Ericsson second quarter report 2006, CEO slidesTitle Ericsson second quarter report 2006, CEO slides...

econdQuarter Report

HENRY STÉNSONSenior Vice President

Communications

econdQuarter Report

2006-07-21© Copyright Telefon AB LM Ericsson 2006. All rights reserved SECOND 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.

CARL-HENRIC SVANBERGPresident and CEO

econdQuarter Report


A milestone quarter for GSM15 years and 2 billion users

GSM a major success with Ericsson leadership 2 billion GSM subscriptions - 1,000 new users per minute*

– 12 years to reach first billion – 30 months for second billion– 80% of second billion in high-growth markets

GSM paving the way for 3G and future technologies– 690 networks across more than 200 countries*

Source: GSM Association

GSM/ WCDMA the winning track – now 100 WCDMA networks


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Mobility changes the worldTraffic accelerates with new services

Global cellular reported subscriptions Traffic in mobile networks

High growth markets

Mature markets Voice traffic

Mobile data traffic

Mobile InternetMobile OfficeTV streaming/ video telephonyMusic and other downloads

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Mobility changes the worldTraffic accelerates with new services

Global cellular reported subscriptions Traffic in mobile networks

Mobile Voice

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Mobile data to pass voice 2010 - fixed data passed voice 2000

Mobile data

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Wireline network trafficIPTV/Internet the main traffic drivers

IPTV Assumption:50 Mn IPTV subscribers in 20114 hours/day – 5 Mbps (from 2007)

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Vendor consolidation

Ongoing natural process to reach critical mass– Complete offering vs. niche products

Global presence, technology leadership and operational excellence remain key

Our strategy remains– Organic growth with bolt-on acquisitions the primary focus– Opportunities while large mergers are in progress– Balance long-term growth and short-term profitability


Regional update, Q2 2006- Ericsson sales (BSEK) and growth (%) year-over-year

Tariff competition and falling roaming charges Operator focus on cost and new servicesGrowth driven by services and added Marconi sales

The need for more capacity is growing

North AmericaAsia Pacific

Central & EasternEurope,Middle East & Africa

Western Europe12.5 b. +26%

Latin America


Regional update, Q2 2006 - Ericsson sales (BSEK) and growth (%) year-over-year

High activity throughout the regionNetwork rollouts continues – Ericsson’s largest regionSeveral 3G contracts – HSPA contracts in 12 countries

Continued positive development


Central & Eastern Europe,Middle East & Africa

12.9 b. +24%


Latin America



Strong growth throughout region – subscribers and networksHSPA rollouts in Australia and Japan at full speed Strong China sales – steady rollout but invoicing fluctuates

Dynamic region with continued opportunities

North AmericaAsia Pacific11.2 b. +55%


12.9 b. +24%


Latin America



Operators consolidate positions after recent build outsNeed for capacity and coverage enhancements remainCDMA migration to GSM/WCDMA in continued focus

Market slower after two exceptional years


11.2 b. +55%


12.9 b. +24%


Latin America3.8 b. -14%



Cingular’s HSPA rollout on planSteady 2G expansions but operators trimming inventories Extra invoicing in Q2, 2005, also affects YoY comparison

Spectrum auctions affects market but opens opportunities

North America3.7 b. - 42% Asia Pacific

11.2 b. +55%


12.9 b. +24%


Latin America3.8 b. -14%


Continued strong growth in Services

Professional services sales SEK 8.1 b.– Up 31% year-over-year

Continued growth in managed services – 35 contracts with 65 m. subscribers - 60 hosting contracts

Biggest telecom support organization – Supporting 725 m. subscribers 24/7

Platform established for continued leadership


Marconi integration on plan

Product portfolio being integrated– Services, softswitch, broadband and transmission– Increasingly difficult to track Marconi specific numbers

Workforce reductions on plan – 1,000 to be notified Q3, additional 600 by year-end

Restructuring of supply chain continues– Moving supply chain to low-cost countries– Main effects in 2007

Continued good business momentum

Building leading position in next generation converged networks


Q2 financial highlights

Sales SEK 44.2 (38.4) b.– Up 15% year-over-year

Gross margin 42.0% (45.9%)– Quickly growing services and added Marconi sales– Slight sequential decline due to product mix

Operating margin 18.7% (21.6%)– Excluding amortization of intangibles 19.6%


Q2 financial highlights (cont.)

Operating income SEK 8.3 (8.3) b.Earnings per share SEK 0.36 (0.37)

– SEK 0.38 before amortization of Marconi intangibles

Cash flow from operations SEK -2.0 (5.4) b.– Receivables increased following completion of large contracts – Sequential increase of customer financing of SEK 1.5 b.

Net cash of SEK 27.9 b.


Sony Ericsson Q2 highlights

Sales EUR 2,272 million– Sales up 41%, units up 33% year-over-year

Income before tax EUR 211 (87) million– Successful introduction of new products

Increasing market share– Sony Ericsson Walkman, Cybershot and

smart phones in focus


Market outlook 2006

*All estimates refer to market growth compared to previous year. This slide contains forward looking statements.

The GSM/WCDMA track within the global mobile systems market to show moderate growth compared to 2005, measured in USD*

Addressable market for professional services to show good growth*

Well positioned to capture market opportunities

Question & Answer

econdQuarter Report


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