Table of Contents

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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

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FORM 6-K

 

REPORT OF FOREIGN ISSUER

 

Pursuant to Rule 13a-16 or 15d-16 of

the Securities Exchange Act of 1934

 

July 21, 2004

 

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LM ERICSSON TELEPHONE COMPANY

(Translation of registrant’s name into English)

 

16483 Stockholm, Sweden

(Address of principal executive offices)

 

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Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.  

Form 20-F  x  Form 40-F  ¨

 

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.  Yes  ¨  No  x

 

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Announcement of LM Ericsson Telephone company, dated July 21, 2004, regarding Second Quarter Report 2004.

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Table of Contents

		Second quarter report 2004 July 21, 2004

 

Ericsson reports solid performance

 

Second quarter summary

 

•	Net sales SEK 32.6 (27.6) b., six months SEK 60.7 (53.5) b.

 

•	Gross margin 47.8% (35.1%)1)

 

•	Operating margin 22.8% (0.8%)2), excluding positive non-recurring effect of SEK 0.3 b.

 

•	Income after financial items SEK 7.8 (0.2) b.2)

 

•	Net income SEK 5.3 (-2.7) b., six months SEK 8.3 (-7.0) b.

 

•	Earnings per share SEK 0.33 (-0.17), six months SEK 0.52 (-0.44)

 

		Second quarter									First quarter
SEK b.		2004			2003			Change			2004			Change
Orders booked, net		33.1			28.3			17	%		33.0			0	%
Net sales		32.6			27.6			18	%		28.1			16	%
Gross margin (%)		47.8	%		35.1	%1)		—			44.7	%		—
Operating income		7.7	3)		0.2	2)		—			4.5			—
Income after financial items		7.8	3)		0.2	2)		—			4.3			—
Net income		5.3			-2.7			—			3.0			—
Earnings per share		0.33			-0.17			—			0.19			—
Cash flow before financing activities		4.3			5.1			—			2.9			—

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1)	Adjusted for restructuring charges in the second quarter 2003 SEK 1.1 b.

2)	Adjusted for restructuring charges in the second quarter 2003, net, SEK 3.8 b.

3)	Includes positive non-recurring effect of SEK 0.3 b.

 

Orders booked in the quarter grew by 17% year-over-year and were flat sequentially at SEK 33.1 (28.3) b. Net sales in the quarter grew by 18% year-over-year to SEK 32.6 (27.6) b. and 16% sequentially as a result of ongoing 3G rollouts, continued GSM capacity expansions as well as upgrades to EDGE. Currency exchange effects negatively impacted sales by 6% year-over-year.

 

Gross margin increased sequentially to 47.8% (35.1%) due to continued focus on operational excellence, higher volumes and a favorable product mix. The announced operating expense reduction target of an annualized run rate of SEK 33 b., was achieved at the end of this quarter, one quarter earlier than originally anticipated.

 

Income after financial items was SEK 7.8 (0.2) b. compared to SEK 4.3 b. in the first quarter, including a non-recurring positive effect of SEK 0.3 b. Net currency exchange effects, compared to rates one year ago, have had a negative impact of SEK -0.7 b. on operating income in the quarter.

 

Cash flow before financing was SEK 4.3 (5.1) b. Continued focus on workflow improvements has kept working capital close to flat despite the sales growth. The financial position improved consequently, with a net of financial assets and liabilities, i.e. net cash, of SEK 31.7 b.

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CEO COMMENTS

 

“Confidence has returned to the industry. 3G rollouts, GSM capacity expansions as well as EDGE upgrades creates momentum for us,” says Carl-Henric Svanberg, president and CEO of Ericsson. “With new and expansion contracts across all regions we are capitalizing on our technology leadership, our large installed base as well as our particularly strong position in high growth markets. Our competitive services offering is gaining operator recognition with eight new contracts for managed services and hosting.

 

We show healthy development in all technologies. Our organization’s commitment to drive operational excellence creates strong results. Higher than anticipated sales drove an encouraging bottom line performance and it is our continued ambition to deliver best in class margins. We have now reached a point where targeted investments in R&D and customer support should further strengthen our leading position and ability to drive profitable growth.

 

The pace of 3G network rollout is accelerated by the growing number of handsets available. Experience from the introductory phase of WCDMA/CDMA2000 puts richer consumer offerings and enhanced system capacity in focus. We will leverage our 3G leadership by the introduction of Ericsson WCDMA Evolved, with HSDPA capabilities. This is a logical evolutionary step that will offer true mobile broadband with speeds of up to 14 Mbit/s.

 

It is clear that consumers want to use the same services irrespective of whether they are accessing them from a fixed or mobile network. Our end-to-end solutions, based on converged services and networks, support our customers in meeting these consumer demands. Our long experience in wireline, our leading wireless technology and our IP knowledge, are essential components in driving the convergence necessary to achieve ease-of-use and reachability for private as well as professional users.

 

We will reinforce our position as the leading infrastructure provider in the telecom industry through understanding of consumer needs, continued R&D leadership, operational excellence and by being the most innovative and responsive partner to our customers,” concludes Carl-Henric Svanberg.

 

MARKET VIEW

 

Drivers for growth in both developed markets and in high growth markets continue to be positive. The traffic is steadily increasing as a result of new and richer services being offered and more competitive tariff schemes besides the continuously growing number of subscribers. Operators are increasing their focus on business development and activities aimed at growing revenues.

 

In developed markets, which are primarily capacity driven, continued 3G deployments, upgrades of GSM networks and rapid build-out of broadband access are driving the development. In addition there is a clear trend toward wireless/wireline convergence based on all-IP technologies. This will create efficiency gains, but equally important enable the new seamless services demanded by consumers.

 

In high growth markets we see continued strong development both in subscriber additions and in usage. Investments in low cost coverage in these markets continue to be a strong driver. The cost efficient Ericsson Expander solution has been positively received and opens new business opportunities primarily in developing areas with a number of contracts signed in several countries around the world. In these markets there is also an often underestimated number of advanced users demanding services equivalent to those in developed markets.

 

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In Europe commercial launches of 3G is ongoing. By year-end WCDMA will be commercially launched across all of Western Europe. In addition, most operators in Europe are in the process of deploying EDGE. Though average minutes of use are substantially below the rest of the world, more attractive tariff schemes and an increasing number of new services should stimulate traffic growth.

 

The North American market shows healthy development. Along with convergence, operators in North America early on recognized the need to meet consumer demands for seamless services and the benefits of 3G technology. The consolidation among operators continues. The Cingular/AWS merger will create a strong player, however, the regulatory process is creating a normal temporary slow down in the AWS’ investments.

 

The subscriber growth in the Asia Pacific region continues, led by China and India, where India is on track to become the world’s second largest market in number of mobile subscriptions. In parallel with the ongoing 3G license discussions in China, demand for coverage and capacity expansions in 2G and 2.5G networks remains strong. 3G is being rolled out in a number of markets in South East Asia along with continued demand for 2G and 2.5G.

 

Ten new WCDMA networks were commercially launched during the quarter, reaching a total of 37. During the quarter the number of WCDMA subscriptions grew from 4.4 million to almost 7 million. The number of CDMA2000 1X subscriptions has now reached more than 100 million.

 

Worldwide subscription penetration is 24% with a total of 1.5 billion subscriptions, of which close to 1.1 billion is in GSM. The global number of subscriptions has been estimated to pass two billion early 2007 with most of the increase coming from high growth markets. Worldwide subscription penetration in 2007 is estimated to reach 30%.

 

OUTLOOK

 

The traffic growth in the world’s mobile networks should generate a slight to moderate growth in the global mobile systems market. In addition to this underlying growth there is an effect from operators catching up on previous years’ limited investments. This effect continues but should abate over time. All estimates refer to 2004 compared to 2003 and are measured in USD.

 

In the first quarter report 2004 we stated “we estimate that the global mobile systems market in 2004, measured in USD, will show slight to moderate growth, compared to 2003. There is also an element of operators catching up on previous years’ limited investments.”

