Ericsson reports pos. cash flow & cont. sales growth in Mobile Systems during Q2

Ericsson reports positive cash flow and continued sales growth in Mobile Systems during second quarter · Systems sales increase 9%, driven by 29% growth in GSM · Losses in phones reduced to SEK -4.6 b., compared with SEK -5.7 b. in Q1, 2001 · Income before taxes of SEK -5.3 b. before restructuring charges · Efficiency program and Back-to-Profit program on track to restore profitability · Outlook: Due to weakening market conditions, we expect flat to moderate growth in mobile systems market for the full year 2001; Systems sales expected to grow at least in pace with the market Second quarter Six months (SEK b.) 2001 2000 Change 2001 2000 Change Orders 61.2 64.7 -5% 136.7 144.2 -5% Systems 50.7 45.6 11% 113.3 103.5 9% Phones 7.6 13.4 -43% 14.8 28.0 -47% Other 5.5 8.7 -37% 13.8 20.0 -31% Sales 62.8 65.0 -3% 118.7 124.1 -4% Systems 50.7 46.4 9% 94.8 85.3 11% Phones 8.1 13.4 -39% 15.3 28.1 -46% Other 6.9 8.5 -19% 14.2 17.8 -20% Adjusted Operating Income 1) -4.2 7.2 -8.6 13.5 Systems 0.6 9.6 2.4 15.3 Phones -4.6 -2.1 -10.4 -1.5 Other 0.1 0.5 0.0 1.0 Unallocated -0.3 -0.8 -0.6 -1.3 Adjusted Operating Margin 1) -7% 11% -7% 11% Systems 1% 21% 3% 18% Phones -57% -16% -68% -5% Other 2% 6% 0% 6% Adjusted Income Before Taxes 1) -5.3 6.7 -10.2 12.8 Net Income -14.2 10.2 -13.8 14.4 Earnings per share, -1.81 1.28 -1.75 1.82 diluted (SEK) Earnings per share, diluted per U.S. GAAP (SEK) -1.45 1.17 -1.74 1.80 Cash flow before financing activities 4.3 7.2 -13.4 1.0 1) Adjusted for: - Capital gain, Juniper - - 5.5 - - Non-operational capital 0 4.7 0 4.7 gains - Pension refund - 1.1 - 1.1 - Restructuring charges -15.0 - -15.0 - OPERATIONAL RESULTS Order development for Systems improved in the second quarter with an increase of 11% over last year, compared to 8% in the first quarter. The increase was attributable to increased orders for GSM and PDC, but also a CDMA order in China. In addition we signed agreements for eight new commercial 3G networks, which are only to a very small extent reflected in orders. Orders for Multi-Service Networks increased slightly. An increase in Systems sales by 9% was driven by strong growth in GSM and ENGINE. Sales of TDMA and PDC systems continued to decline. Mobile phone sales were down 39% in the quarter, negatively affected by lower average selling price and lower unit volumes. As expected, income before taxes of SEK -5.3 b. excluding restructuring charges was slightly below the first quarter result. Losses in mobile phones continued, but were reduced from the first quarter. The profitability of the systems business has not yet begun to benefit from the ongoing Efficiency program, and operating margin declined due to continued 3G spending, excess capacity costs and increased price pressure. Our actions to improve working capital have contributed substantially to the positive cash flow of SEK 4.3 b. Adjusted for divestitures, operating cash flow improved from SEK -23.2 b. in the first quarter to SEK 0.9 b. in the second quarter. CEO COMMENTS "We are very encouraged by our progress made during the quarter considering the very challenging market and we will soon start to see the results of our improvement actions," said Kurt Hellström, President and CEO of Ericsson. "Our focus on cash flow has paid off and we will continue to prioritize cash flow to ensure further improvements." "Weak market conditions for our industry persisted in the second quarter. Many of our customers have delayed spending on network expansion and in some cases postponed contracted deliveries. We cannot predict how long this situation will prevail as we have yet to see signs of improvement." "While we cannot control the market, we can control our costs. The programs targeted to reduce our costs by SEK 38 b. are running at full speed. Among other measures, we have consolidated activities in 29 countries into 8 Market Units. During the quarter, our cost reduction actions have affected more than 10,000 employees and 5,800 consultants. During the second half of the year another 10,000 employees will be affected. These are tough but necessary actions to restore profitability." "Fifty operators have launched GPRS already and we expect a gradual introduction which could stimulate a more favorable market later this year. Regardless of how the Mobile Internet market develops in the short term, it is only a matter of time before additional network capacity is required to support the continuing subscriber growth and increasing voice traffic. With our solid customer base, unmatched geographical presence, and the broadest range of technologies, we are well positioned to benefit when the market recovers." OPERATIONAL REVIEW Systems While Systems sales grew faster than the market, the margins will only