,549

Non-controlling interests

140 135 124

Other information

Average number of shares, basic (million)

3,258 3,244 3,249

Earnings per share, basic (SEK) 1)

0.60 0.41 4.17

Earnings per share, diluted (SEK) 1)

0.60 0.40 4.13
Jan-Mar Jan-Dec

SEK million

2016 2015 2015

Net income

2,106 1,454 13,673

Other comprehensive income

Items that will not be reclassified to profit or loss

Remeasurements of defined benefits pension plans incl. asset ceiling

-3,502 -3,211 -2,026

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

953 694 721

Items that may be reclassified to profit or loss

Cash flow hedges

Gains/losses arising during the period

Reclassification adjustments for gains/losses included in profit or loss

Revaluation of other investments in shares and participations

Fair value remeasurement

-4 181 457

Changes in cumulative translation adjustments

-1,133 4,409 -604

Share of other comprehensive income on JV and associated companies

-376 -4 141

Tax on items that may be reclassified to profit or loss

Total other comprehensive income, net of tax

-4,062 2,069 -1,311

Total comprehensive income

-1,956 3,523 12,362

Total comprehensive income attributable to:

Stockholders of the Parent Company

-2,093 3,305 12,218

Non-controlling interest

137 218 144

SEK million

Mar 31
2016
Dec 31
2015

ASSETS

Non-current assets

Intangible assets

Capitalized development expenses

6,349 5,493

Goodwill

40,316 41,087

Intellectual property rights, brands and other intangible assets

8,400 9,316

Property, plant and equipment

16,127 15,901

Financial assets

Equity in JV and associated companies

851 1,210

Other investments in shares and participations

1,090 1,275

Customer finance, non-current

1,663 1,739

Other financial assets, non-current

4,997 5,634

Deferred tax assets

14,117 13,183
93,910 94,838

Current assets

Inventories

32,252 28,436

Trade receivables

66,701 71,069

Customer finance, current

2,346 2,041

Other current receivables

24,105 21,709

Short-term investments

25,077 26,046

Cash and cash equivalents

35,934 40,224
186,415 189,525

Total assets

280,325 284,363

EQUITY AND LIABILITIES

Equity

Stockholders equity

144,699 146,525

Non-controlling interest in equity of subsidiaries

945 841
145,644 147,366

Non-current liabilities

Post-employment benefits

25,715 22,664

Provisions, non-current

158 176

Deferred tax liabilities

2,098 2,472

Borrowings, non-current

22,110 22,744

Other non-current liabilities

1,834 1,851
51,915 49,907

Current liabilities

Provisions, current

3,374 3,662

Borrowings, current

2,414 2,376

Trade payables

21,549 22,389

Other current liabilities

55,429 58,663
82,766 87,090

Total equity and liabilities

280,325 284,363

Of which interest-bearing liabilities

24,524 25,120

Of which net cash

36,487 41,150

Assets pledged as collateral

2,513 2,526

Contingent liabilities

918 922
Jan-Mar Jan-Dec

SEK million

2016 2015 2015

Operating activities

Net income

2,106 1,454 13,673

Adjustments to reconcile net income to cash

Taxes

-1,208 -1,921 -2,835

Earnings/dividends in JV and associated companies

-16 -22 130

Depreciation, amortization and impairment losses

2,097 2,681 10,206

Other

652 944 3,110
3,631 3,136 24,284

Changes in operating net assets

Inventories

-4,212 -4,019 -366

Customer finance, current and non-current

-251 -258 824

Trade receivables

3,408 2,037 7,000

Trade payables

-617 -1,668 -2,676

Provisions and post-employment benefits

-14 -166 544

Other operating assets and liabilities, net

-4,317 -4,962 -9,013
-6,003 -9,036 -3,687

Cash flow from operating activities

-2,372 -5,900 20,597

Investing activities

Investments in property, plant and equipment

-1,474 -2,367 -8,338

Sales of property, plant and equipment

44 75 1,301

Acquisitions/divestments of subsidiaries and other operations, net

-108 -58 -2,200

Product development

-1,208 -294 -3,302

Other investing activities

735 118 -543

Short-term investments

1,013 399 5,095

Cash flow from investing activities

-998 -2,127 -7,987

Cash flow before financing activities

-3,370 -8,027 12,610

Financing activities

Dividends paid

-33 -25 -11,337

Other financing activities

94 899 627

Cash flow from financing activities

61 874 -10,710

Effect of exchange rate changes on cash

-981 1,476 -2,664

Net change in cash and cash equivalents

-4,290 -5,677 -764

Cash and cash equivalents, beginning of period

40,224 40,988 40,988

Cash and cash equivalents, end of period

35,934 35,311 40,224
Jan-Mar Jan-Dec

SEK million

2016 2015 2015

Opening balance

147,366 145,309 145,309

Total comprehensive income

-1,956 3,523 12,362

Sale/repurchase of own shares

29 46 169

Stock purchase plan

238 198 865

Dividends paid

-33 -25 -11,337

Transactions with non-controlling interests

-2

Closing balance

145,644 149,051 147,366
2016 2015

Isolated quarters, SEK million

Q1 Q4 Q3 Q2 Q1

Net sales

52,209 73,568 59,161 60,671 53,520

Cost of sales

-34,819 -46,899 -39,110 -40,536 -34,556

Gross income

17,390 26,669 20,051 20,135 18,964

Gross margin (%)