 

We maintain our view that the addressable market for professional services, also measured in USD, is expected to continue to show good growth.

 

With our technology leadership and global presence we are well positioned to take advantage of these market opportunities.

 

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CONSOLIDATED ACCOUNTS

 

FINANCIAL REVIEW

 

All comparative numbers are stated excluding restructuring charges.

 

Income

 

Orders booked were SEK 33.1 (28.3) b., an increase by 17% year-over-year, driven by generally strong development, especially in Italy, Russia, South East Asia and Brazil. Sequentially, orders booked were flat reflecting continued good demand in Western Europe, Asia Pacific and Latin America. However, North America showed a weaker development both year-over-year and sequentially due to operator consolidation affecting short-term investment plans.

 

Sales were SEK 32.6 (27.6) b., an increase of 18% year-over-year. All regions were strong, especially high growth markets such as India, China and Mexico. Currency exchange effected sales negatively by 6%. Sequentially, sales increased by 16% driven by overall strong demand.

 

Gross margin increased sequentially by 3.1 percentage points to 47.8% (35.1%), due to continued focus on operational excellence, higher volumes and a favorable product mix.

 

Operating expenses amounted to SEK 9.2 (9.7) b. The annualized run rate was SEK 34 (42) b., down from SEK 35 b. in the previous quarter. The announced operating expense reduction target of an annualized run rate of SEK 33 b., was achieved at the end of this quarter, one quarter earlier than originally anticipated.

 

Operating income was SEK 7.7 (0.2) b. compared to SEK 4.5 b. the previous quarter, including a non-recurring positive effect of SEK 0.3 b. due to the closure of a subsidiary. Operating margin was 23.7% (0.8%). Income after financial items was SEK 7.8 (0.2) b. compared to SEK 4.3 b. in the first quarter.

 

Net effects of currency exchange differences on operating income compared to the rates one year ago were SEK -0.7 b. in the quarter. Excluding effects from currency hedging the effects would have been -0.5 b.

 

Net income was SEK 5.3 (-2.7) b. for the quarter.

 

Earnings per share were SEK 0.33 (-0.17).

 

The number of employees amounted to 50,700 (57,600) at the end of the quarter of which 22,400 (27,700) in Sweden.

 

Balance sheet and financing

 

Numbers within brackets indicate year-end 2003.

 

The financial position remained strong with net of financial assets and debt, i.e. net cash, at SEK 31.7 (27.0) b. compared to SEK 26.8 b. at the end of the first quarter 2004. Cash improved by SEK 3.6 b. sequentially to SEK 78.0 (73.2) b.

 

Days sales outstanding (DSO) for trade receivables were 88 (79), an improvement of 14 days sequentially, mainly due to better collections. Inventory, including work in progress, increased by SEK 0.4 b. sequentially to SEK 14.8 (11.0) b., due to the higher business activity. Inventory turnover was 5.1 (6.1), up sequentially from 4.9.

 

Gross customer financing exposure decreased sequentially by SEK 1.8 b. to SEK 9.4 (12.3) b. Net customer financing credits on balance sheet were reduced sequentially by SEK 0.9 b. to SEK 3.0 (4.0) b.

 

The equity ratio was 37.5% (34.4%) compared to 35.0% at the end of the previous quarter.

 

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Cash flow

 

Cash flow from operations remained strong at SEK 6.5 (5.7) b. Cash flow before financing activities amounted to SEK 4.3 (5.1) b. Cash flow from investing activities was SEK -2.2 (-0.6) b. net. The cash flow is affected by increased work in progress as a result of the higher business activity.

 

On April 26, Ericsson announced its intention to make a public cash offer for the 28,44% of the shares in its Italian subsidiary Ericsson S.p.A., not already owned by Ericsson. The cash offer has affected cash flow by SEK 1.3 b. during the quarter. Ericsson now holds 88,32% of the shares. Although no final decision to this effect has been taken by the competent bodies, Ericsson intends to proceed with the delisting of the Ericsson S.p.A. shares from the Milan Stock Exchange through the merger between Ericsson S.p.A. and a fully owned unlisted Italian company, in the absence of the conditions for making the residual offer or for exercising the squeeze-out right.

 

Payment readiness increased sequentially by SEK 4.7 b. to SEK 83.1 (68.8) b., mainly due to improved earnings.

 

Cash outlays of SEK 5.0 b., with regard to restructuring, are expected during 2004. Of this SEK 1.5 b. was paid in the second quarter.

 

SEGMENT RESULTS

 

SYSTEMS

 

		Second quarter									First quarter
SEK b.		2004			2003			Change			2004			Change
Orders booked		31.2			26.3			18	%		31.1			0	%
Mobile Networks		25.5			20.0			27	%		24.9			2	%
Fixed Networks		1.1			1.7			-37	%		1.2			-8	%
Professional Services		4.6			4.6			1	%		5.0			-7	%
Net sales		30.4			25.2			20	%		26.1			16	%
Mobile Networks		24.3			18.9			28	%		21.1			15	%
Fixed Networks		1.1			2.2			-48	%		0.9			26	%
Professional Services		5.0			4.1			22	%		4.1			22	%
Operating income		6.3			1.0	1)		—			4.2			—
Operating margin (%)		21	%		4	%1)		—			16	%		—

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1)	Adjusted for restructuring charges in the second quarter 2003, net, SEK 1.8 b.

 

Systems orders increased year-over-year by 18% to SEK 31.2 (26.3) b. Orders were flat sequentially. Systems sales increased both year-over-year and sequentially by 20% and 16% respectively.

 

Mobile Networks orders increased by 27% year-over-year to SEK 25.5 (20.0) b. and grew slightly sequentially. WCDMA equipment and associated network rollout services share of total Mobile Networks sales were stable at approximately 12% and of radio access sales 30% were WCDMA/EDGE related.

 

Development within Professional Services was favorable during the quarter with several key contracts signed especially for hosting services. Professional Services represents approximately 16% of total Systems sales.

 

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OTHER OPERATIONS

 

		Second quarter									First quarter
SEK b.		2004			2003			Change			2004			Change
Orders booked		2.7			2.3			17	%		2.4			13	%
Net sales		2.8			2.5			11	%		2.4			15	%
Operating income		0.6			-0.3	1)		—			0.0			—
Operating margin (%)		20	%		-14	%1)		—			2	%		—

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1)	Adjusted for restructuring charges in the second quarter 2003 SEK 1.1 b.

 

Orders booked, sales and operating income improved both year-over-year and sequentially, mainly attributable to Ericsson Mobile Platforms.

 

SONY ERICSSON MOBILE COMMUNICATIONS

 

Sony Ericsson Mobile Communications (Sony Ericsson) reported a fourth consecutive quarter of profit with a sales increase of 34% year-over-year while sustaining a consistent level of profitability. Ericsson’s share in Sony Ericsson’s income after financial items was SEK 0.5 b. compared to SEK 0.5 b. in the previous quarter.

 

Units shipped in the quarter reached 10.4 million, a 55% increase compared to the same period last year, reflecting a continued strong demand for its style-oriented line-up of imaging and multi-media phones. Average selling price (ASP) decreased sequentially in line with expectation due to an increase in GSM phones in the overall product mix.

 

The company maintained momentum in an increasingly competitive market environment, and has established a solid basis for sustained growth going forward. Sony Ericsson is revising its global market outlook for 2004 to approximately 600 million units from its previously stated level of over 550 million.

