Telefonaktiebolaget LM Ericsson 6K Current report

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN ISSUER

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

of the Securities Exchange Act of 1934

July 20, 2015

Commission File Number 000-12033

LM ERICSSON TELEPHONE COMPANY

(Translation of registrant’s name into English)

Torshamnsgatan 21, Kista

SE-164 83, Stockholm, Sweden

(Address of principal executive offices)

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 if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ¨

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ¨

THIS REPORT ON FORM 6-K SHALL BE DEEMED TO BE INCORPORATED BY REFERENCE IN THE REGISTRATION STATEMENTS ON FORM F-3 (NO. 333-203977) AND ON FORM S-8 (Nos. 333-196453, 333-161683 AND 333-161684 ) OF TELEFONAKTIEBOLAGET LM ERICSSON (PUBL.) AND TO BE A PART THEREOF FROM THE DATE ON WHICH THIS REPORT IS FURNISHED TO THE SECURITIES AND EXCHANGE COMMISSION, TO THE EXTENT NOT SUPERSEDED BY DOCUMENTS OR REPORTS SUBSEQUENTLY FILED WITH OR FURNISHED TO THE SECURITIES AND EXCHANGE COMMISSION.

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.


TELEFONAKTIEBOLAGET LM ERICSSON (publ)

By:		/S/NINAMACPHERSON
		Nina Macpherson
		Senior Vice President and
		General Counsel

By:		/S/HELENANORRMAN
		Helena Norrman
		Senior Vice President
		Corporate Communications

Date:July 20, 2015

LOGO

SECOND QUARTER

REPORT 2015, as adjusted for incorporation by reference.

Stockholm, July 17, 2015


		Read more
SECOND QUARTER HIGHLIGHTS		(page)

>	Reported sales increased by 11% YoY.	3

>	The mobile broadband business in North America stabilized in the quarter, but remained at a lower level than a year ago.	3

>	Professional Services continued to deliver strong sales growth YoY.	7

>	Sales in segment Networks recovered and showed a growth QoQ of 18%.	6

>	Gross margin decreased YoY to 33.2% (36.4%). Excluding restructuring charges, gross margin was 35.1% (36.6%) due to lower capacity business in North America and continued 4G coverage deployments in Mainland China, lower IPR revenues and higher share of services sales.	3

>	The global cost and efficiency program is progressing according to plan and restructuring charges in the quarter were SEK 2.7 (0.2) b., mainly related to the reductions in Sweden.	3

>	Operating income, excluding restructuring charges, improved in all segments YoY to SEK 6.3 (4.2) b. and segment Networks operating margin recovered from last quarter.	4

>	Cash flow from operating activities recovered to SEK 3.1 (2.1) b., after a weak first quarter.	9


	Q2		Q2		YoY		Q1		QoQ		Six months		Six months
SEK b.	2015		2014		change		2015		change		2015		2014
Net sales		60.7		54.8		11%		53.5		13%		114.2		102.4
Gross margin		33.2%		36.4%		-		35.4%		-		34.2%		36.4%
Operating margin excluding restructuring charges		10.4%		7.7%		-		5.1%		-		7.9%		6.8%
Operating income		3.6		4.0		-11%		2.1		67%		5.7		6.6
Operating income excluding restructuring charges		6.3		4.2		49%		2.7		129%		9.1		7.0
Operating margin		5.9%		7.3%		-		4.0%		-		5.0%		6.5%
Gross margin excluding restructuring charges		35.1%		36.6%		-		36.3%		-		35.7%		36.6%
Net income		2.1		2.7		-20%		1.5		46%		3.6		4.4
EPS diluted, SEK		0.64		0.79		-19%		0.40		60%		1.04		1.44
Cash flow from operating activities		3.1		2.1		50%		-5.9		-152%		-2.8		11.5
Net cash, end of period¹⁾		3.5		32.5		-89%		15.6		-78%		3.5		32.5

¹⁾	Reconciliation of non-IFRS financial measures to the most directly comparable IFRS financial measures can be found on page 28.


1		Ericsson \| Second Quarter Report 2015

CEO COMMENTS

Reported sales increased by 11%. Profitability improved sequentially, driven by a strong development in segment Networks.