benefit from the full positive effects of the Efficiency program next year. Excluding restructuring charges of SEK 11.1 b., the second quarter operating margin decreased to 1%, compared to 4% in the first quarter. This further margin decline was driven by higher R&D for 3G in combination with increased price pressure in 2G. Mobile Systems - reconfirmed leadership in 3G and GSM Orders in the second quarter improved substantially in the Asia Pacific region, particularly in China, offset by declines in Western Europe and North America. The decline in Western Europe is significant for 2G, considering that a substantial portion of the order intake is for 3G. Our 3G business accelerated with 8 new agreements. We now have agreements for 34 networks and have been shipping commercial products since last year. 3G development remains on track for volume business in 2003, with gradual ramp-up during 2002. Total mobile systems sales increased 8%. In GSM we again outpaced the market with sales growth of 29% and strengthened our leading market position. Our CDMA sales grew by 50% as we make progress in this relatively new market for us. Meanwhile, TDMA and PDC sales continued to decline as many operators in the Americas and Japan prepare to transition to next generation technology. China and Eastern Europe were the main contributors to the sales increase. With our strong customer base in 2G we have also built a solid lead in the upgrade to 2.5G networks. We have sold a total of 70 GPRS networks and 20 of them are already in commercial service. Multi-Service Networks Broadband and Internet traffic is driving the strong demand for multi- service networks from wireline operators as we support their transition from circuit-switched to packet-switched networks. To date, we have signed 57 contracts for our ENGINE solution, including 6 new contracts during the quarter. As expected, the sales growth slowed to 13%, compared to the extraordinary growth of 37% in the first quarter. Sales were particularly strong in Latin America. Phones We sold 7.7 million units during the quarter, compared to 6.2 million in the first quarter. With this unit volume increase we slightly improved our market share during the quarter. Older models were phased out in preparation for the introduction of new phones, such as the R520 and T39 GPRS models, which we have started shipping. Our main focus continues to be executing the Back-to-Profit program. During the quarter, we reduced the number of employees in Phones from 14,400 to 7,800. The reductions consist of the transfer of 2,000 employees to Flextronics, 2,800 internal transfers to Systems and 1,800 redundancies. Outsourcing of manufacturing to Flextronics took place in Sweden, Brazil and Malaysia. While we have begun to see positive effects from the Back-to-Profit program, the current negative market situation has more than offset these benefits. Margins were affected by continued excess capacity, lower unit sales and reduced average selling price, even though excess capacity costs were substantially reduced. Excluding restructuring charges of SEK 3.9 b. for the Extended Back-to- Profit program, operating losses were reduced by SEK 1.1 b. compared to the first quarter. The Extended Back-to-Profit program has commenced and should provide SEK 0.5 b. savings this year and annual savings of SEK 3 b. from 2002. The Sony Ericsson Mobile Communications joint venture remains on schedule for launch on October 1, 2001. Other Operations The lower orders, sales and operating margin compared to the second quarter last year were largely impacted by Microelectronics. As a sub- supplier of many components, Microelectronics is suffering from the declining business volume in mobile phones. During the second quarter we closed on the sale of the Enterprise Solutions distribution operations to Apax Partners. No capital gain was recognized. Approximately 2,300 employees were transferred as part of this transaction. Efficiency Program We decisively launched a major efficiency improvement program in March 2001, targeting SEK 20 b. in cost reductions. The program is on track to restore profitability despite weak market conditions. During the second quarter, we achieved the following results: · We reduced the number of employees by 1,300. Another 2,000 employees have been given individual notice and will start leaving in August. · We cut back 5,800 consultants, including temporary workers. · We consolidated activities in 29 countries into 8 market units, which will result in significant cost synergies in marketing, sales, administration and IS/IT. · We began streamlining our R&D sites worldwide, resulting in fewer sites. · We reviewed projects and refocused resources, while protecting core R&D projects. · We started the introduction of one global IS/IT organization to