 

Transactions with Sony Ericsson Mobile Communications

 

SEK m.		Second quarter 2004		Second quarter 2003		Six months 2004		Six months 2003
Sales to Sony Ericsson		395		934		899		1,510
Royalty from Sony Ericsson		170		154		310		210
Purchases from Sony Ericsson		164		488		498		753
Shareholder contribution		—		—		—		1,384
Receivables from Sony Ericsson		385		155		385		155
Liabilities to Sony Ericsson		77		616		77		616

 

On June 30, Sony Ericsson announced it had increased its equity stake in the Chinese factory Beijing Ericsson Putian Mobile Communications Co. Ltd. to 51%, taking over majority ownership of the facility from Ericsson. The name of the factory has been changed to Beijing SE Putian Mobile Communications Co. Ltd. (BMC). BMC operations have been fully consolidated into Sony Ericsson in the second quarter, which had a positive effect on the company’s results.

 

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PARENT COMPANY INFORMATION

 

Net sales for the six months period amounted to SEK 0.9 (0.9) b. and income after financial items was SEK 4.5 (3.1) b. Restructuring costs are excluded in income after financial items for 2003.

 

Major changes in the company’s financial position for the six months period include decreased investments in subsidiaries of SEK 12.7 b. Short- and long-term internal borrowings decreased by SEK 15.6 b. At the end of the quarter, cash and short-term cash investments amounted to SEK 73.3 (68.4) b.

 

In accordance with the conditions of the Stock Purchase Plans and Option Plans for Ericsson employees, 1,176,180 shares from treasury stock were sold or distributed to employees during the second quarter. The holding of treasury stock at June 30, 2004 was 302,891,773 Class B shares.

 

OTHER INFORMATION

 

An extraordinary general meeting of shareholders in Telefonaktiebolaget LM Ericsson will be held at Berwaldhallen, Dag Hammarskjölds väg 3 in Stockholm, Sweden, at 5.30 p.m. on Tuesday, August 31, 2004. The extraordinary general meeting will resolve on a proposal for resolution to change the difference in voting rights between shares of series A and series B, and the implementation of a conversion clause by amending the articles of association and the issue of conversion rights to holders of shares of series A. The meeting will further resolve on a proposal from Mr. Einar Hellbom on the abandonment of shares of series A. The notice can be found on www.ericsson.com/press

 

Stockholm, July 21, 2004

 

Carl-Henric Svanberg

President and CEO

 

Date for next report: October 22, 2004

 

AUDITORS’ REPORT

 

We have reviewed the report for the six-month period ended June 30, 2004, for Telefonaktiebolaget LM Ericsson (publ.). We conducted our review in accordance with the recommendation issued by FAR. A review is limited primarily to enquiries of company personnel and analytical procedures applied to financial data and thus provides less assurance than an audit. We have not performed an audit and, accordingly, we do not express an audit opinion.

 

Based on our review, nothing has come to our attention that causes us to believe that the interim report does not comply with the requirements for interim reports in the Annual Accounts Act.

 

Stockholm, July 21, 2004

 

Bo Hjalmarsson		Peter Clemedtson		Thomas Thiel
Authorized Public Accountant		Authorized Public Accountant		Authorized Public Accountant
PricewaterhouseCoopers AB		PricewaterhouseCoopers AB

 

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Safe Harbor Statement of Ericsson under the Private Securities Litigation Reform Act of 1995;

 

All statements made or incorporated by reference in this release, other than statements or characterizations of historical facts, are forward-looking statements. These forward-looking statements are based on our current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by us. Forward-looking statements can often be identified by words such as “anticipates”, “expects”, “intends”, “plans”, “predicts”, “believes”, “seeks”, “estimates”, “may”, “will”, “should”, “would”, “potential”, “continue”, and variations or negatives of these words, and include, among others, statements regarding: (i) strategies, outlook and growth prospects; (ii) positioning to deliver future plans and to realize potential for future growth; (iii) liquidity and capital resources and expenditure, and our credit ratings; (iv) growth in demand for our products and services; (v) our joint venture activities; (vi) economic outlook and industry trends; (vii) developments of our markets; (viii) the impact of regulatory initiatives; (ix) research and development expenditures; (x) the strength of our competitors; (xi) future cost savings; and (xii) plans to launch new products and services.

 

In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. These forward-looking statements speak only as of the date hereof and are based upon the information available to us at this time. Such information is subject to change, and we will not necessarily inform you of such changes. These statements are not guarantees of future performance and are subject to risks, uncertainties and assumptions that are difficult to predict. Therefore, our actual results could differ materially and adversely from those expressed in any forward-looking statements as a result of various factors. Important factors that may cause such a difference for Ericsson include, but are not limited to: (i) material adverse changes in the markets in which we operate or in global economic conditions; (ii) increased product and price competition; (iii) further reductions in capital expenditure by network operators; (iv) the cost of technological innovation and increased expenditure to improve quality of service; (v) significant changes in market share for our principal products and services; (vi) foreign exchange rate fluctuations; and (vii) the successful implementation of our business and operational initiatives.

 

A glossary of all technical terms is available at: http://www.ericsson.com/about and in the Annual Report.

 

To read the full report, please go to: http://www.ericsson.com/investors/6month04-en.pdf

 

FOR FURTHER INFORMATION PLEASE CONTACT

 

Henry Sténson, Senior Vice President, Communications

Phone: +46 8 719 4044

E-mail: investor.relations@ericsson.com or press.relations@ericsson.com

 

Investors

 

Gary Pinkham, Vice President, Investor Relations

Phone: +46 8 719 0000; E-mail: investor.relations@ericsson.com

 

Lotta Lundin, Investor Relations

Phone: +46 8 719 6553; E-mail: investor.relations@ericsson.com

 

Glenn Sapadin, Investor Relations

Phone: +1 212 843 8435; E-mail: investor.relations@ericsson.com

 

Media

 

Pia Gideon, Vice President, Market and External Communications

Phone: +46 8 719 2864, +46 70 519 8903; E-mail: press.relations@ericsson.com

 

Åse Lindskog, Director, Head of Media Relations

Phone: +46 8 719 9725, +46 730 244 872; E-mail: press.relations@ericsson.com

 

Ola Rembe, Director, Media Relations

Phone: +46 8 719 9727, +46 730 244 873; E-mail: press.relations@ericsson.com

 

Telefonaktiebolaget LM Ericsson (publ)

Org. number: 556016-0680

Torshamnsgatan 23

SE-164 83 Stockholm

Phone: +46 8 719 00 00

www.ericsson.com

 

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FINANCIAL STATEMENTS AND ADDITIONAL INFORMATION

 

		Page
Financial Statements
Consolidated income statement		10
Consolidated balance sheet		11
Consolidated statement of cash flows		12
Changes in stockholders’ equity		13
Consolidated income statement isolated quarters		14
		Page
Additional Information
Accounting policies and reporting		15
Orders booked by segment by quarter		16
Net sales by segment by quarter		17
Operating income, operating margin		18
Number of employees		18
Orders booked by market area by quarter		19
Net sales by market area by quarter		20
External orders booked by market area by segment		21
External net sales by market area by segment		21
Top ten markets in orders and sales		22
Customer financing risk exposure		22
Trend of net sales and operating expenses isolated quarters		22
Other information		23

 

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ERICSSON

CONSOLIDATED INCOME STATEMENT

 

