Ericsson (SE) – Ericsson reports first quarter results

Ericsson (SE) – Ericsson reports first quarter results

Ericsson reports first quarter results

Sales SEK 49.6 (44.2) b, up 5% for comparable units in constant currencies
Operating income 1) before joint ventures SEK 4.7 (3.4) b
Operating margin 1) before joint ventures 9.5% (7.6%)
Share in earnings from joint ventures SEK -2.2 (0.9) b
Income after financial items 1) SEK 3.3 (4.5) b
Restructuring charges SEK 0.7 (0.8) b, excluding joint ventures
Net income SEK 1.8 (2.6) b
Earnings per share SEK 0.54 (0.83)
Cash flow 2) 3) SEK -1.7 (2.8) b, including SEK 1.5 b pension trusts payment

1) Excluding restructuring charges.
2) Excluding cash outlays for restructuring of SEK 1.2 (0.3) b
3) Excluding dividend from Sony Ericsson of SEK 0.0 (2.2) b

CEO COMMENTS

„We have started the year with good growth ahead of the market and a positive margin trend but with a weaker cash flow,” said Carl-Henric Svanberg, President and CEO of Ericsson (NASDAQ:ERIC). „Sales of network infrastructure are stable and the demand for professional services is growing. We have won several strategic contracts during the quarter, including 3G for China Unicom, 4G for Verizon Wireless and managed services for Vodafone UK.

The effects of the global economic recession on the global mobile network market are so far limited. We have seen operators, in a few markets where local currencies have depreciated dramatically, postpone investments. Some operators are also more cautious with longer-term investments in fixed networks, such as rollout of fiber networks. Most operators, however, have healthy financial positions, there is a strong traffic growth and the networks are fairly loaded.

It remains difficult to more precisely predict how operators will act in the current environment. However, investments in wireless networks largely continues, and rollouts of new networks and new technologies accelerate in markets such as the US, China and India. Telecom plays a critical role for growth and development of societies, and fixed and mobile broadband rollouts are now on political agendas in most countries.

Our cost reduction activities are running according to plan, targeting annual savings of SEK 10 b. from the second half of 2010. With our business mix, worldwide presence and early decision to cut costs, we are well positioned to strengthen our leadership in the present turbulent economic environment.

Our joint ventures, Sony Ericsson and ST-Ericsson, are affected by the economic downturn and the dramatic decline in consumer demand for handsets. Extensive programs to reduce costs are ongoing to adjust to the current market environment and restore profitability,” concluded Carl-Henric Svanberg.

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ST-Ericsson reports financial results[1] for its first two months of operation

ST-Ericsson reports financial results[1] for its first two months of operation

50/50 joint venture between Ericsson and STMicroelectronics started operations on February 2nd 2009, creating a new wireless-semiconductor industry leader
Net sales $391 million
Operating loss $98 million
$230 million of annualized savings expected from a new program of resources and operations re-alignment to reflect outcome of the integration as well as current unfavorable business environment
Continuous focus on innovation and strengthening of strategic partnerships with customers since the launch of the company in February 2009

Geneva – Switzerland -April 29, 2009 – ST-Ericsson, a joint venture of STMicroelectronics (NYSE: STM) and Ericsson (NASDAQ:ERIC), reported financial results for its first two months of operation from February 2nd 2009.

President and CEO Alain Dutheil commented: „Our sales development in the quarter reflects the broad-based economic downturn that has led to weaker consumer demand for handsets and put pressure on the overall wireless semiconductor industry.
Even in such a challenging climate, during the first quarter of 2009 we confirmed our number two position in the market, we renewed our focus on innovation and we strengthened our partnership with key customers.
We were the first to consolidate in our industry, creating a new global leader in wireless platforms and semiconductors, and we are currently executing on an alignment of our operations that will allow us to shape the long term success of the company, while creating a sustainable cost structure for the short and medium term.
A more efficient and integrated product strategy, based on the future convergence of our 3G roadmap and on our continued commitment on 2G/EDGE and connectivity, as well as a strong focus on next generation access technologies, will help us achieve our short and long term objectives and continue to offer our customers a complete and innovative portfolio of solutions.”

FINANCIAL HIGHLIGHTS

First Quarter 2009 actual (Feb 2 – March 28 2009)

$ millionsFeb – March 2009
Income Statement
NET SALES391
OPERATING INCOME/(LOSS) (98) [2]
NET INCOME/(LOSS)(89)

Net sales in the two months of operations reflected the economic downturn that led to weaker consumer demand especially in Europe, mainly in the feature phones segment, reinforced by overall inventory reduction in the handset supply chain.
The operating loss of $98 million was a consequence both of the level of sales and of price pressure on margins, partially offset by already planned reductions in operating expenses related to the cost synergies program previously announced by ST-NXP Wireless in November 2008. Net cash [3] was $358 million at the end of Q109.

Alignment of operations and resources
A restructuring plan is being launched for immediate execution and is due to be completed by the second quarter of 2010. This plan is incremental to the $250 million cost synergies program announced by ST-NXP Wireless in November 2008.
Annualized savings of the new restructuring plan are expected to be approximately $230 million upon completion. Restructuring costs are estimated in the range of $70 – 90 million, of which the majority is expected to be recorded during the second quarter of 2009.

The main assumptions of the restructuring plan are: a re-alignment of product roadmaps to create a more agile and cost efficient R&D organization; and a reduction in workforce of 1,200 worldwide to reflect further integration activities following the merger, lower sales volumes and limited visibility on the timing of market recovery.

Market evolution
„In view of the continued uncertainty of the global economy and in accordance with published industry forecasts, we see a continued challenging 2009 for our industry” said Alain Dutheil. „However, we believe that the destocking phase is substantially over, even if we have yet to see signs of a broad-based pick-up of demand in our industry”.

Q1 2009 Highlights- Products, Technology and Wins
In February 2009 the company announced its cooperation with Nokia to provide a Next-Generation Smartphone Platform for Symbian Foundation, with a reference platform based on ST-Ericsson’s U8500 single chip.
Also in February the company announced its collaboration with ARM to demonstrate the world’s first Symmetric Multi Processing mobile platform technology running on Symbian OS.
In March, the company launched fully integrated single-chip solutions for feature-rich, low-cost handsets. ST-Ericsson’s 4910 and 4908 EDGE platforms combine the industry’s highest level of integration and cost-efficiency, with both digital and analog basebands, RF transceiver and power management unit (PMU) in a single chip.
A next-generation mobile audio digital-to-analog converter (DAC) for the mobile music market was also launched. ST-Ericsson’s STw5211 further extends the company’s wide portfolio of audio solutions with enhanced performance.

PRO-FORMA INFORMATION[4]

Q1 09
Pro-formaQ4 08
Pro-formaQ3 08
Pro-formaQ2 08
Pro-formaQ1 08
Pro-forma
NET SALES5627461,003966862
OPERATING INCOME/ (LOSS)(179)(127)(59)(94)(121)

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