Ericsson extends leadership in 2G and 3G - growing faster than the market

Ericsson extends leadership in 2G and 3G - growing faster than the market * In 2000, sales up 27% and orders up 31% (for comparable units 29% and 33%) * Increasing investment in 3G to reinforce success * Operating margin in line with outlook * Mobile phones: Complete transfer of production. Additional restructuring charges in 2000 of SEK 8b. raising cost savings to SEK 15b. per year by 2002 * A capital gain of SEK 15.4b. from sale of Juniper Networks shares * Outlook 2001: Sales growth 15-20% and operating margin between 6 and 8 %, with increased 3G investments. (SEK b.) Fourth Twelve months Quarter 2000 1999Change % 2000 1999Change % Orders 79.5 66.0 20% 292.3 223.8 31% Sales 82.1 73.8 11% 273.6 215.4 27% Operating income 5.6 8.7 -33% 31.2 17.6 77% Adjusted Operating -1.5 8.7 16.7 17.9 -7% income 1) Adjusted Operating -1.8% 11.8% 6.1% 8.3% margin % Income before tax 4.6 8.5 -46% 28.7 16.4 75% (IBT) EPS, fully diluted 0.28 0.78 -64% 2.65 1.54 72% (SEK) EPS US GAAP, fully 1.15 0.96 20% 3.44 1.92 79% diluted (SEK) Cash flow before 11.6 9.5 6.4 -2.4 financing activities 1) Adjusted for Capital gain Juniper 15.4 15.4 Non-operational -0.2 7.0 -0.3 gains/losses & pension refund Additional -8.0 -8.0 restructuring in phones Results in line with guidance With an adjusted operating margin of 6.1% for 2000 and a positive cash flow in the fourth quarter, Ericsson delivered a financial performance in line with guidance. Sales and orders growth were driven once again by continued strong performance in mobile systems. In the fourth quarter, Ericsson achieved an operating income of SEK 5.6b. Adjusted operating income was SEK -1.5b., excluding capital gain from Juniper shares, SEK 15.4b., non-operational capital losses of SEK -0.2b., and additional restructuring charges of SEK 8b. for the full outsourcing of the mobile phone production. The adjusted operating income includes earlier announced restructuring costs of SEK 4.7b. CEO COMMENT "We have generated a solid growth, and in mobile systems we have once again managed to grow even faster than the market, with good profitability", said Kurt Hellström, President and CEO of Ericsson. "We are now the world leader in both 2G and 3G mobile systems. We have captured well over 50% of the GPRS and 3G orders so far. We are in a prime position to increase our market share in the shift to 3G; one of the largest technology shifts ever. We have achieved this with our customer base, our technology leadership, and our ability and commitment to deliver these systems in large volumes. We are now aggressively investing even more in 3G to secure our commitments. "The results in our mobile phones business, while in line with expectations, remain unsatisfactory. As announced, the losses are caused by delivery failure from key suppliers and an inadequate product mix in the entry-level market. The delivery failures have lead to loss of large sales volumes and serious under-utilization of production capacity, which has forced us into costly restructuring measures." "Our back-to-profit program, launched in the middle of last year, is progressing as planned, and we are on track to reach profitability by the second half of this year. In light of current market dynamics, we have taken a fundamental look at how we run the consumer business, and we have decided to completely outsource supply and production of mobile phones." "We signed a strategic partnership with Flextronics that allows us to rapidly achieve better economies of scale and increased flexibility. These extra measures cause further provisions that we see as an investment that will give us a very quick payback. Overall, we will reach annual cost savings of SEK 15b. a year from 2002. As this also creates a sound basis for long-term profitability, it also confirms our commitment to remain a top player in mobile phones." Orders in Mobile Systems up more than 60% in fourth quarter By the end of the fourth quarter, Ericsson had won 22 of 33 publicly announced WCDMA agreements and a majority of the GPRS contracts. Operators in North America and Latin America chose the GSM/GPRS track towards 3G and Mobile Internet. We are also benefiting as the world's number one in GSM and 3G. As operators intensify investments in GSM and 3G, we grew our mobile systems order intake in the fourth quarter by more than 60%. We have increased R&D, supply and implementation capacity for 3G during the fourth quarter; a trend that will continue during 2001. ENGINE wins 35% market share In the fourth quarter 2000, Ericsson continued to gain a strong foothold in the market for converting telecom networks from circuit switched narrow-band to packet-switched broadband technologies supporting high- speed data and Internet. We won a 35% market share in fierce competition with traditional datacom suppliers. The market is driven by leading telecom operators, and ENGINE's success builds on our strong relationships with these operators, as well as our long standing experience and research in ATM and IP. Mobile phones maintain over 10% market share