		Apr - Jun									Jan - Jun
SEK million		2004			2003			Change			2004			2003			Change
Net sales		32,595			27,613			18	%		60,706			53,472			14	%
Cost of sales		-17,020			-19,011			-10	%		-32,564			-37,873			-14	%
Gross margin		15,575			8,602						28,142			15,589
Research and development and other technical expenses		-4,729			-6,084			-22	%		-9,521			-12,981			-27	%
Selling expenses		-2,243			-4,085			-45	%		-4,475			-7,534			-41	%
Administrative expenses		-2,217			-1,842			20	%		-3,927			-3,646			8	%
Operating expenses		-9,189			-12,011			-23	%		-17,923			-24,161			-26	%
Other operating revenues and costs		811			195						975			109
Share in earnings of JV and associated companies		538			-365						1,055			-1,107
Operating income		7,735			-3,579						12,249			-9,560
Financial income		987			850			16	%		1,919			2,014			-5	%
Financial expenses		-909			-856			6	%		-2,042			-2,074			-2	%
Income after financial items		7,813			-3,585						12,126			-9,620
Taxes		-2,450			820						-3,693			2,667
Minority interest		-73			37						-150			-87
Net income		5,290			-2,728						8,283			-7,040
Other information
Average number of shares, basic (million)		15,829			15,822						15,783			15,821
Earnings per share, basic (SEK)		0.33			-0.17						0.52			-0.44
Earnings per share, diluted (SEK)		0.33			-0.17						0.52			-0.44
NOTE 1
Restructuring costs, net		—			-3,799						—			-6,992
Total		—			-3,799						—			-6,992
-of which in
Cost of sales		—			-1,096						—			-2,909
Operating expenses		—			-2,296						—			-3,655
Other operating revenues and costs		—			-142						—			-163
Share in earnings of JV and associated companies / Phones		—			-265						—			-265
NOTE 2
Key measurements, excluding restructuring costs
Net sales		32,595			27,613						60,706			53,472
Gross margin		15,575			9,698						28,142			18,508
- as percentage of net sales		47.8	%		35.1	%					46.4	%		34.6	%
Operating expenses		-9,189			-9,715						-17,923			-20,506
- as percentage of net sales		28.2	%		35.2	%					29.5	%		38.3	%
Other operating revenues and costs		811			337						975			272
Share in earnings of JV and assoc. companies		538			-100						1,055			-842
Operating income		7,735			220						12,249			-2,568
Operating margin (%)		23.7	%		0.8	%					20.2	%		-4.8	%
Income after financial items		7,813			214						12,126			-2,628

 

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ERICSSON

CONSOLIDATED BALANCE SHEET

 

SEK million		Jun 30 2004		Dec 31 2003		Jun 30 2003
ASSETS
Fixed assets
Intangible assets
Capitalized development expenses		4,681		4,784		4,226
Goodwill		5,957		5,739		7,001
Other		734		687		736
Tangible assets		5,911		6,505		7,569
Financial assets
Equity in JV and associated companies		3,664		2,970		2,507
Other investments		452		433		550
Long-term customer financing		2,427		3,027		3,960
Deferred tax assets		24,703		27,130		28,788
Other long-term receivables		1,060		1,342		1,730
		49,589		52,617		57,067
Current assets
Inventories		14,792		10,965		12,845
Receivables
Accounts receivable - trade		31,796		31,886		30,790
Short-term customer financing		581		979		6,088
Other receivables		10,590		12,718		20,155
Short-term cash investments, cash and bank		78,003		73,207		62,358
		135,762		129,755		132,236
Total assets		185,351		182,372		189,303
STOCKHOLDERS’ EQUITY, PROVISIONS AND LIABILITIES
Stockholders’ equity		67,983		60,481		65,713
Minority interest in equity of consolidated subsidiaries		1,526		2,299		2,473
Provisions
Pensions		10,389		8,005		11,483
Other provisions		26,045		28,063		21,034
		36,434		36,068		32,517
Long-term liabilities		29,927		29,772		34,729
Current liabilities
Interest-bearing liabilities		6,944		9,509		6,465
Accounts payable		9,692		8,895		8,987
Other current liabilities		32,845		35,348		38,419
		49,481		53,752		53,871
Total stockholders’ equity, provisions and liabilities		185,351		182,372		189,303
Of which interest-bearing provisions and liabilities		46,282		46,209		51,406
Net cash		31,721		26,998		10,952
Assets pledged as collateral		7,943		8,023		5,781
Contingent liabilities		1,972		2,691		3,103

 

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ERICSSON

CONSOLIDATED STATEMENT OF CASH FLOWS

 

		Apr - Jun				Jan - Jun				Jan -Dec
SEK million		2004		2003		2004		2003		2003
Net income		5,290		-2,728		8,283		-7,040		-10,844
Adjustments to reconcile net income to cash		1,661		1,143		3,438		1,772		6,387
		6,951		-1,585		11,721		-5,268		-4,457
Changes in operating net assets
Inventories		-609		1,332		-3,636		932		2,286
Customer financing, short-term and long-term		780		2,976		1,226		2,947		7,999
Accounts receivable		458		2,065		416		6,798		4,131
Other		-1,127		955		-44		2,856		12,908
Cash flow from operating activities		6,453		5,743		9,683		8,265		22,867
Product development		-227		-536		-462		-1,273		-2,359
Other investing activities		-1,975		-77		-2,042		-1,200		-1,053
Cash flow from investing activities		-2,202		-613		-2,504		-2,473		-3,412
Cash flow before financing activities		4,251		5,130		7,179		5,792		19,455
Dividends paid		-4		-14		-10		-17		-206
Other equity transactions		4		1		7		2		8
Other financing activities		-972		-10,040		-2,695		-9,535		-11,726
Cash flow from financing activities		-972		-10,053		-2,698		-9,550		-11,924
Effect of exchange rate changes on cash		319		67		315		-98		-538
Net change in cash		3,598		-4,856		4,796		-3,856		6,993
Cash and cash equivalents, beginning of period		74,405		67,214		73,207		66,214		66,214
Cash and cash equivalents, end of period		78,003		62,358		78,003		62,358		73,207

 

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CHANGES IN STOCKHOLDERS’ EQUITY

 

SEK million		Jan-Jun 2004		Jan-Dec 2003		Jan-Jun 2003
Opening balance		60,481		73,607		73,607
Effect of changed accounting principle		-1,275		—		—
Opening balance in accordance with new accounting principle		59,206		73,607		73,607
Stock issue, net		—		158		158
Sale of own shares		7		8		2
Stock Purchase and Option Plans		66		151		67
Repurchase of own stock		—		-158		-158
Changes in cumulative translation effects due to changes in foreign currency exchange rates		421		-2,444		-923
Adjustment of cost for stock issue 2002		—		3		—
Net income		8,283		-10,844		-7,040
Closing balance		67,983		60,481		65,713

 

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ERICSSON

CONSOLIDATED INCOME STATEMENT ISOLATED QUARTERS

 

		2004						2003
SEK million		Q2			Q1			Q1			Q2			Q3			Q4
Net sales		32,595			28,111			25,859			27,613			28,039			36,227
Cost of sales		-17,020			-15,544			-18,862			-19,011			-19,084			-21,944
Gross margin		15,575			12,567			6,997			8,602			8,955			14,283
Research and development and other technical expenses		-4,729			-4,792			-6,897			-6,084			-6,846			-7,309
Selling expenses		-2,243			-2,232			-3,449			-4,085			-3,354			-4,227
Administrative expenses		-2,217			-1,710			-1,804			-1,842			-3,423			-1,693
Operating expenses		-9,189			-8,734			-12,150			-12,011			-13,623			-13,229
Other operating revenues and costs		811			164			-86			195			431			1,001
Share in earnings of JV and assoc. companies		538			517			-742			-365			247			256
Operating income		7,735			4,514			-5,981			-3,579			-3,990			2,311
Financial income		987			932			1,164			850			741			1,240
Financial expenses		-909			-1,133			-1,218			-856			-1,064			-1,721
Income after financial items		7,813			4,313			-6,035			-3,585			-4,313			1,830
Taxes		-2,450			-1,243			1,847			820			400			-1,607
Minority interest		-73			-77			-124			37			-33			-81
Net income		5,290			2,993			-4,312			-2,728			-3,946			142
Other information
Average number of shares, basic (million)		15,829			15,749			15,820			15,822			15,823			15,825
Earnings per share, basic (SEK)		0.33			0.19			-0.27			-0.17			-0.25			0.01
Earnings per share, diluted (SEK)		0.33			0.19			-0.27			-0.17			-0.25			0.01
NOTE 1
Restructuring costs, net		—			—			-3,193			-3,799			-5,449			-4,022
Total		—			—			-3,193			-3,799			-5,449			-4,022
-of which in
Cost of sales		—			—			-1,813			-1,096			-1,111			-770
Operating expenses		—			—			-1,359			-2,296			-4,176			-3,145
Other operating revenues and costs		—			—			-21			-142			-162			-20
Share in earnings of JV and associated companies / Phones		—			—			—			-265			—			-87
NOTE 2
Key measurements, excluding restructuring costs
Net sales		32,595			28,111			25,859			27,613			28,039			36,227
Gross margin		15,575			12,567			8,810			9,698			10,066			15,053
- as percentage of net sales		47.8	%		44.7	%		34.1	%		35.1	%		35.9	%		41.6	%
Operating expenses		-9,189			-8,734			-10,791			-9,715			-9,447			-10,084
- as percentage of net sales		28.2	%		31.1	%		41.7	%		35.2	%		33.7	%		27.8	%
Other operating revenues and costs		811			164			-65			337			593			1,021
Share in earnings of JV and assoc. companies		538			517			-742			-100			247			343
Operating income		7,735			4,514			-2,788			220			1,459			6,333
Operating margin (%)		23.7	%		16.1	%		-10.8	%		0.8	%		5.2	%		17.5	%
Income after financial items		7,813			4,313			-2,842			214			1,136			5,852

