LM Ericsson Telephone Company ( ERIC)

Q3 2011 Earnings Call

October 20, 2011 9:30 AM ET


Ase Lindskog – VP, Head-Industry, IR

Hans Vestberg – President and CEO

Johan Wibergh – Head of Business Units and Networks

Jan Frykhammar – CFO


Matthew Hoffman – Cowen & Company

Sandip Dishpandi – JP Morgan

Tim Boddy – Goldman Sachs

Stewart Jeffrey – Nomura Securities

Odon De Laporte – Cheuvreux

Anush Krushan – UBS

Mark Sue – RBC Capital Markets

Andrew Gartner – Barclays Capital

Zahid Hussein – Citigroup

Kai F. Korschelt – Deutsche Bank

Ed Snyder – Charter Equity Research

Edward Snyder – Charter Equity Research



Welcome to the Ericsson’s Analyst and Media Conference Call for their third quarter reports. To view visual aids for this call please go to www.Ericsson.com/press or www.Ericsson.com/investors. (Operator Instructions) Replay will be available one hour after today’s conference. Ase Lindskog will now open the call.

Ase Lindskog

Thank you, operator, and hello, everyone. You are welcome to our call today where we will comment on our third quarter earnings report. With me here today I have Hans Vestberg, President and CEO of Ericsson; Jan Frykhammar, Chief Financial Officer; and Johan Wibergh, who is head of our Business Units and Networks.

So to start with, I have to make the usual reminders that during the call today we will be making forward-looking statements. And these statements are based on our current expectations and certain planned assumptions, which are subject to risks and uncertainties. The actual results may differ materially due to impact as mentioned today’s press release and discussed in this conference call. We also encourage you to read about these risks and uncertainties in our earnings report as well as in our annual report.

So with that said, I would like to hand the call over to Hans Vestberg.

Hans Vestberg

Thank you, Ase. Before we dwell into the figures, just giving you a highlight of the quarter. I’m trying here to just outline more or less the topics that we discuss with our customers, or have had discussion with our customers the last couple of weeks. As I’ve said, today’s press conference I have roughly spoken or met some 7% to 8% of the Ericsson revenue in the last 30 days, and these are the main topics.

The main discussion is still on mobile broadband. We have now passed 900 million mobile growth on subscribers. We had a prediction the beginning of the year if you might remember that we will pass 1 billion. With the pace that we have right now, we will definitely add 100 million in Q4. So it’s continuing to grow. And, of course, here also, the new types of devices, smartphones coming into networks and PM pricing is very important in discussions we have that we have and operate. And, of course, finally understanding our technology, everything from radio, IP and billing and OSS is working in order to support that type of business. So that’s top on the mind.

Secondly, even though we have seen a lot of discussion around outsourcing and Managed Services throughout the year, we see an increase in that discussion. Of course driven by OpEx reduction, but also to find resources and confidences handling this somewhat more complex networks that we see as the broadband and data traffic increases.

Finally, or not finally, but IPO is in focus. There’s a lot of discussion going on in the industry. We of course believe strongly in share technology, and that’s the reason why we have more than 5.5 billion mobile subscriptions in the world right now, because we’re sharing technology. Ericsson of course having the largest portfolio in the telecom industry when it comes to patents have of course an important part in this discussion, but customers want to understand how this is impacting them and what’s happening. And here we have a very important role with our patent portfolio.

Finally, we of course also discuss what is happening around us. There are uncertainties, and we read the news and seeing of course the macroeconomic information coming out from different banks into (inaudible).

In our case, I would say that we cannot exclude that operators might be somewhat more cautious when it comes to short-term spending. If we look back on the third quarter, second and first quarter, we see roughly the same pattern we have seen, the southern European countries have taking down their spending. We have seen the Arab spring being part of that as well, seeing the lower spending. So – but again, we stay close to our customer that’s the most important, understand? Will they spend less, be more cautious in this environment? That’s the most important for us and of course, understanding that economic environment can kind of have an impact on that.

We will then go to the figures starting with net sale. 70% year-over-year up. 24% growth currency adjusted fueled by mobile broadband and the services. And of course, when we talk about mobile broadband, we just need to remember it’s not only radio access, it’s the whole portfolio on that where it’s including many links, mobile back calling, IP, et cetera.

Services came back and had a growth of 7% in the quarter and professional services currency adjusted was up 13%. If you look at the profitability, we increased net income with 6% year-over-year and the quarter-a-quarter up 18%, impacted by higher volumes but also less restructuring to some extent. And then, we had lower operations costs but a little bit lower gross margin as well. That Jan will come back to where we sort of will go there.

Read the rest of this transcript for free on seekingalpha.com

If you liked this article you might like

Qualcomm's PR and Lobbying Savvy May Have Helped It Fight Off Broadcom

Qualcomm's PR and Lobbying Savvy May Have Helped It Fight Off Broadcom

You're Only Allowed One Call. Who Gets It: AT&T, Verizon, Sprint or T-Mobile?

You're Only Allowed One Call. Who Gets It: AT&T, Verizon, Sprint or T-Mobile?

3 Tech Stock Ideas for Patient Investors

3 Tech Stock Ideas for Patient Investors

3 Tech Stock Ideas for Patient Investors

3 Tech Stock Ideas for Patient Investors

Samsung's S9 Launch and Other Mobile World Congress News: 4 Key Takeaways

Samsung's S9 Launch and Other Mobile World Congress News: 4 Key Takeaways