control and reduce costs. We will continue to implement our efficiency measures this year and will realize the full extent of the cost savings in 2002. We believe that these measures will be sufficient to address the challenges of the current market downturn but are prepared to take additional cost cutting measures if the market deteriorates further. We expect savings of SEK 5.5 b. from the Efficiency program during 2001. FINANCIAL REVIEW Income Statement Adjusted operating income improved to SEK -4.2 b., excluding restructuring charges, compared to SEK -4.4 b. in the first quarter. The adjusted operating margin improved slightly to -7% in the second quarter compared to -8% in the first quarter, a result of lower income in Systems partly offset by somewhat reduced losses in Phones. Effects of changes in foreign currency exchange rates were positive by SEK 0.3 b. overall, but unfavorable for Phones with SEK -0.8 b. A total of SEK 15 b. in restructuring charges was taken during the second quarter, including SEK 11.1 b. in Systems and SEK 3.9 b. for the Extended Back-to-Profit program in Phones. Of the amount, SEK 8 b. is for redundancies, SEK 6 b. for inventory write-offs and supplier contract compensation and SEK 1 b. for excess facilities. In the income statement, SEK 5 b. has been charged to gross margin and SEK 10 b. to operating expenses. The restructuring charges do not include any goodwill write-offs, because Ericsson has had a conservative approach to acquisitions since the introduction of the String-of-Pearls strategy in 1997. Approximately SEK 10 b. of the restructuring charges is estimated to impact cash flow. Of this amount, around SEK 6 b. will impact 2001, but will be largely offset by positive cash flow effects of the savings. Financial net amounted to SEK -0.3 b. in the first quarter, and to SEK - 0.8 b. in the second quarter due to increased borrowing. Taxes are calculated at our expected annual average rate of 30%. Earnings per share (EPS) diluted were SEK -1.81 in the quarter and SEK - 1.75 (1.82) year to date. EPS diluted according to U.S. GAAP year to date was SEK -1.74 (1.80), affected as usual by positive effects from capitalization of software development, but also by differences between U.S. GAAP and Swedish GAAP regarding timing of recognizing restructuring provisions in income. Cash Flow Cash flow before financing activities in the quarter was SEK 4.3 b., a substantial improvement from the SEK -17.7 b. in the first quarter. The sale of the distribution and service operations of Enterprise Systems contributed approximately SEK 3.4 b. to net cash flow. Operating cash flow, which excludes this divestiture, was positive by SEK 0.9 b., compared to SEK -23.2 b. in the first quarter, excluding the sale of Juniper shares. The operating cash flow improvement reflects reduced Days Sales Outstanding (DSO) in accounts receivable, more than offsetting negative income and capital expenditure effects. Balance Sheet and Financing To restore payment readiness after the negative cash flow in the first quarter, borrowing under our Euro Medium Term Note (EMTN) program was increased by SEK 26 b. This also extended the maturity profile of the borrowings, and we thereby increased the flexibility in using our short- term credit lines. As a result, our payment readiness is now 14% of sales, compared to our target level of 7% to 10%. We believe this is favorable in the current uncertain environment. During the quarter, Moody's and Standard & Poor's lowered our credit rating from A1 to A3 and A to A-, respectively. As a consequence, SEK 22 b. borrowed in May under our extended EMTN program included conditions of increased interest rates, should our rating be lowered further by two steps or more. Our payment readiness is balanced against our equity ratio. The equity ratio decreased from 38.7% in March to 32.3% in June, affected by the dividend payment to our shareholders and the negative second quarter income. The restructuring charge and the increased borrowing also negatively affected the equity ratio. We feel reasonably comfortable with this ratio, since we now have improved the payment readiness substantially. Even though we increased borrowing substantially, net debt increased by only SEK 1.6 b. to SEK 33.3 b., reflecting the improved cash position. By these actions and through continued efforts to improve working capital efficiency and profitability, we will maintain a strong financial position to take us through these difficult times. Customer Financing We have so far made very limited customer financing commitments regarding 3G mobile systems and we continue to be conservative and selective. We have made financing commitments to only three of our 3G customers. Our outstanding exposure, which is related to 2G only, increased moderately during the