During the quarter, Ericsson shipped 11.8 million phones. Overall, we sold 43.3 million phones, an increase of 38% and a share of over 10% in an estimated world market of around 405 - 415 million in 2000. The back-to- profit program is on target to lead the division to profits in the second half of 2001. According to our plan, we are transferring the mobile phone production from our factories in Kumla/Sweden and Lynchburg/Virginia to low-cost manufacturing units. We have phased out a number of products to concentrate our product portfolio. Our partnership with Arima/Taiwan to develop and manufacture entry-level phones for GSM is on schedule, and this week, we signed another agreement with the Taiwanese manufacturer GVC who will handle development and production of phones according to our specifications. On top of this, we are now entering a strategic partnership with Flextronics for complete outsourcing of mobile phones production. Ericsson will focus on technology, design, branding, marketing and sales of phones. By the end of this year, the division Consumer Products will employ 7,000 people, compared to 18,000 last year. Our market view The strong growth in mobile communications continues. It is driven by the growing number of subscribers and the large operators' transition to multi-service broadband networks. In 2000, the number of mobile subscribers grew by almost 50% to between 700 and 715 million. For 2001, we expect the mobile phone market to reach between 500 and 540 million units, and the number of mobile subscribers to reach 920 - 950 million. The growing demand for Mobile Internet is demonstrated by the success of SMS and WAP/i-mode. Over 13 billion SMS messages are sent every month, andthe number of WAP phones increased from 3 to 26 million from August to December 2000. This year, GPRS - or 2.5G - will be in operation, and Ericsson will begin delivery of 3G systems. We strongly believe in Mobile Internet, and remain committed to drive the market and deliver end-to-end solutions. Outlook A more uncertain economic environment and a more cautious capital market contribute to more uncertainty also in our industry. However, we remain optimistic about our business. We have won most of the contracts for the next generation networks. Therefore we are increasing investments to secure our fast start in 3G. For the first quarter 2001 we see continued strong growth for systems and lower sales for phones. Overall we expect to increase sales by around 15% for comparable units. Income before tax is expected to be around zero, affected by operating losses in phones and increased 3G investments. Later in the year we will begin to benefit from the restructuring of our phones business. For the full year 2001, we expect sales to grow between 15 and 20% and an operating margin in the range of 6-8%. FINANCIAL REVIEW * All numbers in SEK if not stated otherwise FOURTH QUARTER ORDERS, SALES AND INCOME Orders booked in the fourth quarter increased by 20%, with strong systems orders offsetting lower orders for mobile phones and Other operations. Adjusting for an exceptionally large order of SEK 4.9b. in Defense Systems in the fourth quarter of 1999, the increase was 30%. ENGINE and GPRS order bookings developed favorably. We increased sales by 11%. Gross margins in our network operators business were stable, but overall gross margin declined due to lower margins for mobile phones, as price pressure continued, as expected. We shipped 11.8 million phones in the quarter to reach a total of 43.3 million for the year, confirming our position as the world's third largest vendor. As presented in October, we have begun restructuring of the handset business in our "Back-to-Profits" program. As forecasted, we had 4.7b. of restructuring costs, including inventory write-downs for obsolescence. The new decision to outsource all our manufacturing of mobile phones resulted in an additional restructuring provision of 8b. in the fourth quarter, which includes the 2b. previously identified for the back-to- profits-program. Of the total restructuring amount, 12.7b., around 50% relate to inventory and supply, and around 20% relate to excess equipment when outsourcing, and around 30% represent personnel redundancy, and unabsorbed fixed costs in our production units. Operating expenses increased in the quarter, following increased R&D efforts for 3G, as indicated above, and expenses related to restructuring in Consumer Products. Operating expenses were 35% of sales in the quarter, above our target of 30%. Operational capital gains in the quarter other than Juniper Networks were 0.1b., somewhat lower than our outlook of 0.4b. Income effects of changed currency exchange rates compared to the rates during last year were approximately +0.4b. Operating income in the quarter was 5.6b. Adjusted for capital gain of Juniper shares, non-operational items and additional restructuring provision in phones, the operating income was -1.5b. Income before tax was 4.6b. Minority interests in income were higher than earlier in the year, due to good fourth quarter results in certain companies. BALANCE