33.3 % 36.3 % 33.9 % 33.2 % 35.4 %

Research and development expenses

-7,485 -7,921 -8,540 -9,896 -8,487

Selling and administrative expenses

-6,720 -7,996 -6,393 -7,765 -7,131

Operating expenses

-14,205 -15,917 -14,933 -17,661 -15,618

Other operating income and expenses

273 254 80 1,059 -1,240

Shares in earnings of JV and associated companies

17 29 -121 27 27

Operating income

3,475 11,035 5,077 3,560 2,133

Financial income

-89 -109 188 -238 684

Financial expenses

-377 -619 -809 -290 -740

Income after financial items

3,009 10,307 4,456 3,032 2,077

Taxes

-903 -3,329 -1,338 -909 -623

Net income

2,106 6,978 3,118 2,123 1,454

Net income attributable to:

Stockholders of the Parent Company

1,966 7,056 3,080 2,094 1,319

Non-controlling interests

140 -78 38 29 135

Other information

Average number of shares, basic (million)

3,258 3,254 3,251 3,247 3,244

Earnings per share, basic (SEK) 1)

0.60 2.17 0.95 0.64 0.41

Earnings per share, diluted (SEK) 1)

0.60 2.15 0.94 0.64 0.40
2016 2015

Isolated quarters, SEK million

Q1 Q4 Q3 Q2 Q1

Operating activities

Net income

2,106 6,978 3,118 2,123 1,454

Adjustments to reconcile net income to cash

Taxes

-1,208 395 51 -1,360 -1,921

Earnings/dividends in JV and associated companies

-16 -33 136 49 -22

Depreciation, amortization and impairment losses

2,097 2,521 2,425 2,579 2,681

Other

652 1,092 1,052 22 944
3,631 10,953 6,782 3,413 3,136

Changes in operating net assets

Inventories

-4,212 3,496 -226 383 -4,019

Customer finance, current and non-current

-251 302 375 405 -258

Trade receivables

3,408 2,754 -1,421 3,630 2,037

Trade payables

-617 886 -494 -1,400 -1,668

Provisions and post-employment benefits

-14 -673 -302 1,685 -166

Other operating assets and liabilities, net

-4,317 4,141 -3,154 -5,038 -4,962
-6,003 10,906 -5,222 -335 -9,036

Cash flow from operating activities

-2,372 21,859 1,560 3,078 -5,900

Investing activities

Investments in property, plant and equipment

-1,474 -1,740 -1,807 -2,424 -2,367

Sales of property, plant and equipment

44 92 59 1,075 75

Acquisitions/divestments of subsidiaries and other operations, net

-108 -945 -1,028 -169 -58

Product development

-1,208 -1,183 -982 -843 -294

Other investing activities

735 -418 37 -280 118

Short-term investments

1,013 -8,613 3,631 9,678 399

Cash flow from investing activities

-998 -12,807 -90 7,037 -2,127

Cash flow before financing activities

-3,370 9,052 1,470 10,115 -8,027

Financing activities

Dividends paid

-33 -277 -11,035 -25

Other financing activities

94 -669 -34 431 899

Cash flow from financing activities

61 -669 -311 -10,604 874

Effect of exchange rate changes on cash

-981 -2,109 -171 -1,860 1,476

Net change in cash and cash equivalents

-4,290 6,274 988 -2,349 -5,677

Cash and cash equivalents, beginning of period

40,224 33,950 32,962 35,311 40,988

Cash and cash equivalents, end of period

35,934 40,224 33,950 32,962 35,311
Jan-Mar Jan-Dec

SEK million

2016 2015 2015

Net sales

Cost of sales

Gross income

Operating expenses

-223 -289 -1,040

Other operating income and expenses

574 693 2,889

Operating income

351 404 1,849

Financial net

11 1,451 14,952

Income after financial items

362 1,855 16,801

Transfers to (-) / from untaxed reserves

-1,500

Taxes

-45 -119 -208

Net income

317 1,736 15,093
Jan-Mar Jan-Dec

SEK million

2016 2015 2015

Net income

317 1,736 15,093

Revaluation of other investments in shares and participations

Fair value remeasurement

5 181 457

Total other comprehensive income, net of tax

5 181 457

Total comprehensive income

322 1,917 15,550

SEK million

Mar 31
2016
Dec 31
2015

ASSETS

Fixed assets

Intangible assets

742 809

Tangible assets

443 456

Financial assets

99,716 99,914
100,901 101,179

Current assets

Inventories

Receivables

25,355 25,692

Short-term investments

23,713 25,506

Cash and cash equivalents

20,931 23,118
69,999 74,316

Total assets

170,900 175,495

STOCKHOLDERS EQUITY, PROVISIONS AND LIABILITIES

Equity

Restricted equity

48,018 48,018

Non-restricted equity

42,925 42,578
90,943 90,596

Provisions

809 807

Non-current liabilities

45,853 46,457

Current liabilities

33,295 37,635

Total stockholders equity, provisions and liabilities

170,900 175,495

Assets pledged as collateral

513 526

Contingent liabilities

22,955 22,461

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 IASBs 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, 2015, and should be read in conjunction with that annual report.

There is no significant difference between IFRS effective as per March 31, 2016 and IFRS as endorsed by the EU.

The definition of Net Cash has been adjusted in order to more clearly represent Ericssons ability to meet financial obligations. Post-employment benefits will no longer be included in the calculation of Net Cash. Net Cash for prior periods has been recalculated using the new definition. The revised definition is as follows:

Net Cash: Cash and cash equivalents plus short-term investments less interest-bearing liabilities (which include: non-current borrowings and current borrowings).

Accounting for bonds

Due to the conditions in the market for government and mortgage bonds in Sweden, Ericsson now intends to hold bonds purchased in its Asset management portfolio until maturity instead of intending to hold them for trading. Bonds purchased in this portfolio after January 1, 2016 will be classified as available-for-sale. There were no purchases made in Q1 2016. The impact of this change on the financial statements will be disclosed in the interim report following the first purchase of bonds.