quarter, partly due to changes in foreign currency exchange rates. MARKET VIEW Last year was a record year in mobile communications and operators continue to make considerable investments. However, deteriorating market conditions are causing us to lower our estimates for the mobile phones and systems markets for 2001. We anticipate that the difficult market conditions will persist for the rest of this year. In response to the slowing economy and a cautious capital market, many operators are reducing their capital expenditures by running existing networks at higher utilization levels and deferring network expansion. They are also prioritizing customer retention over growth with a strong emphasis on improving their cash flow and balance sheet. Consequently, we now expect the market growth for mobile systems in 2001 to be flat to slightly positive compared with last year. We had previously estimated 5% to 15% growth. With the exception of Western Europe, subscriber growth remains robust and our global forecast has not changed. We continue to believe the number of mobile subscribers will increase 25% to 35% this year, with 920 to 950 million subscribers by year-end. With high consumer penetration levels, reduction of mobile phone subsidies, and the pruning of non-active subscriptions, the subscriber growth rate is slowing significantly in Western Europe this year. We now expect that the volume of mobile phones sold this year will be lower than our previous estimates. The inventory build-up in the distribution channel has caused some confusion regarding market estimates. Our new estimate for sell-through (units purchased by end users) is 400 to 440 million, and for sell-in (shipments to distributors) 370 to 410 million. Our previous estimate of 430 to 480 million units was for sell-through. The development of the 3G market remains on track for volume business from 2003. A number of trial networks will be launched this year with many commercial launches starting in 2002. OUTLOOK In our first quarter report, we indicated that income before taxes in the second quarter would not improve compared with the first quarter of 2001. We did not give an indication for the full year due to poor visibility. At that time we expected a lower growth rate in systems sales and lower phone sales compared with the second quarter of 2000. Now uncertainty has increased even further, particularly in the US and Western Europe, regarding the duration and severity of the current unfavorable market environment. As a consequence, we refrain from specific guidance for the third quarter and the full year. As described in our market view, we have lowered our market size expectations for 2001 compared to our outlook after the first quarter. We expect to grow our systems business at least in pace with the market for the full year, and the Back-to-Profit program in mobile phones is expected to be completed by year-end. The joint venture with Sony is expected to have a positive result from the start. The Bluetooth and mobile platform (ASIC) activities that will be kept within Ericsson are in an investment phase and will incur losses. Under the current weaker market conditions, it will be more of a challenge to come back to a profit at the end of the year for Ericsson's total phone business. We share the views of many market observers that visibility has diminished. Our objective to generate a 10% operating margin with positive cash flow as soon as possible remains. The weaker market conditions may cause a delay for us in achieving this. We are of course monitoring the development closely, and through our Efficiency program we increase our flexibility to respond swiftly to changes up or down. We are prepared to take additional cost cutting measures to attain our profitability objectives should the market conditions continue to worsen. Parent Company information The parent company business mainly consists of corporate management and holding company functions but also includes activities performed on a commission basis by Ericsson Treasury Services AB and Ericsson Credit AB regarding internal banking and customer credit management. In the second quarter, a stock issue and a subsequent stock repurchase was carried out related to the 2001 employee stock option and stock purchase plans, decided at the Annual General Meeting. 