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LM Ericsson Telephone Co. (



Q1 2011 Earnings Call

April 27, 2011 11:00 am ET


Åse Lindskog – VP, IR

Hans Vestberg – President and CEO

Johan Wibergh - EVP and Head of Business Unit Networks

Magnus Mandersson – EVP and Head of Business Unit and Global Services

Jan Frykhammar – CFO


Jeff Kvaal – Barclays Capital

Tim Boddy – Goldman Sachs

Edward Snyder – Charter Equity

Kulbinder Garcha – Credit Suisse

Mark Sue – RBC Capital Market

Alexandre Peterc – Exane BNP Paribas

Stuart Jeffrey – Nomura

Patrick Standaert – Morgan Stanley

Anil Krishnan [ph] – UBS



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Welcome to the Ericsson’s analyst and media conference call for the first quarter reports. To reinstate your names for this call please log on to or (Operator Instructions) As a reminder replay will be available one hour after today’s conference. Åse Lindskog will now open the call. Thank you.

Åse Lindskog

Thank you, operator. Hello everyone and welcome to Ericsson’s call today. With me here today in the room I have Hans Vestberg, President and CEO of Ericsson; Jan Frykhammar who is our Chief Financial Officer; I have also Johan Wibergh who is heading of our Business Unit and Networks and in addition and also Magnus Mandersson who is heading up our Business Unit and Global Services.

So first of all then ladies and gentlemen I have to remind you that during the call today, we will be making forward-looking statements. These statements they are based on our current expectations and certain planning assumptions, which are subject to risk and uncertainties. The actual results may differ materially due to factors mentioned in today's press release and discussed in this conference call. So I encourage you to read about the risks and uncertainties in our earnings report as well as in our Annual Report full year 2010.

So with that said and done I would like to hand over to Hans Vestberg for comments about our performance and plans going forward. So here Hans.

Hans Vestberg

Thank you, Åse. And I will go briefly through the first quarter result and I will be doing that sharing with my colleagues in the room as well. First of all just a reminder that the result for the P&L is in 2011 including restructuring in 2010 it’s excluding restructuring and I will point out when it’s not. But just to have that here we will not make any specific comment on that but it’s so that 2011 is loaded with restructuring charges but 2010 is not when we compare.

So we ended the first quarter with 53 billion Swedish krona in sales to summarize it in one simple line mobile broadband is driving a lot of that growth around the globe that’s in the short of it. The net income 4.1 billion compared to 1.3 last year and this is net, net both of them so they are these are apples-to-apples as these are including restructuring both of them. And that’s driven by increased volumes but also the improved profitability in the networks segment.

Cash flow ended at minus 2.1 compared to 3 billion positive last year and this is adjusted cash flow, which means we extract the restructuring charges that were cashed out in operational cash flow. The reason for the negative cash flow is the higher level of work in progress in the regions, which is work in progress and the continued ramp up for production that’s increasing our working capital from the profit period we expect a good cash flow but we are tying up it’s the capital on the inventory side especially.

Net sales up 17% year-over-year 25% organically and in constant currency. We have now five regions rolling out, out of 10. We will take the segments quickly we will come back to the networks up 35% very much driven by mobile broadband but also the GSM, EDGE in China, which is partly driven also by smartphones using EDGE I would say.

Global services down 4% and here before Magnus will talk about it just a reminder this is of course a business that are very much impacted by currencies as well as trading services in local currencies. And they are growing if we subtract that currency change as we had for one year well year-over-year. Multimedia flat or minus 1% and here is the same of course with currency this would be a growth. We see revenue management coming back in volumes but not to the extent before but a definitely coming back IPX as well. That is quick on the net sales.

Net income or profitability at 34.1 billion year-over-year dramatic improvement 220% quarter-over-quarter down 7% then we need to remember that volumes in Q4 was substantially it was higher. This is impacted by high volumes but also on the profitability improvements in the network segment especially. As we have talked now for two, three quarters about the network monetization they have started and they are partly impacted the first quarter. The other thing that is impacting of course when it comes to net income when we compare apples-to-apples including restructurings that we have net restructuring in first quarter 2011 compared to 2010.

If you take the regions, quickly here you can say that we have five regions growing North America, Latin America, Northern Europe and Central Asia, we have China, North East Asia and India. And a couple of notes, North America has continued expansion on mobile broadband but also we have a very good service business there so that’s continuing to grow. Latin America is up 1% coming from lower investment level last year and of course with currency this would be higher but we will see that in the mobile broadband and rural expansions happening.

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