SHEET AND CASH FLOW We reduced inventory by 5.1b. in the quarter, of which 5.9b. in phones. Inventory for systems increased by 0.7b. Accounts receivable increased by 9.1b., driven by the larger sales particularly in December. We managed to reduce customer financing receivables by 2.9b. Investments in tangible assets were 3.8b. Cash flow before financing activities in the quarter was 11.6b., which includes the favorable effect of sales of shares in Juniper Networks. FULL YEAR 2000 Orders booked increased by 31% and sales by 27% (33% and 29%, for comparable units), slightly above our outlook. Orders and sales in our Network Operator segment developed well during the year with orders up 40% and sales up 29%. Strong demand for 2G infrastructure, GPRS and ENGINE were main drivers. The ENGINE solution for migration of circuit-switched networks to next-generation packet-switched technology is to a large extent utilizing earlier development in the broadband area, such as broadband ISDN and optical transmission systems. In our mobile phones business, sales and gross margins were severely impacted by delivery problems from a key supplier, leading to delays and reductions in sales, lower prices and large inventory write-offs. In addition, we also decided to implement an aggressive restructuring program for the phone operations and incurred additional costs. Operating expenses were 33% of sales, above our target of 30%, due to increased R&D investments and beginning ramp-up of capacity for 3G. Overall, we achieved an adjusted operating margin of 6.1%, excluding a capital gain of 15.4b from sale of Juniper shares, additional restructuring provision in phones 8b. and non-operational items of 7.0b. This is in line with our guidance. Income effects of changed currency exchange rates compared to the rates during last year were around +1.3b. For mobile phones, however, effects were negative around -3.4b. due to unfavorable exposure from purchases in Japanese Yen and US dollars combined with a large share of revenues in EUR. Income before tax was 28.7 (16.4)b., up 75%. The tax rate year to date was as low as 27%, since a portion of the capital gains was non-taxable. Earnings per share, fully diluted were SEK 0:28 (0:78) in the quarter and 2:65 (1:54) year to date. The dilutive effect of this year's employee stock option programs was around 0.2%. Earnings per share according to US GAAP were SEK 3:44 (1:92). Inventory turnover for the year reached 5.2 (4.8), affected by inventory write-downs. Our long-term target is a level of more than 5.0. Receivables turnover for the year was 3.9 (3.7) turns, slightly below target of 4.0. Customer financing is granted very selectively and preferably as bridge- financing until a permanent solution is found by our customers. During the year, we managed to reduce on-balance sheet risks by 20%, while off- balance sheet exposure increased only slightly. Investments in tangible assets were 12.3b., of which 5.1b. in Sweden. The equity ratio at year-end was 37.7 (35.2)%. We did not reach our target of 40% and we will continue our efforts to improve capital efficiency, in particular regarding inventory and receivables. Cash flow before financing activities year to date was 6.4b, with the favorable effect of capital gains offsetting increases in inventory and receivables. At year-end 2000 Ericsson had 105,129 employees world-wide, a net increase of 1,839 during the year, mainly a result of increased R&D efforts for 3G. DIVIDEND PROPOSAL The Board of Directors will propose to the Annual General Meeting an unchanged dividend of SEK 0:50 per share. ANNUAL REPORT The Annual Report will be distributed to shareholders and be available at our head office at Telefonplan, Stockholm, as of March 9, 2001. ANNUAL GENERAL MEETING OF SHAREHOLDERS The Annual General Meeting of shareholders will be held on Wednesday March 28, 2001 in Stockholm Globe Arena. Appendices: * Segment review * Market review * Orders, sales and margins by segment by quarter * Employees * Restated segment data for new segment structure Stockholm, January 26, 2001 Kurt Hellström President and CEO As earlier communicated, the Board of Directors appointed Kurt Hellström also Chief Executive Officer effective as of January 1, 2001. Uncertainties in the Future. "Safe Harbor" Statement under the U.S. Private Securities Litigation Reform Act of 1995: Some statements in this interim report are forward looking and actual results may differ materially from those stated. In addition to the factors discussed, among other factors that may affect results are product demand, the effect of economic conditions, exchange-rate and interest-rate movements, the impact of competing products and their pricing, product development, commercialization and technological difficulties, political risks in the countries in which the Company has operations or sales, supply constraints, and the result of customer financing efforts. Date for next report: April 20, 2001 FOR FURTHER INFORMATION PLEASE CONTACT Roland Klein, Senior Vice President, Corporate Communications Phone: +46 8 719 2128, +44 7776 162997; E-mail: roland.klein@clo.ericsson.se Media: Pia Gideon, Vice President, External Relations Phone: +46 8 719 2864, +46 70 519 2864; E-mail: pia.gideon@lme.ericsson.se Investor relations: Gary Pinkham, Vice President, Investor Relations Phone: +1 212 685 4030; E-mail: gary.pinkham@ericsson.com Lars Jacobsson, Vice President, Financial Reporting and Analysis Phone: +46 8 719 9489, +46 70 519 9489; E-mail: lars.jacobsson@lme.ericsson.se SEGMENT REVIEW Segment results fourth quarter 2000 Segment (SEK Orders Order Sales Sales Adjusted Adjusted b.) growth growth Operating Operating margin income Network 60.2 47% 61.4 21% 9.4 15% (17%) Operators Consumer 14.9 -5% 13.9 -17% -10.3 -74% (6%) Products Enterprise 4.7 1% 5.8 8% 0.3 5% (8%) Solutions Other 3.8 -58% 4.8 -12% -0.2 -5% (0%) operations Unallocated -0.7 Inter-segment -4.2 -3.7 sales TOTAL 79.5 20% 82.1 11% -1.5 -2% (12%) Adjustments: Capital gain 15.4 Juniper Non- -0.2 operational items Additional -8.0 restructuring Operating 5.6 income Network Operators Sales increased by 21% and now generate 75% of total sales. GSM systems showed the strongest sales growth and very strong order bookings. Wireline systems showed a good quarter based on ENGINE demand. Latin America achieved particularly strong sales, whereas Western Europe had a slow growth rate. Increased R&D spending, along with a changed sales mix of products and markets, caused the operating margin to drop from 17 to 15%. Consumer Products In the quarter we sold 11.8 million phones. As indicated in our outlook, pressure on prices resulted in reduced margins The Back-to-Profits program is on its way to return the business into profits in the second half 2001. Enterprise Solutions Enterprise solutions are in the process of changing the distribution channel strategy to work with third party channels. As these efforts slowed down the business, sales growth and operating income were modest. Other operations and Unallocated Due to a large Defense Systems order in the fourth quarter last year, this year's order bookings appear low. This year, Energy Systems were divested from April 1,which has reduced sales this year. Our Cables business has done very well with strong demand for fiber optic cables. Microelectronics' sales has been somewhat hurt by the lower volumes for mobile phones. Operating income is negative due to unfavorable development in our joint venture with Hewlett-Packard. On a comparable basis, orders decreased by 10% and sales increased by 5%. Unallocated costs were slightly lower than in the fourth quarter last year. SEGMENT REPORT CONTINUED Segment results full year 2000 Segment (SEK Orders Order Sales Sales Adjusted Adjusted Employees b.) growth growthOperating Operating income margin Network 212.4 40% 194.1 29% 33.1 17%(13%) 70,317 Operators Consumer 57.0 20% 56.3 21% -16.2 -29% (1%) 16,840 Products Enterprise 17.8 -1% 17.5 1% 0 0% (0%) 8,324 Solutions Other 18.6 -16% 19.0 14% 1.7 9% (2%) 8,520 operations Unallocated -1.9 1,128 Inter-segment -13.5 -13.4 sales TOTAL 292.3 31% 273.6 27% 16.7 6% (8%) 105,128 Adjustments: Capital gain 15.4 Juniper Non- 7.0 operational items Additional -8.0 restructuring Operating 31.2 income Network Operators With order growth and sales stronger than the market, we improved our operating margin to 17 (13)%. Orders and sales were strong for all mobile standards, and good orders bookings were achieved for our ENGINE solution. Also Mini-link transmission equipment had a strong increase from last year. The operating income reflects an increased investment level in R&D and other preparations for rapid roll-out of 3G. Consumer Products We increased unit sales by 38% to 43.3 million units. Revenues grew 21%, to 56.3b., a result of lost sales due to component supply, unfavorable product mix and an over-supply situation in the end of the year, with strong price erosion. The full year loss at -16.2b. is in line with guidance after nine months and includes 4.7b. of restructuring charges. Enterprise Solutions The business consulting business grew substantially during the year and was increasingly focused on Internet applications. The traditional business with enterprise communications solutions of PABXs and data networks was reorganizing its distribution channels during the year, which slowed down the business development. Orders and sales were flat and the operating margin was slightly down. Other Operations and unallocated costs During the year we have divested our Energy systems business and real estate properties. These effects are reported among non-operational capital gains. Among remaining business operations, Cables, Defense systems and Microelectronics all had very strong sales increases. Orders increased very well too, except for Defense systems, where a large ERIEYE order last year makes this year's bookings lower. Unallocated costs decreased more than 20% compared to last year. A pension refund of 1.1b. is included in non-operational items. New segment reporting for 2001 For enhanced comparability with peer companies in our industry as well as competitive reasons, we will in 2001 report orders, sales and operating income