Business

The mobile broadband business in North America stabilized in the quarter, but remained at a lower level than a year ago. The YoY decline in North America was partly offset by an increased pace of 4G deployments in Mainland China. Sales growth was strong in the Middle East, India and South East Asia, while it continued to be weak in Japan. Professional Services sales increased YoY with continued strong global demand and growth in all ten regions.

The OSS & BSS business had a favorable development YoY, contributing to sales both in Professional Services and segment Support Solutions.

Segment Networks sales increased by 18% sequentially, supported by the stabilized mobile broadband sales in North America.

Profitability

Operating income, excluding restructuring charges, increased YoY by almost 50%, with improvements in all segments. After a weak first quarter, segment Networks profitability recovered, driven by increased sales and a positive currency hedge effect.

IPR revenues

Reported IPR revenues were slightly down YoY despite a positive currency effect as a majority of the licenses contracts are in USD. The decline was primarily due to the ongoing dispute with a major customer.

Cost and efficiency program

The global cost and efficiency program is progressing according to plan. The target, to achieve savings of approximately SEK 9 b. during 2017 relative to 2014, remains. During the quarter, numerous activities were implemented globally including a reduction of 2,100 positions in Sweden, resulting in higher than normal restructuring charges. Savings related to the activities will start to impact results towards the end of this year.

Cash flow

After a weak first quarter, cash flow from operating activities was positive in the quarter. As cash flow is volatile between quarters it should be viewed on a full-year basis. Our full-year cash conversion target of more than 70% remains.

Targeted growth areas

Our growth strategy builds on a combination of excelling in our core business and establishing leadership in targeted growth areas. We see good progress in the targeted areas and sales continued its strong development from the first quarter. This was mainly driven by a solid sales development in OSS & BSS.

The consolidation in the industry continues, both among vendors and customers, creating opportunities and challenges. Therefore we have, during the first half of 2015, accelerated our transformation journey towards becoming a true ICT company. With our ongoing strategic initiatives we are well positioned to continue to create value for our customers in a transforming market.

Hans Vestberg

President and CEO


2		Ericsson \| Second Quarter Report 2015

FINANCIAL HIGHLIGHTS


	Q2		Q2		YoY		Q1		QoQ		6 months		6 months
SEK b.	2015		2014		change		2015		change		2015		2014
Net sales		60.7		54.8		11%		53.5		13%		114.2		102.4
Of which Networks		31.2		29.0		8%		26.4		18%		57.6		53.3
Of which Global Services		26.4		23.1		14%		23.9		10%		50.3		43.4
Of which Support Solutions		3.1		2.8		9%		3.1		1%		6.2		5.6
Of which Modems		0.0		0.0		-		0.1		-		0.1		0.0
Gross income		20.1		19.9		1%		19.0		6%		39.1		37.3
Gross margin (%)		33.2%		36.4%		-		35.4%		-		34.2%		36.4%
Research and development expenses		-9.9		-9.1		9%		-8.5		17%		-18.4		-17.4
Selling and administrative expenses		-7.8		-6.5		19%		-7.1		9%		-14.9		-13.0
Other operating income and expenses		1.1		-0.2		-		-1.2		-		-0.2		-0.2
Operating income		3.6		4.0		-11%		2.1		67%		5.7		6.6
Operating margin		5.9%		7.3%		-		4.0%		-		5.0%		6.5%
for Networks		8%		12%		-		2%		-		5%		11%
for Global Services		6%		6%		-		7%		-		7%		6%
for Support Solutions		-8%		-13%		-		3%		-		-3%		-7%
for Modems		-		-		-		0%		-		-		-
Financial net		-0.5		-0.2		168%		-0.1		-		-0.6		-0.4
Taxes		-0.9		-1.1		-20%		-0.6		46%		-1.5		-1.9
Net income		2.1		2.7		-20%		1.5		46%		3.6		4.4
Restructuring charges		-2.7		-0.2		-		-0.6		-		-3.4		-0.4

Net sales

Reported sales increased by 11% YoY. Significant currency effects impacted sales positively, mainly due to a strengthened USD towards the SEK.

The mobile broadband business in North America stabilized in the second quarter. However, sales in North America are still at a lower level than a year ago. In addition, sales declined in Japan, parts of Latin America and Russia. This was partly offset by a continued fast pace of 4G deployments in Mainland China. Sales growth was also strong in regions Middle East, India and South East Asia. Professional Services sales increased YoY driven by Consulting and Systems Integration and Managed Services.