 

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ACCOUNTING POLICIES AND REPORTING

 

ACCOUNTING POLICIES

 

Interim reports are prepared in accordance with RR20 “Interim Financial Reporting”.

 

CHANGED ACCOUNTING POLICIES AND REPORTING IN 2004

 

RR29 “Employee Benefits”, which is based on IAS 19 “Employee Benefits” issued by International Accounting Standards Committee (“IASC”), has been adopted as from January 1, 2004. When applying RR 29, defined benefit plans for pensions and other post-employment benefits are accounted for using consistent principles. Prior to 2004, such plans have been accounted for by using local principles for each country in the consolidated accounts. The effect of this standard is mainly a change in timing of pension costs compared to previous principles, so that pension costs for future salary increases are estimated and recognized during the service period. In accordance with the transition rules, a transition liability was determined as of 1 January 2004. This transition liability exceeded the liability for pensions recognized per December 31, 2003 in accordance with earlier principles and the net effect of the change in accounting principles at adoption has in accordance with RR29 been charged to stockholders’ equity. The one-time effect of adopting RR29 was an increase of the pension liability as of January 1, 2004, by SEK 1.8 billion. The effect on equity, net after taxes, was SEK 1.3 billion. RR29 has not had material impact on reported Net Income or Earnings Per Share.

 

The company has chosen to follow the guidance of the draft interpretation URA43 “Accounting for particular social taxes and wealth tax” issued by The Swedish Accounting Standards Council.

 

INTERNATIONAL FINANCIAL REPORTING STANDARDS 2005

 

From 2005, Ericsson will be required to report according to IFRS. An internal project is underway to identify differences between current GAAP and what changes will be necessary. The company is in the process of evaluating the impact. It is expected that IAS 39 regarding financial instruments, IFRS 3 Business combinations and IAS 38 Intangible Assets will be the standards with the largest impact.

 

REPORTING

 

LONG TERM INCENTIVE PLAN 2004

 

The Annual General Meeting decided to implement a Long Term Incentive Plan 2004 (LTI 2004) directed to 200 senior managers and 4,500 other key contributors. Participation in the LTI 2004 presupposes that the employees participate in the Stock Purchase Plan 2003 (SPP 2003) directed to all employees, i.e. save money for the purchase of shares in Ericsson.

 

In addition to the regular one matching share under the SPP 2003, participants in the LTI 2004 will be entitled to additional matching of shares free of consideration. 4,500 key contributors will be entitled to an additional match of one share for each one purchased. Further, 150 senior managers and 50 top senior managers may be entitled to an additional performance match of up to four shares or six shares respectively for each one purchased. The performance match is based on average annual percentage growth rate in earnings per share.

 

For more information regarding the Stock Purchase Plan 2003 see the 2003 Annual Report.

 

CHANGED DEFINITIONS COMPARED TO PREVIOUS ANNUAL REPORT

 

Items affecting comparability

 

During 2003 restructuring costs, non-operational capital gains/losses and capitalization of development expenses were reported as items affecting comparability. Due to the immateriality of the non-operational capital gains/losses for 2003 and the fact that the capitalization of development expenses are no longer, per se, affecting comparability, these items are no longer reported as items affecting comparability.

 

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ORDERS BOOKED BY SEGMENT BY QUARTER

 

SEK million

 

		2003												2004
Isolated quarters		Q1			Q2			Q3			Q4			Q1			Q2
Systems		24,996			26,336			26,518			27,592			31,107			31,191
- Mobile Networks		17,475			20,020			21,508			20,455			24,944			25,457
- Fixed Networks		1,990			1,724			1,513			1,128			1,173			1,081
Total Network Equipment		19,465			21,744			23,021			21,583			26,117			26,538
- Of which Network Rollout		2,542			2,000			2,025			2,153			2,705			3,226
Professional Services		5,531			4,592			3,497			6,009			4,990			4,653
Other Operations		2,587			2,312			1,963			2,330			2,384			2,703
Less: Intersegment Orders		-523			-300			-353			-458			-477			-782
Total		27,060			28,348			28,128			29,464			33,014			33,112
		2003												2004
Sequential change		Q1			Q2			Q3			Q4			Q1			Q2
Systems		-12	%		5	%		1	%		4	%		13	%		0	%
- Mobile Networks		-16	%		15	%		7	%		-5	%		22	%		2	%
- Fixed Networks		4	%		-13	%		-12	%		-25	%		4	%		-8	%
Total Network Equipment		-15	%		12	%		6	%		-6	%		21	%		2	%
- Of which Network Rollout		-37	%		-21	%		1	%		6	%		26	%		19	%
Professional Services		-3	%		-17	%		-24	%		72	%		-17	%		-7	%
Other Operations		1	%		-11	%		-15	%		19	%		2	%		13	%
Less: Intersegment Orders		30	%		-43	%		18	%		30	%		4	%		64	%
Total		-12	%		5	%		-1	%		5	%		12	%		0	%
		2003												2004
Year over year change		Q1			Q2			Q3			Q4			Q1			Q2
Systems		-34	%		-16	%		48	%		-3	%		24	%		18	%
- Mobile Networks		-40	%		-13	%		73	%		-2	%		43	%		27	%
- Fixed Networks		-26	%		-42	%		-14	%		-41	%		-41	%		-37	%
Total Network Equipment		-39	%		-16	%		62	%		-5	%		34	%		22	%
- Of which Network Rollout		-46	%		-49	%		44	%		-46	%		6	%		61	%
Professional Services		-2	%		-14	%		-7	%		5	%		-10	%		1	%
Other Operations		-47	%		-52	%		-37	%		-9	%		-8	%		17	%
Less: Intersegment Orders		-25	%		-61	%		-31	%		14	%		-9	%		161	%
Total		-35	%		-20	%		37	%		-4	%		22	%		17	%
		2003												2004
Year to Date		0303			0306			0309			0312			0403			0406
Systems		24,996			51,332			77,850			105,442			31,107			62,298
- Mobile Networks		17,475			37,495			59,003			79,458			24,944			50,401
- Fixed Networks		1,990			3,714			5,227			6,355			1,173			2,254
Total Network Equipment		19,465			41,209			64,230			85,813			26,117			52,655
- Of which Network Rollout		2,542			4,542			6,567			8,720			2,705			5,931
Professional Services		5,531			10,123			13,620			19,629			4,990			9,643
Other Operations		2,587			4,899			6,862			9,192			2,384			5,087
Less: Intersegment Orders		-523			-823			-1,176			-1,634			-477			-1,259
Total		27,060			55,408			83,536			113,000			33,014			66,126
		2003												2004
YTD year over year change		0303			0306			0309			0312			0403			0406
Systems		-34	%		-25	%		-10	%		-9	%		24	%		21	%
- Mobile Networks		-40	%		-28	%		-9	%		-7	%		43	%		34	%
- Fixed Networks		-26	%		-34	%		-29	%		-32	%		-41	%		-39	%
Total Network Equipment		-39	%		-29	%		-11	%		-10	%		34	%		28	%
- Of which Network Rollout		-46	%		-47	%		-35	%		-38	%		6	%		31	%
Professional Services		-2	%		-8	%		-8	%		-4	%		-10	%		-5	%
Other Operations		-47	%		-50	%		-46	%		-40	%		-8	%		4	%
Less: Intersegment Orders		-25	%		-44	%		-40	%		-31	%		-9	%		53	%
Total		-35	%		-28	%		-14	%		-12	%		22	%		19	%