according to our primary areas of business - Systems, Phones and Other operations. Within the Systems business, orders and sales for mobile systems and multi-service networks will be separately disclosed, although there is a high degree of integration within systems for R&D, customers, implementation and support services. Attached is a restated segment report for year 2000 by quarter in the new format. MARKET REVIEW External Sales by Market Area, fourth quarter 2000 Market Network ConsumerEnterprise Other Total % of Increase Area Operators Products SolutionsOperations Total Western 19.6 5.4 2.9 2.2 30.1 37% 2% Europe CEEMA *) 10.1 1.1 0.4 0.2 11.9 14% 16% North 4.6 2.3 0.1 0.4 7.5 9% -1% America Latin 12.2 2.4 0.4 0.2 15.2 19% 34% America Asia 14.0 2.5 0.4 0.5 17.5 21% 15% Pacific Total**) 60.5 13.8 4.3 3.4 82.1 100% 11% External Sales by Market Area, full year 2000 Market Network ConsumerEnterprise Other Total % ofIncrease Area Operators Products SolutionsOperations Total Western 60.7 23.3 8.4 7.8 100.2 36% 17% Europe CEEMA *) 29.6 6.2 0.9 1.0 37.7 14% 27% North 23.4 9.9 0.4 1.5 35.2 13% 40% America Latin 35.9 6.1 1.3 0.9 44.1 16% 46% America Asia 43.4 10.5 1.2 1.2 56.3 21% 25% Pacific Total **) 193.0 56.0 12.1 12.4 273.6 100% 27% *) Central and Eastern Europe, Middle East and Africa **) Excluding inter-segment sales Sales increases slowed down the fourth quarter, in particular in Western Europe, North America and Japan. In Europe, operators have begun to cut subsidies of mobile phones, reducing the growth of new subscribers and slowing down replacement. As the penetration is now around 70% in many countries, the main objective for operators is to keep the current customer base. A number of firm contracts for 3G were signed in the fourth quarter, underlining our leading position. ENGINE continues to dominate the "Circuit-to-Packet" market. A major break-through order for IP backbone network including Juniper routers was won with Telia International, evidence of the strong partnership with Juniper, which has now lead to a joint venture agreement. Our joint venture with Microsoft reported the first contract for its first product, Outlook via Mobile. Our North American operations increased sales for the year strongly. Operators have decided to go for GSM for their 2.5G networks as a way into 3G, which is favorable for us as the market leader in GSM and GPRS. GPRS trials are ongoing. CDMA sales started to pick up momentum and a strategic order for cable modems was won. As part of the back-to-profits program in our Consumer Business, around 2000 employees will be transferred to SCI in early 2001, following the outsourcing of manufacturing operations in Lynchburg, USA. In the end of the year, Ericsson acquired Microwave Power Devices, a leading developer of multi-carrier power amplifier technology, an important competence for development of 3G systems. In Latin America, sales were very strong in Mexico and Argentina in particular, plus Brazil. Also in Latin America, operators will go the GSM/GPRS-way to 3G. In Asia Pacific, the two major markets China and Japan showed slightly different developments. China had moderate sales increases, but strong orders booked. Sales in Japan were very strong but orders increased slower. It seems as if the market in China is beginning to pick up momentum after a comparatively low investment level in 2000. Top 10 Markets in Orders and Sales, Year 2000 Market Share of Share of Total Total Orders Sales USA 12% 12% China 8% 7% United Kingdom 7% 8% Mexico 6% 6% Italy 6% 6% Brazil 6% 6% Spain 5% 5% Japan 5% 5% Turkey 4% 4% Sweden 3% 3% CONSOLIDATED INCOME STATEMENT Oct-Dec Oct-Dec Jan-Dec Jan-Dec SEK million s 2000 1999 2000 1999 Net 82,109 73,755 273,569 215,403 sales Cost of -63,113 -42,385 -180,392 -125,881 sales Gross margin 18,996 31,370 93,177 89,522 Gross margin as percentage 23.1% 42.5% 34.1% 41.6% of net sales Research and development and other technical expenses -13,458 -9,873 -41,921 -33,123 Selling expenses -11,340 -10,387 -34,706 -30,005 Administrative expenses -4,254 -3,487 -13,311 -11,278 Operating expenses -29,052 -23,747 -89,938 -74,406 Operating expenses as percentage of net sales 35.4% 32.2% 32.9% 34.5% Other operating revenues 15,586 1,066 27,652 2,224 Share in earnings of associated companies 117 -2 274 250 Operating income 5,647 8,687 31,165 17,590 Operating margin as percentage of net sales 6.9% 11.8% 11.4% 8.2% Financial income 720 562 2,929 2,273 Financial -1,314 -457 -4,449 -2,971 expenses Income after 5,053 8,792 29,645 16,892 financial items Minority interest in -460 -313 -953 -506 income before taxes Income before *) 4,593 8,479 28,692 16,386 taxes Tax -2,343 -2,156 -7,674 -4,256 es Net income *) 2,250 6,323 21,018 12,130 *) Of which capital gains/losses, net of minority 15,221 728 25,229 1,843 Operational 15,452 769 19,296 2,171 gains/losses Non-operational gains/losses -231 -41 5,933 -328 Operating margin adjustments for items affecting comparability: Capital gain Juniper 15,383 15,383 Networks Non-operational -231 -41 5,933 -328 gains/losses Pension refund 1,100 Additional restructuring -8,000 -8,000 provision in Consumer Products Total adjustm ents 7,152 -41 14,416 -328 Adjusted -1,505 8,728 16,749 17,918 operating margin Adjusted operating margin -1.8% 11.8% 6.1% 8.3% as percentage of net sales The average rate for conversion from US dollars to SEK was 9.1716 for income statement items CONSOLIDATED BALANCE SHEET Dec 31 Dec 31 SEK million s 2000 1999 Fixed assets Intangible assets 12,833 10,548 Tangible assets 22,378 24,719 Financial assets Equity in associated companies 2,790 2,712 Other investments 2,484 1,751 Long-term customer 6,364 6,657 financing Other long-term 3,657 4,972 receivables Total fixed 50,506 51,359 assets Current assets Invento ries 43,933 25,701 Receiva bles Accounts receivable - trade and short- term customer financing 76,240 65,333 Other receivables 44,029 31,227 Short-term cash investments, cash and bank 35,606 29,008 Total current 199,808 151,269 assets Total 250,314 202,628 assets Stockholders' equity 91,686 69,176 Minority interest in consolidated subsidiaries 2,764 2,182 Convertible debentures 4,347 5,453 Interest bearing provisions and liabilities 42,216 39,567 Non-interest bearing provisions and liabilities 109,301 86,250 Total stockholders' equity, provisions and liabilities 250,314 202,628 The closing rate for conversion from US dollars to SEK was 9.4990 for balance sheet items. CONSOLIDATED STATEMENT OF CASH FLOWS Jan-Dec Jan-Dec SEK millions 2000 1999 Cash flow from operating activities -10,848 12,925 Investments 17,244 -15,364 Cash flow before financing activities 6,396 -2,439 Financing -236 13,550 Effect of exchange rate changes on cash 438 -336 Net change in cash 6,598 10,775 TREND OF OPERATIONS IN BRIEF Jan-Dec Jan-Dec Changes SEK million s 2000 1999 in % Net 273,569 215,403 27% sales Adjusted operating margin as percentage of net sales 6.1% 8.3% Income before taxes 28,692 16,386 100% Net income 21,018 12,130 106% Average number of 7,869 7,817 shares (millions) Average number of shares, fully 8,004 7,987 diluted (millions) Earnings per share (SEK) 2.70 1.58 71% Earnings per share, fully diluted (SEK) 2.65 1.54 72% Earnings per share, fully diluted, in accordance with U.S. GAAP (SEK) 3.44 1.92 79% Equity ratio 37.7% 35.2% Additions to tangible fixed assets 12,294 9,085 35% Total depreciation on tangible 9,957 6,532 52% and intangible assets - Of which goodwill 761 684 11% Number of employees, 105,129 103,290 2% end of period Orders booked 292,344 223,828 31% Capital turnover 2.1 2.1 ratio Calculation of earnings per share: Net income 21,018 12,130 Interest on convertible debentures, net after tax 207 185 Adjusted net income 21,225 12,315 Average number of shares, @/@ 8,004 @/@ 7,987 fully diluted (millions) Earnings per share, fully = 2.65 = 1.54 diluted (SEK) NET SALES BY SEGMENT BY QUARTER (SEK m.) Year-to-dat 2000 1999 0003A 0006A 0009A 0012A 9903A 9906A 9909A 9912A Network Operators & Service Providers 38,718 84,819 132,693 194,074 28,50564,314 99,208149,943 Consumer 14,794 28,145 42,483 56,343 9,69620,064 29,797 46,444 Products Enterprise Solutions 3,858 7,864 11,635 17,479 3,446 7,841 11,949 17,345 Other operations 5,343 9,935 14,269 19,027 3,312 7,301 11,326 16,750 Less : Intersegment sales -3,628 -6,645 -9,620 -13,354 -3,388-7,137-10,632-15,079 Total 59,085 124,118 191,460 273,569 41,57192,383141,648215,403 Change % 0003A 0006A 0009A 0012A Network Operators & Service Providers 36% 32% 34% 29% Consumer Products 53% 40% 43% 21% Enterprise Solutions 12% 0% -3% 1% Other operations 61% 36% 26% 14% Less : Intersegment sales 7% -7% -10% -11% Total 42% 34% 35% 27% Isolated quarters 2000 1999 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Network Operators & Service Providers 38,718 46,101 47,874 61,381 28,505 35,809 34,894 50,735 Consumer Products 14,794 13,351 14,338 13,860 9,696 10,368 9,733 16,647 Enterprise 3,858 4,006 3,771 5,844 3,446 4,395 4,108 5,396 Solutions Other 5,343 4,591 4,334 4,758 3,312 3,989 4,025 5,424 operations Less : Intersegme nt sales -3,628 -3,016 -2,975 -3,734 -3,388 -3,749 -3,495 -4,447 Total 59,085 65,033 67,342 82,109 41,571 50,812 49,265 73,755 Change % Q1 Q2 Q3 Q4 Network Operators & Service Providers 36% 29% 37% 21% Consumer Products 53% 29% 47% -17% Enterprise Solutions 12% -9% -8% 8% Other operations 61% 15% 8% -12% Less : Intersegment sales 7% -20% -15% -16% Total 42% 28% 37% 11% ORDERS BOOKED BY SEGMENT BY QUARTER (SEK m.) Year-to-date 2000 1999 0003A 0006A 0009A 0012A 9903A 9906A 9909A 9912A Network Operators & Service Providers 57,465102,735 152,262 212,440 32,672 69,879 110,916151,762 Consumer 14,562 27,988 42,123 57,001 10,116 20,196 31,948 47,552 Products Enterprise Solutions 5,486 9,428 13,097 17,834 4,259 8,835 13,290 17,978 Other operations 5,854 10,770 14,724 18,573 3,795 8,134 12,769 22,021 Less: Intersegme nt sales -3,893 -6,726 -9,340 -13,504 -3,381 -7,371 -11,111-15,485 Total 79,474144,195 212,866 292,344 47,461 99,673 157,812223,828 Change % 0003 0006 0009 0012 A A A A Network Operators & Service Providers 76% 47% 37% 40% Consumer Products 44% 39% 32% 20% Enterprise Solutions 29% 7% -1% -1% Other operations 54% 32% 15% -16% Less: Intersegment