Sequentially, reported sales increased by 13%. As the second quarter progressed mobile broadband business in North Amer-ica stabilized. The large scale 4G deployments in Mainland China continued at high pace and the activity level in region Middle East also remained high. This was partly offset by lower sales in Japan.

Reported IPR revenues were down both YoY and QoQ. The majority of the licenses contracts are in USD and the stronger USD supported the YoY comparison. The decline YoY was primarily due to the ongoing dispute with a major customer.

Gross margin

Gross margin decreased YoY mainly due to increased restructuring charges. Excluding restructuring charges, gross margin declined to 35.1% (36.6%) due to lower capacity business in North America and continued 4G coverage deployments in Mainland China.

In addition lower IPR revenues and higher share of services sales impacted gross margin negatively.

The gross margin decreased sequentially due to lower IPR revenues and increased share of hardware sales driven by mobile broadband coverage deployments.

Restructuring charges and cost and efficiency program

The global cost and efficiency program is progressing according to plan. The target, to achieve savings of approximately SEK 9 b. during 2017 relative to 2014, remains. During the quarter, numerous activities were implemented globally, including a reduction of 2,100 positions in Sweden, with approximately 1,700 employees leaving the company. Savings related to the activities will start to impact results towards the end of this year. The total restructuring charges increased YoY and QoQ following the implementation of the cost and efficiency program.

Efforts to identify and implement efficiency gains are progressing and total restructuring charges for full-year 2015 are expected to be SEK 4-5 b. The increase, compared with previous estimate of SEK 3-4 b., is a consequence of a somewhat higher implementation pace.

Operating expenses

Restructuring charges impacted operating expenses negatively by SEK 1.6 (0.1) b. Total operating expenses, excluding restructuring charges, were SEK 16.1 (15.5) b. The increase was due to negative currency effects.


3		Ericsson \| Second Quarter Report 2015

Other operating income and expenses

Other operating income and expenses improved YoY following a positive currency hedge contracts effect and a capital gain of SEK 0.3 b. related to a real estate divestment in the US.

The revaluation and realization effects from currency hedge contracts were SEK 0.6 b. This is to be compared with hedge contract effects of SEK -1.4 b. in Q1 2015 and SEK -0.5 b. in Q2 2014.

The positive effect derives mainly from the hedge contract balance in USD. The SEK has strengthened towards the USD between March 31, 2015 (SEK/USD rate 8.64) and June 30, 2015 (SEK/USD rate 8.24).

Operating income

Operating income decreased YoY due to higher restructuring charges of SEK 2.7 (0.2) b. Operating income, excluding restructuring charges, improved to SEK 6.3 (4.2) b. with an operating margin of 10.4% (7.7%). The improvement was driven by higher sales and positive currency hedge effects, partly offset by a lower gross margin.

Despite higher restructuring charges, operating income increased QoQ driven by higher sales and positive other operating income and expenses.

Financial net

The negative financial net increased YoY and QoQ, mainly related to a lower cash position and negative interest revaluation effects.

Net income and EPS

Net income and EPS diluted decreased YoY following the lower operating income. Net income and EPS increased QoQ.

Employees

The number of employees on June 30, 2015 was 117,183 compared with 118,706 on March 31, 2015. The decrease is mainly related to implementation of the global cost and efficiency program outside Sweden. Effects from headcount reductions in Sweden will start impacting number of employees during the third quarter. The number of Ericsson services professionals on June 30, 2015 was 65,000 (66,000 March 31, 2015).

MODEMS

Net Sales

The discontinuation of the modems business is now almost completed. Net sales in the quarter was SEK 0.0 b.

Operating income

Operating income for the modems business was SEK 0.0 b.