155 million of Ericsson Series C shares were issued and later repurchased as treasury stock. These shares have been converted to Ericsson Series B and will be used for the stock option and stock purchase plans. At the first grant on May 14, 2001, 45.6 million options were granted at an exercise price of SEK 64 per share. The stock issue increased the capital stock in restricted stockholders' equity by SEK 155 m. and the repurchase of shares reduced non-restricted equity by SEK 156 m. Net sales for the period was SEK 2.7 b. and income before taxes was SEK 9.4 b. Major changes in the company's financial position were: - Increased investments in subsidiaries, SEK 18 b. - Increased short- and long-term loans to subsidiaries, SEK 26 b. These investments were financed primarily through increased internal borrowing of SEK 16 b. and increased external borrowing of SEK 25 b. At June 30, cash and short-term cash investments amounted to SEK 22 b. (26 b.). Accounting principles This interim report has been prepared in accordance with the Swedish Financial Accounting Standards Council's recommendation RR 20, Interim reports. The same accounting principles have been used as in our latest annual report. The following optional recommendations are not yet implemented: RR 1:00, RR 15, RR 16, RR 17 and RR 19. For U.S. GAAP purposes, FAS 133 "Accounting for derivative instruments and hedging activities" is adopted from January 1, 2001. Stockholm, July 20, 2001 Kurt Hellström President and CEO (Unaudited) 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, capital- and credit market developments, the ability to successfully restructure existing business, the timing of customer orders and manufacturing lead times, the changes in customer order and payment patterns, insufficient, excess or obsolete inventory, and 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. Results for interim periods are not necessarily indicative of results for the full fiscal year or any future periods Date for next report: October 26, 2001 FOR FURTHER INFORMATION PLEASE CONTACT Corporate Communications: Roland Klein, Senior Vice President, Corporate Communications Phone: +44 20 7451 5660, +44 7776 162 997 E-mail: roland.klein@clo.ericsson.se Investors: Gary Pinkham, Vice President, Investor Relations Phone: +1 212 685 4030 E-mail: investorrelations@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 Maria Bernström, Director, Investor Relations Phone: +46 8 719 5340, +46 70 533 4750 E-mail: maria.bernstrom@lme.ericsson.se Lotta Wiklund, Manager, Investor Relations Phone: +44 0 20 745 15664, +44 7887 628 707 E-mail: lotta.wiklund@clo.ericsson.se Glenn Sapadin, Manager, Investor Relations Phone: +1 212 685 4030 E-mail: investorrelations@ericsson.com Media: Pia Gideon, Vice President, External Relations Phone: +46 8 719 2864, +46 70 519 2864 E-mail: pia.gideon@lme.ericsson.se Mads Madsen, Director, Media Relations Phone: +46 8 719 0626, +46 70 666 2903 E-mail: mads.madsen@lme.ericsson.se Åse Lindskog, Director, Media Relations Phone: +46 719 9725, +46 730 244 872 E-mail: ase.lindskog@lme.ericsson.se ERIC SSON CONSOLIDATED INCOME STATEMENT Apr-June Jan-June SEK 2001 2000 Change 2001 2000 Change mill ion Net 62,780 65,033 -3% 118,712 124,118 -4% sale s Cost -44,482 -39,292 13% -82,837 -73,966 12% of sale s Rest -5,000 - -5,000 - ruct urin g cost s Gros 13,298 25,741 -48% 30,875 50,152 -38% s marg in Gros 21.2% 39.6% 26.0% 40.4% s marg in as perc enta ge of net sale s Rese -12,438 -10,124 23% -23,009 -18,633 23% arch and deve lopm ent and othe r tech nica l expe nses Sell -7,397 -7,418 0% -15,795 -15,709 1% ing expe nses Admi -3,482 -3,455 1% -6,789 -6,329 7% nist rati ve expe nses Rest -10,000 - -10,000 - ruct urin g cost s Oper -33,317 -20,997 59% -55,593 -40,671 37% atin g expe nses Oper 53.1% 32.3% 46.8% 32.8% atin g expe nses as perc enta ge of net sale s Othe 783 8,159 6,687 9,814 r oper atin g reve nues Shar -25 94 -98 77 e in earn ings of asso ciat ed comp anie s Oper -19,261 12,997 -248% -18,129 19,372 -194% atin g inco me *) Oper -30.7% 20.0% -15.3% 15.6% atin g marg in as perc enta ge of net sale s Fina 436 476 -8% 1,477 1,253 18% ncia l inco me Fina -1,217 -744 64% -2,589 -1,701 52% ncia l expe nses Inco -20,042 12,729 -257% -19,241 18,924 -202% me afte r fina ncia l item s Mino -285 -174 64% -480 -303 58% rity inte rest in inco me befo re taxe s Inco -20,327 12,555 -262% -19,721 18,621 -206% me befo re taxe s Taxe 6,098 -2,401 -354% 5,916 -4,221 -240% s Net -14,229 10,154 -240% -13,805 14,400 -196% inco me Earn -1.80 1.29 -1.75 1.83 ings per shar e, basi c (SEK ) Earn -1.81 1.28 -1.75 1.82 ings per shar e, dilu ted (SEK ) *) Of whic h item s affe ctin g comp arab ilit y -39 4,738 3 4,738 Non- oper atio nal capi tal gain s/lo sses , net - - 5,453 - Capi tal gain , Juni per - 1,100 - 1,100 Pens ion refu nd -15,000 - -15,000 - Rest ruct urin g cost s -15,039 5,838 -9,544 5,838 Tota l -4,222 7,159 -8,585 13,534 Adju sted oper atin g inco me -6.7% 11.0% -7.2% 10.9% Adju sted oper atin g marg in (%) -5,288 6,717 -10,177 12,783 Adju sted inco me befo re taxe s ERICSSON CONSOLIDATED BALANCE SHEET June 30 March 31 Dec 31 June 30 SEK 2001 2001 2000 2000 millio n Fixed assets Intang 13,644 13,425 12,833 10,463 ible assets Tangib 24,383 23,590 22,378 24,396 le assets