 

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NET SALES BY SEGMENT BY QUARTER

 

SEK million

 

		2003												2004
Isolated quarters		Q1			Q2			Q3			Q4			Q1			Q2
Systems		23,961			25,224			25,907			33,574			26,092			30,380
- Mobile Networks		17,643			18,949			19,826			25,635			21,081			24,241
- Fixed Networks		1,898			2,177			1,670			2,220			896			1,129
Total Network Equipment		19,541			21,126			21,496			27,855			21,977			25,370
- Of which Network Rollout		2,577			2,532			2,791			3,213			2,205			2,490
Professional Services		4,420			4,098			4,411			5,719			4,115			5,010
Other Operations		2,363			2,534			2,508			3,174			2,449			2,806
Less: Intersegment Sales		-465			-145			-376			-521			-430			-591
Total		25,859			27,613			28,039			36,227			28,111			32,595
		2003												2004
Sequential change		Q1			Q2			Q3			Q4			Q1			Q2
Systems		-28	%		5	%		3	%		30	%		-22	%		16	%
- Mobile Networks		-28	%		7	%		5	%		29	%		-18	%		15	%
- Fixed Networks		-38	%		15	%		-23	%		33	%		-60	%		26	%
Total Network Equipment		-29	%		8	%		2	%		30	%		-21	%		15	%
- Of which Network Rollout		-33	%		-2	%		10	%		15	%		-31	%		13	%
Professional Services		-20	%		-7	%		8	%		30	%		-28	%		22	%
Other Operations		-39	%		7	%		-1	%		27	%		-23	%		15	%
Less: Intersegment Sales		22	%		-69	%		159	%		39	%		-17	%		37	%
Total		-30	%		7	%		2	%		29	%		-22	%		16	%
		2003												2004
Year over year change		Q1			Q2			Q3			Q4			Q1			Q2
Systems		-28	%		-27	%		-15	%		1	%		9	%		20	%
- Mobile Networks		-31	%		-30	%		-17	%		4	%		19	%		28	%
- Fixed Networks		-42	%		-27	%		-30	%		-27	%		-53	%		-48	%
Total Network Equipment		-32	%		-29	%		-18	%		1	%		12	%		20	%
- Of which Network Rollout		-38	%		-34	%		-5	%		-16	%		-14	%		-2	%
Professional Services		-1	%		-15	%		2	%		3	%		-7	%		22	%
Other Operations		-45	%		-44	%		-27	%		-18	%		4	%		11	%
Less: Intersegment Sales		-32	%		-82	%		-29	%		37	%		-8	%		308	%
Total		-30	%		-28	%		-16	%		-1	%		9	%		18	%
		2003												2004
Year to Date		0303			0306			0309			0312			Q1			Q2
Systems		23,961			49,185			75,092			108,666			26,092			56,472
- Mobile Networks		17,643			36,592			56,418			82,053			21,081			45,322
- Fixed Networks		1,898			4,075			5,745			7,965			896			2,025
Total Network Equipment		19,541			40,667			62,163			90,018			21,977			47,347
- Of which Network Rollout		2,577			5,109			7,900			11,113			2,205			4,695
Professional Services		4,420			8,518			12,929			18,648			4,115			9,125
Other Operations		2,363			4,897			7,405			10,579			2,449			5,255
Less: Intersegment Sales		-465			-610			-986			-1,507			-430			-1,021
Total		25,859			53,472			81,511			117,738			28,111			60,706
		2003												2004
YTD year over year change		0303			0306			0309			0312			Q1			Q2
Systems		-28	%		-28	%		-24	%		-18	%		9	%		15	%
- Mobile Networks		-31	%		-30	%		-26	%		-19	%		19	%		24	%
- Fixed Networks		-42	%		-35	%		-34	%		-32	%		-53	%		-50	%
Total Network Equipment		-32	%		-31	%		-27	%		-20	%		12	%		16	%
- Of which Network Rollout		-38	%		-36	%		-28	%		-25	%		-14	%		-8	%
Professional Services		-1	%		-9	%		-5	%		-3	%		-7	%		7	%
Other Operations		-45	%		-45	%		-40	%		-35	%		4	%		7	%
Less: Intersegment Sales		-32	%		-59	%		-51	%		-37	%		-8	%		67	%
Total		-30	%		-29	%		-25	%		-19	%		9	%		14	%

 

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OPERATING INCOME, OPERATING MARGIN AND EMPLOYEES BY SEGMENT BY QUARTER

 

SEK million

 

OPERATING INCOME AND MARGIN

 

		20031)												2004
Year to date		0303			0306			0309			0312			0403			0406
Systems		-1,487			-503			863			6,646			4,199			10,514
Phones		-500			-683			-483			-183			435			960
Other Operations		-483			-833			-710			-447			45			606
Unallocated2)		-318			-549			-779			-792			-165			169
Total		-2,788			-2,568			-1,109			5,224			4,514			12,249
		20031)												2004
As percentage of net sales		0303			0306			0309			0312			0403			0406
Systems		-6	%		-1	%		1	%		6	%		16	%		19	%
Phones3)		—			—			—			—			—			—
Other Operations		-20	%		-17	%		-10	%		-4	%		2	%		12	%
Total		-11	%		-5	%		-1	%		4	%		16	%		20	%
		20031)												2004
Isolated quarters		Q1			Q2			Q3			Q4			Q1			Q2
Systems		-1,487			984			1,366			5,783			4,199			6,315
Phones		-500			-183			200			300			435			525
Other Operations		-483			-350			123			263			45			561
Unallocated2)		-318			-231			-230			-13			-165			334
Total		-2,788			220			1,459			6,333			4,514			7,735
		20031)												2004
As percentage of net sales		Q1			Q2			Q3			Q4			Q1			Q2
Systems		-6	%		4	%		5	%		17	%		16	%		21	%
Phones3)		—			—			—			—			—			—
Other Operations		-20	%		-14	%		5	%		8	%		2	%		20	%
Total		-11	%		1	%		5	%		17	%		16	%		24	%

---

1)	2003 figures are reported excluding restructuring costs.