4		Ericsson \| Second Quarter Report 2015

REGIONAL SALES


	Second quarter 2015								Change
SEK b.	Networks		Global Services		Support Solutions		Total		YoY		QoQ
North America		6.7		7.1		0.8		14.6		-4%		19%
Latin America		2.3		2.6		0.2		5.1		-6%		11%
Northern Europe and Central Asia		1.5		0.9		0.1		2.6		-6%		-6%
Western and Central Europe		1.9		3.1		0.1		5.1		12%		8%
Mediterranean		2.4		3.3		0.2		5.9		7%		18%
Middle East		4.0		2.1		0.3		6.5		44%		44%
Sub-Saharan Africa		1.2		1.3		0.2		2.7		41%		23%
India		1.8		1.1		0.2		3.0		85%		-14%
North East Asia		4.8		2.0		0.2		6.9		8%		15%
South East Asia and Oceania		2.5		2.3		0.1		4.9		34%		15%
Other¹⁾		2.0		0.7		0.7		3.4		1%		-10%
Total		31.2		26.4		3.1		60.7		11%		13%

¹⁾Region “Other” includes licensing revenues, broadcast services, power modules, mobile broadband modules, Ericsson-LG Enterprise and other businesses.

North America

Mobile broadband sales in the quarter stabilized, driven by data traffic growth, while operators remained focused on cash flow optimization and consolidation. Business related to ICT transformation continued to develop favorably in the quarter.

Latin America

Sales decreased slightly YoY. Business in Professional Services showed a strong development driven by BSS transformation and Systems Integration projects. Currency restrictions and lower capex levels impacted mobile broadband investments in some parts of the region.

Northern Europe and Central Asia

Sales declined YoY, primarily driven by slower mobile broadband investments in Russia. Professional Services showed good momentum and Support Solutions continued to develop favorably, both TV & Media and OSS & BSS.

Western and Central Europe

Sales increased YoY driven by Global Services, as operators seek network quality and operational efficiencies. Mobile broadband deployments and investments in network quality continued.

Mediterranean

Sales growth YoY was mainly driven by Global Services, where Managed Services was the major contributor. Quality and capacity projects related to 3G and 4G contributed positively to Networks sales.

Middle East

Sales growth YoY was driven by continued high investments in mobile broadband. Support Solutions sales showed strong growth, especially in OSS.

Sub-Saharan Africa

Continued growth YoY in most markets, compared to a weak first half 2014, driven by strong data growth as well as positive development of managed services across the region.

India

Sales increased YoY, mainly due to continued mobile broadband investments, driven by growth in mobile data traffic. Global Services sales continued to show a strong development.

North East Asia

Sales growth continued, driven by 4G contracts in Mainland China, partly offset by lower operator investments in Japan.

South East Asia and Oceania

Sales increased YoY, primarily driven by continued mobile broadband projects. Important 4G contracts were signed in Indonesia in the quarter. Professional Services continued to show good momentum.

Other

Reported IPR revenues were slightly down YoY despite a positive currency effect, as a majority of the licenses contracts are in USD. The decline was primarily due to the ongoing dispute with a major customer.

Broadcast services sales continued to show good growth.


5		Ericsson \| Second Quarter Report 2015

SEGMENT RESULTS

NETWORKS


SEK b.	Q2 2015		Q2 2014		YoY change		Q1 2015		QoQ change		6 months 2015		6 months 2014
Net sales		31.2		29.0		8%		26.4		18%		57.6		53.3
Operating income		2.4		3.6		-32%		0.6		313%		3.0		6.1
Operating income excluding restructuring charges		4.3		3.7		16%		0.8		460%		5.0		6.3
Operating margin		8%		12%		-		2%		-		5%		11%
Operating margin excluding restructuring charges		14%		13%		-		3%		-		9%		12%
Restructuring charges		-1.8		-0.1		-		-0.2		-		-2.0		-0.2

Net sales

Reported sales increased by 8% YoY. Sales growth related to mobile broadband deployments in Mainland China, the Middle East and India contributed positively.

Sales increased QoQ following stabilized mobile broadband business in North America. Increased sales in Mainland China and the Middle East also contributed positively in the quarter.

Operating income and margin

The operating income and margin recovered in the quarter. Excluding restructuring charges, operating income improved YoY, positively impacted by higher sales and positive currency effects. This was partly offset by a business mix with continued high share of coverage business in Mainland China and low share of capacity business in North America. Somewhat increased operating expenses and lower IPR revenues also had a negative impact on operating margin.

Reported operating income declined YoY due to restructuring charges of SEK 1.8 (0.1) b. Most of the charges are related to implementation of the global cost and efficiency program in Sweden. The effect from currency hedge contracts was positive at SEK 0.5 (-0.2) b.