Financ ial assets 2,635 2,796 2,790 2,755 Equity in associ ated compan ies 3,049 2,893 2,484 2,217 Other invest ments 3,233 4,016 6,364 6,097 Long- term custom er financ ing 7,429 6,064 3,657 3,108 Other long- term receiv ables Total 54,373 52,784 50,506 49,036 fixed assets Curren t assets Invent 31,975 48,521 43,933 40,777 ories Receiv ables 71,927 76,108 76,240 69,680 Accoun ts receiv able - trade and short- term custom er financ ing 53,510 51,827 44,029 37,075 Other receiv ables Short- 36,235 20,878 35,606 27,643 term cash invest ments, cash and bank Total 193,647 197,334 199,808 175,175 curren t assets Total 248,020 250,118 250,314 224,211 assets Stockh 76,626 93,645 91,686 83,178 olders ' equity Minori 3,481 3,047 2,764 2,127 ty intere st in equity of consol idated subsid iaries Provis 35,116 26,565 27,650 26,063 ions Long- 47,462 20,812 22,294 21,387 term liabil ities Curren 85,335 106,049 105,920 91,456 t liabil ities Total 248,020 250,118 250,314 224,211 stockh olders ' equity , provis ions and liabil ities *) *) Of 69,581 52,593 46,563 37,765 which intere st- bearin g provis ions and liabil ities Assets 132 234 435 - pledge d as collat eral Contin 15,810 12,320 11,184 - gent liabil ities ERICSSON CONSOLIDATED STATEMENT OF CASH FLOWS Jan- Jan- Jan- June Mar June SEK 2001 2001 2000 millio n Net -11,149 -6,743 11,229 income and adjust ments to reconc ile net income to cash Change -7,119 - - s in 13,235 15,827 operat ing net assets Cash - - -4,598 flow 18,268 19,978 from operat ing activi ties Acquis 8,500 5,058 9,528 itions /sales of other invest ments, net Other -3,666 -2,803 -3,891 invest ing activi ties Cash 4,834 2,255 5,637 flow from invest ing activi ties Cash - - 1,039 flow 13,434 17,723 before financ ing activi ties Divide -4,098 -2 -4,066 nds paid Other 17,688 3,614 1,694 financ ing activi ties Cash 13,590 3,612 -2,372 flow from financ ing activi ties Effect 473 -617 -32 of exchan ge rate change s on cash Net 629 - -1,365 change 14,728 in cash Cash 35,606 35,606 29,008 and cash equiva lents, beginn ing of period Cash 36,235 20,878 27,643 and cash equiva lents, end of period CHANGES IN STOCKHOLDERS' EQUITY Jan- Jan- Jan- June March June SEK 2001 2001 2000 millio n Openin 91,686 91,686 69,176 g balanc e Stock 155 - - issue Conver 9 8 1,840 sion of debent ures Repurc -156 - -330 hase of own stock Divide -4,063 - -3,919 nds paid Gains - - 1,963 on sale of own option s and conver tible debent ures Change 2,452 1,475 148 s in cumula tive transl ation adjust ments Net - 424 14,400 income 13,805 Other 348 52 -100 change s Closin 76,626 93,645 83,178 g balanc e ERIC SSON OTHE R INFO RMAT ION Jan-June Jan- Jan- Change March June vs SEK 2001 2001 2000 last mill year ion Numb er of shar es and earn ings per shar e Numb 8,065 7,910 7,909 er of shar es outs tand ing, basi c, end of peri od (mil lion ) Numb 8,153 7,987 7,998 er of shar es outs tand ing, dilu ted, end of peri od (mil lion ) Numb 157 2 2 er of trea sury shar es , end of peri od (mil lion ) Aver 7,909 7,908 7,869 age numb er of shar es, basi c (mil lion ) Aver 7,909** 7,985 7,993 age numb er of shar es, dilu ted (mil lion ) Earn -1.75 0.05 1.83 ings per shar e, basi c (SEK ) Earn -1.75 0.06 1.82 ings per shar e, dilu ted (SEK )* Earn -1.74 -0.29 1.80 ings per shar e, dilu ted, per U.S. GAAP (SEK ) Rati os Equi 32.3% 38.7% 38.0% ty rati o Capi 1.6 1.5 2.0 tal turn over (tim es) Acco 3.3 3.0 3.9 unts rece ivab le turn over (tim es) Inve 4.4 3.3 4.5 ntor y turn over (tim es) Othe r Rese arch and deve lopm ent and othe r tech nica l expe nses (inc 23,454 11,155 19,147 22% ludi ng cost s rela ted to cust omer orde rs) - As 20% 20% 15% perc enta ge of Net Sale s Addi 6,062 2,797 5,468 11% tion s to tang ible fixe d asse ts - Of 2,162 1,023 2,588 -16% whic h in Swed en Tota 3,593 2,283 3,934 -9% l depr ecia tion on tang ible and inta ngib le asse ts - Of 483 226 300 61% whic h good will Orde 136,665 75,499 144,195 -5% rs book ed Expo 63,673 36,457 76,394 -17% rt from Swed en Net 33,347 31,715 14,412 131% debt * Calc ulat ion of earn ings per shar e, dilu ted Net Calculation 424 14,400 inco me Inte not 44 115 rest applicable on conv erti ble debe ntur es, net afte r tax Adju See below 468 14,515 sted ** net inco me Aver 7,985 7,993 age numb er of shar es, dilu ted (mil lion ) Earn 0.06 1.82 ings per shar e, dilu ted (SEK ) ** Potential ordinary shares are not dilutive when their conversion to ordinary shares would increase earnings per share. ORDERS BOOKED BY SEGMENT BY QUARTER (SEK m.) 2000 restated for comparability 2000 2001 Year to date 0003 0006 0009 0012 0103 0106 Systems 57,944 103,50 153,219 213,164 62,583 113,286 3 of which Mobile 48,471 85,757 125,738 175,609 52,625 94,841 Systems 9,473 17,746 27,481 37,555 9,958 18,445 Multi-Service Networks Phones 14,562 27,988 42,113 56,937 7,178 14,813 