2)	“Unallocated” consists mainly of costs for corporate staffs and non-operational gains and losses

3)	Calculation not applicable

 

NUMBER OF EMPLOYEES

 

		2003												2004
		0303			0306			0309			0312			0403			0406
Systems		53,532			50,510			46,669			45,176			45,209			45,108
Other Operations		7,047			6,786			6,409			6,110			5,440			5,568
Unallocated		361			348			323			297			—			—
Total		60,940			57,644			53,401			51,583			50,649			50,676
Change in percent		0303			0306			0309			0312			0403			0406
Systems		-25	%		-23	%		-25	%		-20	%		-16	%		-11	%
Other Operations		-34	%		-31	%		-27	%		-20	%		-23	%		-18	%
Unallocated		-9	%		-22	%		-20	%		-23	%		—			—
Total		-26	%		-24	%		-26	%		-20	%		-17	%		-12	%

 

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Table of Contents

ORDERS BOOKED BY MARKET AREA BY QUARTER

 

SEK million

 

		20031)												20041)
Isolated quarters		Q1			Q2			Q3			Q4			Q1			Q2
Europe, Middle East & Africa*		14,081			14,425			14,140			11,521			17,836			17,749
North America		4,693			4,622			4,380			6,542			4,679			2,434
Latin America		2,621			1,669			2,245			2,547			3,700			4,587
Asia Pacific		5,665			7,632			7,363			8,854			6,799			8,342
Total		27,060			28,348			28,128			29,464			33,014			33,112
* Of which Sweden		1,406			1,190			967			854			964			1,317
* Of which EU		9,643			7,172			8,655			8,062			10,098			10,476
		20031)												20041)
Sequential change		Q1			Q2			Q3			Q4			Q1			Q2
Europe, Middle East & Africa*		-25	%		2	%		-2	%		-19	%		55	%		0	%
North America		-16	%		-2	%		-5	%		49	%		-28	%		-48	%
Latin America		—			-36	%		35	%		13	%		45	%		24	%
Asia Pacific		-12	%		35	%		-4	%		20	%		-23	%		23	%
Total		-12	%		5	%		-1	%		5	%		12	%		0	%
* Of which Sweden		6	%		-15	%		-19	%		-12	%		13	%		37	%
* Of which EU		0	%		-25	%		21	%		-7	%		25	%		4	%
		20031)												20041)
Year over year change		Q1			Q2			Q3			Q4			Q1			Q2
Europe, Middle East & Africa*		-28	%		-18	%		48	%		-38	%		27	%		23	%
North America		-33	%		-21	%		-2	%		18	%		0	%		-47	%
Latin America		-46	%		-50	%		58	%		—			41	%		175	%
Asia Pacific		-46	%		-9	%		45	%		38	%		20	%		9	%
Total		-35	%		-20	%		37	%		-4	%		22	%		17	%
* Of which Sweden		-42	%		-53	%		-28	%		-36	%		-31	%		11	%
* Of which EU		-1	%		-47	%		110	%		-24	%		5	%		46	%
		20031)												20041)
Year to date		0303			0306			0309			0312			0403			0406
Europe, Middle East & Africa*		14,081			28,506			42,646			54,167			17,836			35,585
North America		4,693			9,315			13,695			20,237			4,679			7,113
Latin America		2,621			4,290			6,535			9,082			3,700			8,287
Asia Pacific		5,665			13,297			20,660			29,514			6,799			15,141
Total		27,060			55,408			83,536			113,000			33,014			66,126
* Of which Sweden		1,406			2,596			3,563			4,417			964			2,281
* Of which EU		9,643			16,815			25,470			33,532			10,098			20,574
		20031)												20041)
YTD year over year change		0303			0306			0309			0312			0403			0406
Europe, Middle East & Africa*		-28	%		-23	%		-9	%		-17	%		27	%		25	%
North America		-33	%		-27	%		-21	%		-12	%		0	%		-24	%
Latin America		-46	%		-48	%		-32	%		-5	%		41	%		93	%
Asia Pacific		-46	%		-30	%		-14	%		-3	%		20	%		14	%
Total		-35	%		-28	%		-14	%		-12	%		22	%		19	%
* Of which Sweden		-42	%		-47	%		-43	%		-42	%		-31	%		-12	%
* Of which EU		-1	%		-28	%		-7	%		-11	%		5	%		22	%

---

1)	“Of which EU”: Restated due to new members since April 1, 2004.

 

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NET SALES BY MARKET AREA BY QUARTER

 

SEK million

 

		2003 1)												2004 1)
Isolated quarters		Q1			Q2			Q3			Q4			Q1			Q2
Europe, Middle East & Africa*		13,983			15,083			14,144			19,633			14,986			17,119
North America		3,940			4,217			4,271			5,199			4,404			4,939
Latin America		1,764			2,197			2,663			3,301			2,867			3,455
Asia Pacific		6,172			6,116			6,961			8,094			5,854			7,082
Total		25,859			27,613			28,039			36,227			28,111			32,595
* Of which Sweden		1,403			1,437			1,371			1,657			1,341			1,543
* Of which EU		8,584			8,847			8,488			12,224			8,167			10,144
		2003 1)												2004 1)
Sequential change		Q1			Q2			Q3			Q4			Q1			Q2
Europe, Middle East & Africa*		-32	%		8	%		-6	%		39	%		-24	%		14	%
North America		-40	%		7	%		1	%		22	%		-15	%		12	%
Latin America		-26	%		25	%		21	%		24	%		-13	%		21	%
Asia Pacific		-13	%		-1	%		14	%		16	%		-28	%		21	%
Total		-30	%		7	%		2	%		29	%		-22	%		16	%
* Of which Sweden		-32	%		2	%		-5	%		21	%		-19	%		15	%
* Of which EU		-36	%		2	%		-1	%		43	%		-33	%		24	%
		2003 1)												2004 1)
Year over year change		Q1			Q2			Q3			Q4			Q1			Q2
Europe, Middle East & Africa*		-21	%		-21	%		-16	%		-5	%		7	%		13	%
North America		-3	%		-30	%		-33	%		-21	%		12	%		17	%
Latin America		-59	%		-29	%		-7	%		38	%		63	%		57	%
Asia Pacific		-44	%		-41	%		-7	%		14	%		-5	%		16	%
Total		-30	%		-28	%		-16	%		-1	%		9	%		18	%
* Of which Sweden		-29	%		-44	%		-18	%		-20	%		-4	%		7	%
* Of which EU		-27	%		-27	%		-14	%		-8	%		-5	%		15	%
		2003 1)												2004 1)
Year to date		0303			0306			0309			0312			0403			0406
Europe, Middle East & Africa*		13,983			29,066			43,210			62,843			14,986			32,105
North America		3,940			8,157			12,428			17,627			4,404			9,343
Latin America		1,764			3,961			6,624			9,925			2,867			6,322
Asia Pacific		6,172			12,288			19,249			27,343			5,854			12,936
Total		25,859			53,472			81,511			117,738			28,111			60,706
* Of which Sweden		1,403			2,840			4,211			5,868			1,341			2,884
* Of which EU		8,584			17,431			25,919			38,143			8,167			18,311
		2003 1)												2004 1)
YTD year over year change		0303			0306			0309			0312			0403			0406
Europe, Middle East & Africa*		-21	%		-21	%		-19	%		-15	%		7	%		10	%
North America		-3	%		-20	%		-25	%		-24	%		12	%		15	%
Latin America		-59	%		-47	%		-36	%		-22	%		63	%		60	%
Asia Pacific		-44	%		-42	%		-33	%		-24	%		-5	%		5	%
Total		-30	%		-29	%		-25	%		-19	%		9	%		14	%
* Of which Sweden		-29	%		-38	%		-32	%		-29	%		-4	%		2	%
* Of which EU		-27	%		-27	%		-23	%		-19	%		-5	%		5	%

---

1)	“Of which EU”: Restated due to new members since April 1, 2004.