Operating income and margin improved sequentially following higher sales, improved business mix with higher share of capacity business from North America and a positive effect from currency hedge contracts. Higher restructuring charges and lower IPR revenues impacted operating income negatively.


6		Ericsson \| Second Quarter Report 2015

GLOBAL SERVICES

YoY

QoQ

6 months

SEK b.

2015

2014

change

2015

change

2015

2014

Net sales

26.4

23.1

14%

23.9

10%

50.3

43.4

Of which Professional Services

20.0

16.6

21%

18.1

10%

38.1

31.7

Of which Managed Services

8.2

6.5

26%

7.5

15.7

12.2

Of which Network Rollout

6.4

6.5

-2%

5.8

11%

12.2

11.8

Operating income

1.6

1.5

10%

1.7

-2%

3.3

2.5

Of which Professional Services

2.4

2.1

15%

2.1

14%

4.5

4.0

Of which Network Rollout

-0.8

-0.6

25%

-0.4

78%

-1.2

-1.5

Operating margin

–

for Professional Services

12%

13%

–

12%

–

12%

13%

for Network Rollout

-12%

-9%

–

-7%

–

-10%

-12%

Operating income excluding restructuring charges

2.3

1.6

49%

2.1

11%

4.4

2.6

Operating margin excluding restructuring charges

Restructuring charges

-0.7

-0.1

–

-0.4

–

-1.1

-0.1

Net sales

Reported sales increased by 14% YoY. The good momentum in Professional Services continued, with growth in all ten regions.

Operating income and margin

Operating income improved in Global Services YoY. Operating margin, excluding restructuring charges, was 9% (7%), driven by increased sales in Professional Services and reduced losses in Network Rollout.

The effect from currency hedge contracts was SEK 0.1 (-0.2) b.

Operating margin in Professional Services declined slightly YoY due to increased restructuring charges and strong growth in Managed Services.

The work to return the Network Rollout business to profitability continues with good progress and operating margin, excluding restructuring charges, improved YoY to -4% (-9%).

Global Services operating income decreased slightly QoQ due to increased restructuring charges. Professional Services margin was flat QoQ.


	Q2		Q1		Full year
SEK b.	2015		2015		2014
Number of signed Managed Services contracts		30		27		71
Number of signed significant consulting & systems integration contracts¹⁾		16		13		56

¹⁾In the areas of OSS and BSS, IP, Service Delivery Platforms and data center build projects.


7		Ericsson \| Second Quarter Report 2015

SUPPORT SOLUTIONS


	Q2		Q2		YoY		Q1		QoQ		6 months		6 months
SEK b.	2015		2014		change		2015		change		2015		2014
Net sales		3.1		2.8		9%		3.1		1%		6.2		5.6
Operating income		-0.2		-0.4		-37%		0.1		-		-0.2		-0.4
Operating income excluding restructuring charges		0.0		-0.3		-87%		0.1		-		0.1		-0.3
Operating margin		-8%		-13%		-		3%		-		-3%		-7%
Operating margin excluding restructuring charges		-2%		-12%		-		3%		-		1%		-6%
Restructuring charges		-0.2		0.0		-		0.0		-		-0.2		0.0

Net sales

Reported sales increased by 9% YoY. Sales of OSS & BSS continued to show strong growth while the TV & Media business declined due to lower software licensing sales.

Operating income and margin

Operating income and margin improved YoY. Operating margin excluding restructuring charges was -2% (-12%), driven primarily by sales growth in OSS & BSS. This was partly offset by lower IPR revenues.

Operating Income declined QoQ due to increased restructuring charges and lower IPR revenues.


8		Ericsson \| Second Quarter Report 2015

CASH FLOW


SEK b.	Q2 2015		Q2 2014		Q1 2015
Net income reconciled to cash		3.4		5.9		3.1
Changes in operating net assets		-0.3		-3.8		-9.0
Cash flow from operating activities		3.1		2.1		-5.9
Cash flow from investing activities		7.0		3.7		-2.1
Cash flow from financing activities		-10.6		-12.2		0.9
Net change in cash and cash equivalents		-2.3		-5.0		-5.7
Cash conversion (%)¹⁾		90%		35%		-188%

Cash flow from operating activities recovered in the quarter after a weak first quarter. Working capital was benefiting from good collection of receivables and improved net income.