sales 15% -9% -16% -13% Total 67% 45% 35% 31% Isolated quarters 2000 1999 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Network Operators & Service Providers 57,465 45,270 49,527 60,178 32,672 37,207 41,037 40,846 Consumer Products 14,562 13,426 14,135 14,878 10,116 10,080 11,752 15,604 Enterprise 5,486 3,942 3,669 4,737 4,259 4,576 4,455 4,688 Solutions Other 5,854 4,915 3,954 3,849 3,795 4,339 4,635 9,252 operations Less: Intersegment sales -3,893 -2,832 -2,614 -4,164 -3,381 -3,990 -3,740 -4,374 Total 79,474 64,721 68,671 79,478 47,461 52,212 58,139 66,016 Change % Q1 Q2 Q3 Q4 Network Operators & 76% 22% 21% 47% Service Providers Consumer Products 44% 33% 20% -5% Enterprise Solutions 29% -14% -18% 1% Other operations 54% 13% -15% -58% Less: Intersegment 15% -29% -30% -5% sales Total 67% 24% 18% 20% NET SALES BY MARKET AREA BY QUARTER (SEK m.) Year-to-date 2000 1999 0003A 0006A 0009A 0012A 9903A 9906A 9909A 9912A Western 23,578 47,011 70,090 100,234 17,350 36,374 55,890 85,329 Europe* Central- and Eastern Europe, 7,323 16,799 25,850 37,701 4,779 12,621 19,528 29,736 Middle East & Africa North America 8,549 19,263 27,704 35,193 4,179 11,387 17,610 25,175 Latin 7,781 17,334 28,953 44,118 4,920 12,186 18,916 30,263 America Asia 11,854 23,711 38,863 56,323 10,343 19,815 29,704 44,900 Pacific Total 59,085 124,118 191,460 273,569 41,571 92,383 141,648 215,403 * Of which Sweden 2,380 4,371 6,704 8,732 1,685 3,868 5,461 7,551 * Of 22,052 44,031 65,754 94,293 16,261 34,299 52,411 80,345 which EU Change % 0003 0006 0009 0012 A A A A Western Europe* 36% 29% 25% 17% Central- and Eastern Europe, Middle East & Africa 53% 33% 32% 27% North America 105% 69% 57% 40% Latin America 58% 42% 53% 46% Asia Pacific 15% 20% 31% 25% Total 42% 34% 35% 27% * Of which Sweden 41% 13% 23% 16% * Of which EU 36% 28% 25% 17% Isolated quarters 2000 1999 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Western Europe* 23,578 23,433 23,079 30,144 17,350 19,024 19,516 29,439 Central- and Eastern Europe, Middle East & Africa 7,323 9,476 9,051 11,851 4,779 7,842 6,907 10,208 North America 8,549 10,714 8,441 7,489 4,179 7,208 6,223 7,565 Latin 7,781 9,553 11,619 15,165 4,920 7,266 6,730 11,347 America Asia 11,854 11,857 15,152 17,460 10,343 9,472 9,889 15,196 Pacific Total 59,085 65,033 67,342 82,109 41,571 50,812 49,265 73,755 * Of which 2,380 1,991 2,333 2,028 1,685 2,183 1,593 2,090 Sweden * Of which EU 22,052 21,980 21,723 28,539 16,261 18,038 18,112 27,934 Change % Q1 Q2 Q3 Q4 Western Europe* 36% 23% 18% 2% Central- and Eastern Europe, Middle East & Africa 53% 21% 31% 16% North America 105% 49% 36% -1% Latin America 58% 31% 73% 34% Asia Pacific 15% 25% 53% 15% Total 42% 28% 37% 11% * Of which Sweden 41% -9% 46% -3% * Of which EU 36% 22% 20% 2% ORDERS BOOKED BY MARKET AREA BY QUARTER (SEK m.) Year-to-date 2000 1999 0003A 0006A 0009A 0012A 9903A 9906A 9909A 9912A Western Europe* 25,048 50,870 71,807 105,684 19,096 40,38063,88295,707 Central- and Eastern Europe, Middle East & Africa 17,388 24,503 32,104 40,972 9,197 14,76425,78630,626 North 9,148 19,082 27,326 37,977 6,024 12,52319,62227,468 America Latin 9,695 19,312 33,053 44,959 3,432 11,03217,81627,797 America Asia Pacific 18,195 30,428 48,576 62,752 9,712 20,97430,70642,230 Total 79,474 144,195 212,866 292,344 47,461 99,673 157,812 223,828 * Of which 2,924 6,010 7,983 9,876 1,565 3,517 5,248 7,182 Sweden * Of which 23,261 47,523 67,194 99,951 17,826 37,99060,05090,562 EU Change % 0003 0006 0009 0012 A A A A Western Europe* 31% 26% 12% 10% Central- and Eastern Europe, Middle East & Africa 89% 66% 25% 34% North America 52% 52% 39% 38% Latin America 182% 75% 86% 62% Asia Pacific 87% 45% 58% 49% Total 67% 45% 35% 31% * Of which Sweden 87% 71% 52% 38% * Of which EU 30% 25% 12% 10% Isolated quarters 2000 1999 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Western Europe* 25,048 25,822 20,937 33,877 19,096 21,284 23,50231,825 Central- and 17,388 7,115 7,601 8,868 9,197 5,567 11,022 4,840 Eastern Europe, Middle East & Africa North America 9,148 9,934 8,244 10,651 6,024 6,499 7,099 7,846 Latin America 9,695 9,617 13,741 11,906 3,432 7,600 6,784 9,981 Asia Pacific 18,195 12,233 18,148 14,176 9,712 11,262 9,73211,524 Total 79,474 64,721 68,671 79,478 47,461 52,212 58,13966,016 * Of which 2,924 3,086 1,972 1,893 1,565 1,952 1,731 1,934 Sweden * Of which EU 23,261 24,262 19,671 32,757 17,826 20,164 22,06030,512 Change % Q1 Q2 Q3 Q4 Western Europe* 31% 21% -11% 6% Central- and Eastern Europe, Middle East & Africa 89% 28% -31% 83% North America 52% 53% 16% 36% Latin America 182% 27% 103% 19% Asia Pacific 87% 9% 86% 23% Total 67% 24% 18% 20% * Of which Sweden 87% 58% 14% -2% * Of which EU 30% 20% -11% 7% ADJUSTED OPERATING INCOME AND OPERATING MARGIN PER SEGMENT PER QUARTER (SEK m.) Year-to-date 2000 1999 0003A 0006A 0009A 0012A 9903A 9906A 9909A 9912A Network Operators & Service Providers 5,760 15,581 23,688 33,072 2,108 5,758 10,919 19,637 Consumer Products 457 -1,829 -5,932 -16,195 -23 -56 -675 253 Enterprise Solutions 29 -21 -256 22 -222 -216 -382 64 Other 543 1,060 1,925 1,708 221 629 426 403 operations Unallocated * -414 -1,257 -1,171 -1,858 -205 -666 -1,098 -2,439 Total 6,375 13,534 18,254 16,749 1,879 5,449 9,190 17,918 Adjustments Non- operational items 0 5,838 7,264 7,033 -93 -287 -287 -328 Additional 0 0 0 -8,000 0 0 0 0 restructuring Capital gain Juniper Networks 0 0 0 15,383 0 0 0 0 As percentage of Net Sales 2000 1999 0003 0006 0009 0012 9903 9906 9909 9912 A A A A A A A A Network Operators & 15% 18% 18% 17% 7% 9% 11% 13% Service Providers Consumer Products 3% -6% -14% -29% 0% 0% -2% 1% Enterprise Solutions 1% 0% -2% 0% -6% -3% -3% 0% Other operations 10% 11% 13% 9% 7% 9% 4% 2% Total 11% 11% 10% 6% 5% 6% 6% 8% Isolated quarters 2000 1999 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Network Operators & Service 5,760 9,821 8,107 9,384 2,108 3,650 5,161 8,718 Providers Consumer 457 -2,286 -4,103 -10,263 -23 -33 -619 928 Products Enterprise Solutions 29 -50 -235 278 -222 6 -166 446 Other operations 543 517 865 -217 221 408 -203 -23 Unallocated * -414 -843 86 -687 -205 -461 -432 -1,341 Total 6,375 7,159 4,720 -1,505 1,879 3,570 3,741 8,728 Adjustments Non- operational items 0 5,838 1,426 -231 -93 -194 0 -41 Additional restructuri ng 0 0 0 -8,000 0 0 0 0 Capital gain Juniper 0 0 0 15,383 0 0 0 0 Networks As percentage of Net Sales 2000 1999 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Network Operators & Service Providers 15% 21% 17% 15% 7% 10% 15% 17% Consumer Products 3% -17% -29% -74% 0% 0% -6% 6% Enterprise Solutions 1% -1% -6% 5% -6% 0% -4% 8% Other operations 10% 11% 20% -5% 7% 10% -5% 0% Total 11% 11% 7% -2% 5% 7% 8% 12% * "Unallocated" consists mainly of costs for corporate staffs, certain goodwill amortization and non-operational gains and losses NUMBER OF EMPLOYEES PER SEGMENT PER QUARTER 2000 1999 0003A 0006A 0009A 0012A 9903A 9906A 9909A 9912A Network 63,616 65,005 66,973 70,317 65,530 65,90965,35964,695 Operators & Service Providers Consumer Products 17,290 17,710 18,137 16,840 14,116 14,05314,97016,446 Enterprise 9,130 8,687 8,739 8,324 9,856 10,32910,262 9,615 Solutions Other 11,257 8,839 8,461 8,520 11,046 11,27811,47411,525 operations Unallocated 1,030 1,076 1,084 1,128 669 809 712 1,009 102,777 103,290 Total 102,323 101,317 103,394 105,129 101,217 102,378 Change % Q1 Q2 Q3 Q4 Network Operators & -3% -1% 2% 9% Service Providers Consumer Products 22% 26% 21% 2% Enterprise Solutions -7% -16% -15% -13% Other operations 2% -22% -26% -26% Unallocated 54% 33% 52% 12% Total 1% -1% 1% 2% CAPITAL GAINS/LOSSES SPECIFICATION SEK b. OPERATIONAL Q1 Q2 Q3 Q4 YTD Network Operators and Service Providers Saraïde 0,7 0,1 Across Wireless 1,0 AU-system 0,2 0,1 iD2 0,3 Juniper 15,4 0,7 1,5 0,1 15,5 17,8 Consumer Products Saraïde 0,3 0,1 Across Wireless 0,5 0,3 0,5 0 0,1 0,9 Enterprise Solutions Information 0,1 0,1 Highway Other Operations Other 0,3 0,1 0,2 -0,1 0,5 Total 1,4 2,1 0,3 15,5 19,3 NON-OPERATIONAL Energy Systems 4,5 Real estate 0,2 1,5 -0,2 Other -0,1 Total 0 4,7 1,5 -0,3 5,9 ERICSSON G/L NET OF 25,2 MINORITY SEGMENT ORDERS BOOKED BY QUARTER (SEK m.) Isolated quarters 2000 Total Q1 Q2 Q3 Q4 YTD Systems 57,944 45,559 49,706 59,891 213,100 of which Mobile 48,471 37,286 39,981 49,871 175,609 System Multi Service Networks 9,473 8,273 9,725 10,020 37,491 Phones 14,562 13,426 14,135 14,878 57,001 Other operations 11,266 8,725 7,674 8,086 35,751 Less : Intersegment sales -4,298 -2,989 -2,844 -3,377 -13,508 Total 79,474 64,721 68,671 79,478 292,344 SEGMENT SALES BY QUARTER (SEK m.) Isolated quarters 2000 Total Q1 Q2 Q3 Q4 YTD Systems 38,910 46,433 48,087 61,253 194,683 of which Mobile System 32,481 37,858 38,722 49,022 158,083 Multi Service 6,429 8,575 9,365 12,231 36,600 Networks Phones 14,794 13,351 14,338 13,860 56,343 Other operations 9,297 8,504 8,087 10,039 35,927 Less : Intersegment sales -3,916 -3,255 -3,170 -3,043 -13,384 Total 59,085 65,033 67,342 82,109 273,569 SEGMENT ADJUSTED OPERATING INCOME BY QUARTER (SEK m.) Isolated quarters 2000 Total Q1 Q2 Q3 Q4 YTD Systems 5,753 9,812 8,242 9,416 33,223 Phones 457 -2,286 -4,103 -10,263 -16,195 Other operations 578 480 492 29 1,579 Unallocated* -413 -847 89 -687 -1,858 Total 6,375 7,159 4,720 -1,505 16,749 Adjustments Non-operational items 0 5,838 1,426 -231 7,033 Additional restructuring 0 0 0 -8,000 -8,000 Capital gain Juniper 0 0 0 15,383 15,383 Networks * "Unallocated" consists mainly of costs for corporate staffs, certain goodwill amortization and non-operational gains and losses SEGMENT ADJUSTED OPERATING MARGIN BY QUARTER Isolated quarters 2000 Q1 Q2 Q3 Q4 YTD Systems 15% 21% 17% 15% 17% Phones 3% -17% -29% -74% -29% Other operations 6% -6% 6% 0% 4% Total 11% 11% 7% -2% 6% NUMBER OF EMPLOYEES PER SEGMENT PER QUARTER 2000 0003A 0006A 0009A 0012A Systems 64,836 66,207 68,571 71,102 Phones 17,290 17,710 18,137 16,840 Other Operations 20,197 17,400 16,686 17,187 Total 102,323 101,317 103,394 105,129 ------------------------------------------------------------ This information was brought to you by BIT http://www.bit.se The following files are available for download: http://www.bit.se/bitonline/2001/01/26/20010126BIT00020/bit0001.doc http://www.bit.se/bitonline/2001/01/26/20010126BIT00020/bit0002.pdf