Other operations 11,266 19,991 27,665 35,751 8,239 13,764 Less : Intersegment -4,298 -7,287 -10,131 -13,508 -2,501 -5,198 sales Total 79,474 144,19 212,866 292,344 75,499 136,665 5 Change 0103 0106 Systems 8% 9% of which Mobile 9% 11% Systems 5% 4% Multi-Service Networks Phones -51% -47% Other operations -27% -31% Less : Intersegment -42% -29% sales Total -5% -5% 2000 2001 Isolated quarters Q1 Q2 Q3 Q4 Q1 Q2 Systems 57,944 45,559 49,716 59,945 62,583 50,703 of which Mobile 48,471 37,286 39,981 49,871 52,625 42,216 Systems 9,473 8,273 9,735 10,074 9,958 8,487 Multi-Service Networks Phones 14,562 13,426 14,125 14,824 7,178 7,635 Other operations 11,266 8,725 7,674 8,086 8,239 5,525 Less : Intersegment -4,298 -2,989 -2,844 -3,377 -2,501 -2,697 sales Total 79,474 64,721 68,671 79,478 75,499 61,166 Change Q1 Q2 Systems 8% 11% of which Mobile 9% 13% Systems 5% 3% Multi-Service Networks Phones -51% -43% Other operations -27% -37% Less : Intersegment -42% -10% sales Total -5% -5% NET SALES BY SEGMENT BY QUARTER (SEK m.) 2000 restated for comparability 2000 2001 Year to date 0003 0006 0009 0012 0103 0106 Systems 38,910 85,343 133,440 194,747 44,127 94,843 of which Mobile 32,481 70,339 109,061 158,083 35,336 76,356 Systems 6,429 15,004 24,379 36,664 8,791 18,487 Multi-Service Networks Phones 14,794 28,145 42,473 56,279 7,170 15,317 Other operations 9,297 17,801 25,888 35,927 7,249 14,162 Less : Intersegment -3,916 -7,171 -10,341 -13,384 -2,614 -5,610 sales Total 59,085 124,118 191,460 273,569 55,932 118,712 Change 0103 0106 Systems 13% 11% of which Mobile 9% 9% Systems 37% 23% Multi-Service Networks Phones -52% -46% Other operations -22% -20% Less : Intersegment -33% -22% sales Total -5% -4% 2000 2001 Isolated quarters Q1 Q2 Q3 Q4 Q1 Q2 Systems 38,910 46,433 48,097 61,307 44,127 50,716 of which Mobile 32,481 37,858 38,722 49,022 35,336 41,020 Systems 6,429 8,575 9,375 12,285 8,791 9,696 Multi-Service Networks Phones 14,794 13,351 14,328 13,806 7,170 8,147 Other operations 9,297 8,504 8,087 10,039 7,249 6,913 Less : Intersegment -3,916 -3,255 -3,170 -3,043 -2,614 -2,996 sales Total 59,085 65,033 67,342 82,109 55,932 62,780 Change Q1 Q2 Systems 13% 9% of which Mobile 9% 8% Systems 37% 13% Multi-Service Networks Phones -52% -39% Other operations -22% -19% Less : Intersegment -33% -8% sales Total -5% -3% ADJUSTED OPERATING INCOME AND OPERATING MARGIN BY SEGMENT BY QUARTER (SEK m.) 2000 restated for comparability 2000 2001 Year to date 0003 0006 0009 0012 0103 0106 Systems 5,641 15,280 23,392 32,641 1,808 2,382 Phones 569 -1,544 -5,517 - -5,722 -10,350 15,613 Other operations 578 1,058 1,550 1,579 -118 25 Unallocated* -413 -1,260 -1,171 -1,858 -331 -642 Total 6,375 13,534 18,254 16,749 -4,363 -8,585 Items affecting comparability: - Non-operational - 4,738 6,164 5,933 42 3 capital gains/losses, net - Capital gain Juniper - - - 15,383 5,453 5,453 Networks - Pension refund - 1,100 1,100 1,100 - - - Restructuring costs - - - -8,000 - -15,000 2000 2001 As percentage of Net 0003 0006 0009 0012 0103 0106 Sales Systems 14% 18% 18% 17% 4% 3% Phones 4% -5% -13% -28% -80% -68% Other operations 6% 6% 6% 4% -2% 0% Total 11% 11% 10% 6% -8% -7% 2000 2001 Isolated quarters Q1 Q2 Q3 Q4 Q1 Q2 Systems 5,641 9,639 8,112 9,249 1,808 574 Phones 569 -2,113 -3,973 - -5,722 -4,628 10,096 Other operations 578 480 492 29 -118 143 Unallocated* -413 -847 89 -687 -331 -311 Total 6,375 7,159 4,720 -1,505 -4,363 -4,222 Items affecting comparability: - Non-operational - 4,738 1,426 -231 42 -39 capital gains/losses, net - Capital gain Juniper - - - 15,383 5,453 - Networks - Pension refund - 1,100 - - - - - Restructuring costs - - - -8,000 - -15,000 2000 2001 As percentage of Net Q1 Q2 Q3 Q4 Q1 Q2 Sales Systems 14% 21% 17% 15% 4% 1% Phones 4% -16% -28% -73% -80% -57% Other operations 6% 6% 6% 0% -2% 2% Total 11% 11% 7% -2% -8% -7% * "Unallocated" consists mainly of costs for corporate staffs, certain goodwill amortization and non-operational gains and losses ORDERS BOOKED BY MARKET AREA BY QUARTER (SEK m.) 2000 2001 Year to date 0003 0006 0009 0012 0103 0106 Western Europe* 25,048 50,870 71,807 105,684 29,042 47,697 Central- and 17,388 24,503 32,104 40,972 11,273 17,606 Eastern Europe, Middle East & Africa North America 9,148 19,082 27,326 37,977 7,320 13,183 Latin America 9,695 19,312 33,053 44,959 12,638 22,723 Asia Pacific 18,195 30,428 48,576 62,752 15,226 35,456 Total 79,474 144,195 212,866 292,344 75,499 136,665 * Of which Sweden 2,924 6,010 7,983 9,876 1,998 5,135 * Of which EU 23,261 47,523 67,194 99,951 27,565 45,356 Change 0103 0106 Western Europe* 16% -6% Central- and -35% -28% Eastern Europe, Middle East & Africa North America -20% -31% Latin America 30% 18% Asia Pacific -16% 17% Total -5% -5% * Of which Sweden -32% -15% * Of which EU 19% -5% 2000 2001 Isolated quarters Q1 Q2 Q3 Q4 Q1 Q2 