Investing activities in the quarter was impacted by the continued construction of new ICT centers in Sweden and Canada, with a total investment of approximately SEK 7 b., 2014-2018. This was more than offset by decreased short-term investments of SEK 9.7 b. and real estate divestment in the US generated a positive cash flow effect of SEK 0.8 b.

Cash flow from financing activities was negatively impacted by payments of dividends of SEK 11.0 b. in the quarter.

Payments related to restructuring charges already provisioned for, amounted to approximately SEK 0.5 b. in the quarter.


Working capital KPIs, number of days	Jan-Jun 2015		Jan-Mar 2015		Jan-Dec 2014		Jan-Sep 2014		Jan-Jun 2014
Sales outstanding		112		125		105		111		113
Inventory		74		82		64		69		70
Payable		57		64		56		57		61

Days sales outstanding decreased as a result of good collection. Inventory days is trending down but is still on a high level due to the high share of coverage business in Mainland China. Payable days decreased after a seasonally strong Q1. Efforts, in order to reduce working capital through a better order-to-cash process, continue.

¹⁾	Reconciliation of non-IFRS financial measures to the most directly comparable IFRS financial measures can be found on page 28.


9		Ericsson \| Second Quarter Report 2015

FINANCIAL POSITION


SEK b.	Jun 30 2015		Jun 30 2014		Mar 31 2015
+ Short-term investments		20.8		35.3		30.8
+ Cash and cash equivalents		33.0		33.1		35.3
Gross cash		53.8		68.4		66.1
– Interest bearing liabilities and post-employment benefits		50.3		35.9		50.5
Net cash¹⁾		3.5		32.5		15.6
Equity		136.7		138.0		149.1
Total assets		278.9		265.5		303.0
Capital turnover (times)		1.3		1.2		1.1
Equity ratio (%)		49%		52.0%		49.2%

Net cash decreased in the quarter as a result of the dividend payout and capex related to the construction of three global ICT centers in Sweden and Canada. This was partly offset by the positive cash flow from operating activities.

The net cash position, excluding post-employment benefits, was SEK 28.0 b.

The average maturity of long-term borrowings as of June 30, 2015, was 5.3 years, compared to 6.2 years 12 months earlier.

In the quarter a revolving Credit Facility of USD 2.0 b. was renewed. The new facility expires in 2020.

Debt maturity profile, Parent Company

LOGO

¹⁾	Reconciliation of non-IFRS financial measures to the most directly comparable IFRS financial measures can be found on page 28.


10		Ericsson \| Second Quarter Report 2015

OTHER INFORMATION

Ericsson’s Nomination Committee appointed

On May 25, 2015, Ericsson announced that the Nomination Committee for the Annual General Meeting (AGM) 2016 has been appointed in accordance with the Instruction for the Nomination Committee, resolved by the Annual General Meeting 2012.

The Nomination Committee consists of: Petra Hedengran, Investor AB; Bengt Kjell, AB Industrivärden and Handelsbankens Pensionsstiftelse; Johan Held, AFA Försäkring; Marianne Nilsson, Swedbank Robur Fonder; and Leif Johansson, the Chairman of the Board of Director. Petra Hedengran is the Chairman of the Nomination Committee.

Apple litigations

A past global patent license agreement between Ericsson and Apple expired in January 2015 and Apple declined to take a new license on offered FRAND terms. Ericsson negotiated a renewal agreement with Apple for more than two years. During the negotiations, the companies were not able to reach an agreement on licensing of Ericsson’s patents that enable Apple’s mobile devices to connect with the world and power many of their applications.

On January 12, 2015, Apple initiated litigation with Ericsson by filing a lawsuit in the United States District Court for the Northern District of California, seeking a ruling that Apple does not infringe seven of Ericsson’s patents. Two days later, on January 14, 2015, Ericsson filed a complaint in the United States District Court for the Eastern District of Texas requesting a ruling that its proposed global licensing terms with Apple were fair and reasonable.

