ericsson fourth quarter report 2006, ceo slides€¦ · growing focus on all-ip networks broadband...

FourthFull year2006

Quarter Report

2007-02-02© Copyright Telefon AB LM Ericsson 2006. All rights reserved FOURTH QUARTER REPORT 2006

Safe Harbor Statement

This presentation contains forward looking statements. Such statements are based on our current expectations and are subject to certain risks and uncertainties that couldnegatively affect our business. Please read our earnings reports and our most recentannual report for a better understanding of these risks anduncertainties.

FourthFull year2006

Quarter Report

CARL-HENRIC SVANBERGPresident and CEO


An exciting year

Sales up 17% - profit of SEK 36.0 b. Services up 30% - 100 million subscribersBreakthrough year for HSPA, focus on all-IP and multimediaMarconi successfully integrated - Redback acquiredRecord performance by Sony Ericsson

Technology leadership – global presence – operational excellence


~70 operators - 100 networks - 100 m. WCDMA subscribersSupporting our customers in driving the industry

– Cingular, E-Mobile, Hutch, MTN, Softbank, Telstra, VodafoneEricsson in the lead – technology, performance, share

Source: Global mobile Suppliers Association, Jan, 2007

Commercial 3G/HSPA networks

Breakthrough year for HSPA


~70 operators - 100 networks - 100 m. WCDMA subscribersSupporting our customers in driving the industry

– Cingular, E-Mobile, Hutch, MTN, Softbank, Telstra, VodafoneEricsson in the lead – technology, performance, shareEco system in place

– 130 devices incl. 50 phones - prices quickly decreasing

Source: Global mobile Suppliers Association, Jan, 2007

Commercial 3G/HSPA networks

Breakthrough year for HSPA


Growing focus on all-IP networks

Broadband and triple play accelerate– Multimedia services drive demand for bandwidth and capacity– Intelligent high-capacity routers necessary– Telecom grade a prerequisite

Intelligent IP routers key in telecom networks


Growing focus on all-IP networks

Broadband and triple play accelerate– Multimedia services drive demand for bandwidth and capacity– Intelligent high-capacity routers necessary– Telecom grade a prerequisite

Acquisition of Redback – closed January 25, 2007– Strengthens all-IP solutions offering– Enhances R&D capabilities– Accelerates fixed line business, US and globally

Intelligent IP routers key in telecom networks


Financial highlightsSales

Sales SEK 53.7 (45.7) b. in quarter– Up 18% - strong finish

Sales SEK 177.8 (151.8) b. full year– Up 17% - market growth, market share, Marconi acquired sales

Professional services sales SEK 32.3 (24.9) b. full year– Up 30% - 2/3 recurring revenue


Steady sales growth 2003-2006

Sales CAGR 15% since 2003

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SEK m.

Sales CAGR 18% since 2003 incl. 50% of Sony Ericsson


Financial highlightsMargins

Q4 gross margin 41.8%, full year 42.2%* (45.7%)Q4 operating margin 22.7%, full year 20.1% (21.8%)Positive effects of Marconi restructuring

Operating margin %

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Q103 Q203 Q303 Q403 Q104 Q204 Q304 Q404 Q105 Q205 Q305 Q405 Q106 Q206 Q306 Q406

*Excluding restructuring charges and capital gains in third quarter 2006


Financial highlights

Oper. income SEK 12.2 (10.4) b.– SEK 35.8 (33.1) b. full year

Cash flow SEK 8.9 (13.5) b.– SEK 12.2 (19.6) b. full year

EPS SEK 0.61 (0.54)– SEK 1.65 (1.53) full year

Net cash SEK 40.7 (50.6) b.

Operating income

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Cash flow analysisFull year 2006

Net income 26

Working capital -14Inventory, work in progress -2Receivables -10Others -2

Others 0

Cash flow 12

SEK b.

Good cash flow in a year of strong growth



Net income 26


Others 0

Cash flow 12

SEK b.


Sales growth 17%Inventory 12%

- Factory inventory flat- Work in progress 20%



Net income 26


Others 0

Cash flow 12

SEK b.


Sales growth 17%Receivables 24%

- Growth related increase SEK 7 b. - Market mix change SEK 3 b.


Regional update, Q4 2006- Ericsson sales (BSEK) and growth (%) year-over-year

Opex and outsourcing on operators agendasGrowing traffic from lower tariffs and multimedia offersGrowth driven by services and acquired Marconi sales

Western Europe

FY: 51.9 b. +24%Q: 16.8 b. +35%


Regional update, Q4 2006 - Ericsson sales (BSEK) and growth (%) year-over-year

Strong growth, particularly in Africa and Middle EastStill low penetration in large parts of region Voice the main driver but growing demand for mobile internet

Central & Eastern Europe,Middle East & Africa

FY: 50.3 +23%Q: 15.2 b. +22%



Continued high activity, eg. Bangladesh, India, IndonesiaJapan leads global mobile broadband developmentPent up capacity needs in China while waiting for 3G

Asia Pacific

FY: 43.2 b. +42%Q: 12.9 b. +34%



Strong subscriber growth continues – 16 m. new subscribersFirst HSPA launched - Entel PCS in ChileFirst phase of Vivo GSM migration completed

Latin America

FY: 16.5 b. -14%Q: 4.8 b. -20%



Focus on triple play and fiber-to-the-homeRecent spectrum investments expand the marketT-mobile HSPA first phase rolled out in record time

North America

FY: 15.9 b. - 18%Q: 4.0 b. - 22%


Latin AmericaRecovery after last year’s

slower market

North AmericaFlattish in mobile systemsOpportunities in triple play

Western EuropeSlight growth, potential upside –

multimedia and opex focus

Central & Eastern Europe,Middle East & Africa

Solid growth potential

Asia PacificDynamic and growing region

with variety of needs

Regional comments


Sony Ericsson highlightsRecord quarter caps record year

Units shipped up 46% to 74.8 million in 2006– 60 m. music phones– 21.6 m. camera phones

Growing market share - 20% UMTS share 2H 2006“Wow” products drive success - Cyber-shot, Walkman etc.


Sony Ericsson highlightsRecord quarter caps record year

Q4 sales up 64% - full year up 51% to EUR 11 b.Q4 profit up 144% - full year up 153% to EUR 1.3 b.Strong growth in Europe, Latin America and Asia PacificSEK 2.2 b. of Ericsson’s Q4 operating income

Sony Ericsson sales

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CAGR 37%CAGR 30%

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Thusand


Market outlook

*All estimates refer to market growth compared to previous year, measured in USD. This slide contains forward-looking statements.

The GSM/WCDMA systems market growth 2006 estimated to mid-single digit*

For 2007 we believe that the GSM/WCDMA track within the global mobile systems market, will continue to show mid-single digit growth*

Addressable market for professional services to show good growth*

Well positioned to capture market opportunities

*Measured in USD

FourthFull year2006

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FourthFull year2006

Quarter Report

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