 

20

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EXTERNAL ORDERS BOOKED BY MARKET AREA BY SEGMENT

 

SEK million

 

Jan - Jun 2004		Systems			Share of Systems			Other			Share of Other			Total			Share of Total
Europe, Middle East & Africa		32,308			53	%		3,277			73	%		35,585			54	%
North America		6,880			11	%		233			5	%		7,113			11	%
Latin America		8,135			13	%		152			4	%		8,287			12	%
Asia Pacific		14,320			23	%		821			18	%		15,141			23	%
Total		61,643			100	%		4,483			100	%		66,126			100	%
Share of Total		93	%					7	%					100	%
Jan - Jun 2003		Systems			Share of Systems			Other			Share of Other			Total			Share of Total
Europe, Middle East & Africa		25,166			50	%		3,340			75	%		28,506			51	%
North America		8,889			17	%		426			10	%		9,315			17	%
Latin America		4,177			8	%		113			2	%		4,290			8	%
Asia Pacific		12,715			25	%		582			13	%		13,297			24	%
Total		50,947			100	%		4,461			100	%		55,408			100	%
Share of Total		92	%					8	%					100	%
Change		Systems						Other						Total
Europe, Middle East & Africa		28	%					-2	%					25	%
North America		-23	%					-45	%					-24	%
Latin America		95	%					35	%					93	%
Asia Pacific		13	%					41	%					14	%
Total		21	%					1	%					19	%

 

EXTERNAL NET SALES BY MARKET AREA BY SEGMENT

 

SEK million

 

Jan - Jun 2004		Systems			Share of Systems			Other			Share of Other			Total			Share of Total
Europe, Middle East & Africa		28,611			51	%		3,494			73	%		32,105			53	%
North America		9,001			16	%		342			7	%		9,343			15	%
Latin America		6,105			11	%		217			5	%		6,322			11	%
Asia Pacific		12,211			22	%		725			15	%		12,936			21	%
Total		55,928			100	%		4,778			100	%		60,706			100	%
Share of Total		92	%					8	%					100	%
Jan - Jun 2003		Systems			Share of Systems			Other			Share of Other			Total			Share of Total
Europe, Middle East & Africa		25,603			52	%		3,463			77	%		29,066			54	%
North America		7,942			16	%		215			5	%		8,157			15	%
Latin America		3,769			8	%		192			4	%		3,961			8	%
Asia Pacific		11,659			24	%		629			14	%		12,288			23	%
Total		48,973			100	%		4,499			100	%		53,472			100	%
Share of Total		92	%					8	%					100	%
Change		Systems						Other						Total
Europe, Middle East & Africa		12	%					1	%					10	%
North America		13	%					59	%					15	%
Latin America		62	%					13	%					60	%
Asia Pacific		5	%					15	%					5	%
Total		14	%					6	%					14	%

 

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TOP 10 MARKETS IN ORDERS AND SALES

Year to date - Jan-Jun 2004

 

Orders		Share of total orders			Sales		Share of total sales
United States		9	%		United States		14	%
China		9	%		China		9	%
Italy		7	%		Italy		5	%
Spain		6	%		Sweden		5	%
Brazil		4	%		Spain		4	%
India		4	%		Mexico		4	%
Sweden		3	%		United Kingdom		3	%
Mexico		3	%		Brazil		3	%
Russian Federation		3	%		Russian Federation		3	%
United Kingdom		3	%		India		3	%

 

CUSTOMER FINANCING RISK EXPOSURE

 

(SEK billion)		Jun 30 2003		Sep 30 2003		Dec 31 2003		Mar 31 2004		Jun 30 2004
On-balance-sheet credits		15.6		10.4		10.6		10.3		8.6
Off-balance-sheet credits		1.8		1.8		2.0		1.2		1.1
Total credits		17.4		12.2		12.6		11.5		9.7
Accrued interest		0.1		0.1		0.1		0.1		0.2
Less third party risk coverage		-5.7		-0.5		-0.4		-0.4		-0.5
Ericsson risk exposure		11.8		11.8		12.3		11.2		9.4
On-balance-sheet credits, net book value		10.0		4.3		4.0		3.9		3.0
Off-balance-sheet credits recorded as contingent liabilities		1.6		1.5		1.7		1.0		0.8
Financing commitments		11.0		6.7		6.1		3.7		3.0

 

TREND OF NET SALES AND OPERATING EXPENSES ISOLATED QUARTERS

 

		2003												2004
SEK million		Q1			Q2			Q3			Q4			Q1			Q2
Net sales		25,859			27,613			28,039			36,227			28,111			32,595
R&D and other technical expenses		-6,444			-5,855			-4,772			-6,121			-4,718			-4,700
Selling expenses		-3,153			-2,667			-3,092			-3,053			-2,232			-2,243
Administrative expenses		-1,808			-1,605			-1,765			-1,286			-1,710			-2,217
Capitalization of development expenses, net		614			412			182			376			-74			-29
Operating expenses		-10,791			-9,715			-9,447			-10,084			-8,734			-9,189
Operating expenses as percentage of net sales		41.7	%		35.2	%		33.7	%		27.8	%		31.1	%		28.2	%
Restructuring costs		-1,359			-2,296			-4,176			-3,145			—			—
Operating expenses incl. restructuring costs		-12,150			-12,011			-13,623			-13,229			-8,734			-9,189
Items as % of net sales
R&D and other technical expenses		24.9	%		21.2	%		17.0	%		16.9	%		16.8	%		14.4	%
Selling expenses		12.2	%		9.7	%		11.0	%		8.4	%		7.9	%		6.9	%
G&A expenses		7.0	%		5.8	%		6.3	%		3.5	%		6.1	%		6.8	%
Operating expenses, excluding capitalization of development		-11,405			-10,127			-9,629			-10,460			-8,660			-9,160
- as percentage of net sales		44.1	%		36.7	%		34.3	%		28.9	%		30.8	%		28.1	%
Opex run rate, annualized (SEK b.)		47			42			38			37			35			34

 

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ERICSSON

OTHER INFORMATION

 

SEK million		Apr - Jun 2004			Apr - Jun 2003			Jan - Jun 2004			Jan - Jun 2003			Jan - Dec 2003
Number of shares and earnings per share
Number of shares, end of period (million)		16,132			16,132			16,132			16,132			16,132
Number of treasury shares, end of period (million)		303			310			303			310			306
Number of shares outstanding, basic, end of period (million)		15,829			15,822			15,829			15,822			15,826
Numbers of shares outstanding, diluted, end of period (million)		15,861			15,831			15,861			15,831			15,844
Average number of shares, basic (million)		15,828			15,822			15,783			15,821			15,823
Average number of tresury shares (million)		304			270			305			231			270
Average number of shares, diluted (million)1)		15,860			15,883			15,814			15,829			15,841
Earnings per share, basic (SEK)		0.33			-0.17			0.52			-0.44			-0.69
Earnings per share, diluted (SEK)1)		0.33			-0.17			0.52			-0.44			-0.69
Ratios
Equity ratio, percent		—			—			37.5	%		36.0	%		34.4	%
Capital turnover (times)		1.1			0.9			1.1			0.8			1.0
Accounts receivable turnover (times)		4.0			3.4			3.8			3.1			3.4
Inventory turnover (times)		4.7			5.2			5.1			5.3			6.1
Return on equity, percent		32.2	%		-16.1	%		25.8	%		-20.2	%		-16.2	%
Return on capital employed, percent		30.4	%		-8.6	%		25.2	%		-11.7	%		-5.9	%
Days Sales Outstanding		—			—			88			101			79
Payment readiness, end of period		—			—			83,095			68,755			75,309
Payment readiness, as percentage of sales		—			—			68.4	%		64.3	%		64.0	%
Exchange rates used in the consolidation
SEK / EUR - average rate		—			—			9.17			9.18			9.14
- closing rate		—			—			9.15			9.18			9.07
SEK / USD - average rate		—			—			7.47			8.33			8.08
- closing rate		—			—			7.52			8.04			7.26
Other
Additions to tangible fixed assets		539			377			952			791			3,493	2)
- Of which in Sweden		293			125			457			264			1,069	2)
Additions to capitalized development expenses		227			536			462			1,273			2,358
Depreciation of tangible and other intangible assets		808			1,393			1,512			2,656			5,079
Goodwill amortization		102			991			202			1,213			1,941
Amortization of development expenses		256			124			565			247			775
Total depreciation and amortization of tangible / intangible assets		1,166			2,508			2,279			4,116			7,795
Orders booked		33,112			28,348			66,126			55,408			113,000
Export sales from Sweden		21,726			17,272			43,125			34,486			72,966

---

1)	Potential ordinary shares are not considered when their conversion to ordinary shares would increase earnings per share.

2)	Due to reassessments of the nature of leases, according to the present interpretation of Swedish GAAP/IFRS, financial leases of SEK 1.7 b. have been reflected in the balance sheet as tangible assets and long-term liabilities.

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

 

Date: July 21, 2004