On February 26, 2015, after Apple refused Ericsson’s offer to have a court determine fair licensing terms by which both companies would be bound, Ericsson filed two complaints with the International Trade Commission (ITC) and seven complaints in the United States District Court for the Eastern District of Texas against Apple, asserting infringement of 41 additional Ericsson patents. Ericsson subsequently amended its complaints to assert two additional patents in the US. Ericsson seeks exclusion orders in the ITC proceedings and damages and injunctions in the District Court actions.

On May 8, 2015, Ericsson further announced that it has filed patent infringement suits against Apple in Germany, the United Kingdom and the Netherlands, seeking damages and injunctions. Ericsson has asserted both standard-essential patents related to the 2G and 4G/LTE standards and other patents that are critical to features and functionality of Apple devices, such as the design of semiconductor components, user interface software, location services and applications, as well as the iOS operating system.

Hearings and trials in the various cases are scheduled to begin in December 2015 and continue into 2016. Ericsson expects that the first court rulings will be issued by a German court in the first quarter of 2016.

Implementation of cost and efficiency program in Sweden

On June 24, 2015, Ericsson completed the redundancy process in Sweden, announced on March 11, 2015. The reduction of approximately 2,100 positions in Sweden, with some 1,700 employees leaving the company, is part of the global cost and efficiency program.

Adaptix litigations

In 2013, Adaptix Inc. (“Adaptix”), a US company, filed two lawsuits against Ericsson, AT&T, AT&T Mobility and MetroPCS Communications in the US District Court for Eastern District of Texas alleging that certain Ericsson products infringe five US patents purportedly assigned to Adaptix. Adaptix seeks damages and an injunction. The trial is scheduled for August 2015.

On May 20, 2014, Adaptix filed three patent infringement lawsuits against Ericsson, T-Mobile, Verizon and Sprint in the same court regarding three US patents. One of these lawsuits accuses Ericsson’s LTE products and Sprint’s use thereof of infringement, one accuses Ericsson’s LTE products and Verizon’s use thereof of infringement, and one accuses Ericsson’s LTE products and T-Mobile’s use thereof of infringement. In January 2015, Adaptix filed one more lawsuit in the same court alleging that Ericsson’s LTE products, and Sprint and Verizon’s use thereof, infringe another U.S. Patent.

In addition to a complaint filed in 2013 with the Tokyo District Court, Adaptix filed another lawsuit in Japan in September 2014 alleging that Ericsson’s LTE products infringe another Japanese patent. In the lawsuits in Japan, Adaptix is also seeking damages and an injunction.

WiLAN litigations

In 2012, Wi-LAN Inc., a Canadian patent licensing company, filed a complaint against Ericsson in the US District Court for the Southern District of Florida alleging that Ericsson’s LTE products infringe three of Wi-LAN’s US patents.

In June 2013, Ericsson’s motion for summary judgment was granted and in August 2014, the decision was reversed by the United States Court of Appeals for the Federal Circuit.

On May 22, the Florida Court granted a Motion for Summary Judgment in favor of Ericsson. WiLAN may still file a notice to appeal the decision.

DISCLOSURE PURSUANT TO SECTION 219 OF THE IRAN THREAT REDUCTION ANS SYRIA HUMAN RIGHTS ACT OF 2012 (ITRA)

During the second quarter of 2015, Ericsson made sales of telecommunications infrastructure related products and services in Iran to MTNIrancell and to Mobile Communication Company of Iran, which generated gross revenues (reported as net sales) of approximately SEK 744 million. Ericsson does not normally allocate quarterly net profit (reported as net income) on a country-by-country or activity-by-activity basis, other than as set forth in Ericsson’s consolidated financial statements prepared in accordance with IFRS as issued by the IASB. However, Ericsson has estimated that its operating income (income before taxes and financial net) from such sales, after internal cost allocation, during the second quarter of 2015 would be substantially lower than such gross revenues. During the second quarter of 2015 Ericsson and Sherkat e Khadamate Jame Avai e Ertbatat e Novin Khavar Mianeh (“HiWEB”) has had discussions relating to potential future sales by Ericsson of telecommunications infrastructure related products and services to HiWEB.


11		Ericsson \| Second Quarter Report 2015

RISK FACTORS

Ericsson’s operational and financial risk factors and uncertainties along with our strategies and tactics to mitigate risk exposures or limit unfavorable outcomes are described in our Annual Report 2014. Compared to the risks described in the Annual Report 2014, no material, new or changed risk factors or uncertainties have been identified in the year.