Western Europe* 25,048 25,822 20,937 33,877 29,042 18,655 Central- and 17,388 7,115 7,601 8,868 11,273 6,333 Eastern Europe, Middle East & Africa North America 9,148 9,934 8,244 10,651 7,320 5,863 Latin America 9,695 9,617 13,741 11,906 12,638 10,085 Asia Pacific 18,195 12,233 18,148 14,176 15,226 20,230 Total 79,474 64,721 68,671 79,478 75,499 61,166 * Of which Sweden 2,924 3,086 1,972 1,893 1,998 3,137 * Of which EU 23,261 24,262 19,671 32,757 27,565 17,791 Change Q1 Q2 Western Europe* 16% -28% Central- and -35% -11% Eastern Europe, Middle East & Africa North America -20% -41% Latin America 30% 5% Asia Pacific -16% 65% Total -5% -5% * Of which Sweden -32% 2% * Of which EU 19% -27% NET SALES BY MARKET AREA BY QUARTER (SEK m.) 2000 2001 Year to date 0003 0006 0009 0012 0103 0106 Western Europe* 23,578 47,011 70,090 100,234 18,024 37,154 Central- and 7,323 16,799 25,850 37,701 8,187 17,315 Eastern Europe, Middle East & Africa North America 8,549 19,263 27,704 35,193 7,186 14,961 Latin America 7,781 17,334 28,953 44,118 8,467 18,482 Asia Pacific 11,854 23,711 38,863 56,323 14,068 30,800 Total 59,085 124,118 191,460 273,569 55,932 118,712 * Of which Sweden 2,380 4,371 6,704 8,732 1,628 3,518 * Of which EU 22,052 44,031 65,754 94,293 17,046 35,020 Change 0103 0106 Western Europe* -24% -21% Central- and 12% 3% Eastern Europe, Middle East & Africa North America -16% -22% Latin America 9% 7% Asia Pacific 19% 30% Total -5% -4% * Of which Sweden -32% -20% * Of which EU -23% -20% 2000 2001 Isolated quarters Q1 Q2 Q3 Q4 Q1 Q2 Western Europe* 23,578 23,433 23,079 30,144 18,024 19,130 Central- and 7,323 9,476 9,051 11,851 8,187 9,128 Eastern Europe, Middle East & Africa North America 8,549 10,714 8,441 7,489 7,186 7,775 Latin America 7,781 9,553 11,619 15,165 8,467 10,015 Asia Pacific 11,854 11,857 15,152 17,460 14,068 16,732 Total 59,085 65,033 67,342 82,109 55,932 62,780 * Of which Sweden 2,380 1,991 2,333 2,028 1,628 1,890 * Of which EU 22,052 21,980 21,723 28,539 17,046 17,974 Change Q1 Q2 Western Europe* -24% -18% Central- and 12% -4% Eastern Europe, Middle East & Africa North America -16% -27% Latin America 9% 5% Asia Pacific 19% 41% Total -5% -3% * Of which Sweden -32% -5% * Of which EU -23% -18% EXTERNAL ORDERS BOOKED BY MARKET AREA AND SEGMENT (SEK m.) Share Year to date 2001 Systems Phones Other Total of Total Western Europe 35,787 5,036 6,874 47,697 35% Central- and Eastern Europe, 15,865 1,185 556 17,606 13% Middle East & Africa North America 10,410 2,710 63 13,183 10% Latin America 19,961 1,876 886 22,723 16% Asia Pacific 31,040 3,445 971 35,456 26% Total 113,063 14,252 9,350 136,665 100% Share of Total 83% 10% 7% 100% Change compared to last year Systems Phones Other Total (%) Western Europe 24% -58% -31% -6% Central- and Eastern Europe, -25% -67% N/A -28% Middle East & Africa North America -16% -49% -95% -31% Latin America 26% -27% -5% 18% Asia Pacific 26% -23% -25% 17% Total 10% -49% -30% -5% EXTERNAL NET SALES BY MARKET AREA AND SEGMENT (SEK m.) Share Year to date 2001 System Phones Other Total of s Total Western Europe 26,665 4,730 5,759 37,154 31% Central- and Eastern Europe, 15,372 1,165 778 17,315 15% Middle East & Africa North America 10,337 3,884 740 14,961 13% Latin America 16,053 1,766 663 18,482 15% Asia Pacific 26,229 3,415 1,156 30,800 26% Total 94,656 14,960 9,096 118,712 100% Share of Total 80% 12% 8% 100% Change compared to last year System Phones Other Total (%) s Western Europe -3% -61% -22% -21% Central- and Eastern Europe, 26% -68% -19% 3% Middle East & Africa North America -21% -26% -21% -22% Latin America 15% -19% -43% 7% Asia Pacific 45% -27% 26% 30% Total 12% -46% -20% -4% NUMBER OF EMPLOYEES BY SEGMENT BY QUARTER 2000 2001 0003 0006 0009 0012 0103 0106 Systems 64,836 66,207 68,571 71,102 75,081 76,636 Phones 17,290 17,710 18,137 16,840 14,461 7,837 Other 19,167 16,324 15,602 16,059 16,453 14,005 operations Unallocated 1,030 1,076 1,084 1,128 1,264 1,343 Total 102,323 101,317 103,394 105,129 107,259 99,821 Change 0103 0106 Systems 16% 16% Phones -16% -56% Other -14% -14% operations Unallocated 23% 25% Total 5% -1% TOP 10 MARKETS IN NET SALES AND ORDERS BOOKED Year to date 2001 Net sales Orders booked Share of Share of Top 10 total net Top 10 total orders Markets sales Markets booked China 12% China 13% United 11% United 9% States States Brazil 6% Mexico 7% United 6% Brazil 6% Kingdom Mexico 5% Germany 6% Italy 5% Italy 6% Japan 4% Spain 6% Spain 4% United 5% Kingdom Turkey 4% Japan 4% Germany 3% Sweden 4% ------------------------------------------------------------ This information was brought to you by Waymaker http://www.waymaker.net The following files are available for download: http://www.waymaker.net/bitonline/2001/07/20/20010720BIT00010/bit0001.doc http://www.waymaker.net/bitonline/2001/07/20/20010720BIT00010/bit0001.pdf