Risk factors and uncertainties in focus short-term for the Parent Company and the Ericsson Group include:

Potential negative effects on operators’ willingness to invest in network development due to uncertainty in the financial markets and a weak economic business environment, or reduced consumer telecom spending, or increased pressure on us to provide financing, or delayed auctions of spectrums;

Uncertainty regarding the financial stability of suppliers, for example due to lack of financing;

Effects on gross margins and/or working capital of the business mix in the Networks segment between capacity sales and new coverage build-outs;

Effects on gross margins of the business mix in the Global Services segment including proportion of new network build-outs and share of new managed services deals with initial transition costs;

Effects of the ongoing industry consolidation among our customers as well as between our largest competitors, e.g. with postponed investments and intensified price competition as a consequence;

Changes in foreign exchange rates, in particular USD;

Political unrest or instability in certain markets;

Effects on production and sales from restrictions with respect to timely and adequate supply of materials, components and production capacity and other vital services on competitive terms;

No guarantees that specific restructuring or cost-savings initiatives will be sufficient, successful or executed in time to deliver any improvements in short-term earnings.

Ericsson stringently monitors the compliance with all relevant trade regulations and trade embargos applicable to dealings with customers operating in countries where there are trade restrictions or trade restrictions are discussed. Moreover, Erics-son operates globally in accordance with Group policies and directives for business ethics and conduct.

This report has not been reviewed by Telefonaktiebolaget LM Ericsson’s auditors.

Date for next report: October 23, 2015


12		Ericsson \| Second Quarter Report 2015

EDITOR’S NOTE

For further information, please contact:

Helena Norrman, Senior Vice President, Marketing and Communications

Phone: +46 10 719 34 72

E-mail:investor.relations@ericsson.com ormedia.relations@ericsson.com

Telefonaktiebolaget LM Ericsson

Org. number: 556016-0680

Torshamnsgatan 21

SE-164 83 Stockholm

Phone: +46 10 719 00 00

www.ericsson.com

Investors

Peter Nyquist, Vice President,

Investor Relations

Phone: +46 10 714 64 49, +46 70 575 29 06

E-mail: peter.nyquist@ericsson.com

Stefan Jelvin, Director,

Investor Relations

Phone: +46 10 714 20 39, +46 70 986 02 27

E-mail: stefan.jelvin@ericsson.com

Åsa Konnbjer, Director,

Investor Relations

Phone: +46 10 713 39 28, +46 73 082 59 28

E-mail: asa.konnbjer@ericsson.com

Rikard Tunedal, Director,

Investor Relations

Phone: +46 10 714 54 00, +46 761 005 400

E-mail: rikard.tunedal@ericsson.com

Media

Ola Rembe, Vice President,

Head of External Communications

Phone: +46 10 719 97 27, +46 73 024 48 73

E-mail: media.relations@ericsson.com

Corporate Communications

Phone: +46 10 719 69 92

E-mail: media.relations@ericsson.com


13		Ericsson \| Second Quarter Report 2015

SAFE HARBOR STATEMENT

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; (xii) plans to launch new products and services; (xiii) assessments of risks; (xiv) integration of acquired businesses; (xv) compliance with rules and regulations and (xvi) infringements of intellectual property rights of others.

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) 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 or interest rate fluctuations; and (vii) the successful implementation of our business and operational initiatives.


14		Ericsson \| Second Quarter Report 2015

FINANCIAL STATEMENTS AND

ADDITIONAL INFORMATION



		Contents


		Financial statements
		Consolidated income statement			16
		Statement of comprehensive income			16
		Consolidated balance sheet			17
		Consolidated statement of cash flows			18
		Consolidated statement of changes in equity			19
		Consolidated income statement – isolated quarters			19
		Consolidated statement of cash flows – isolated quarters			20

		Additional information
		Accounting policies			21
		Net sales by segment by quarter			22
		Operating income by segment by quarter			23
		Operating margin by segment by quarter			23
		Net sales by region by quarter			24
		Net sales by region by quarter (cont.)			25
		Top 5 countries in sales			25
		Net sales by region by segment			26
		Provisions			27
		Information on investments			27
		Reconciliation table, non-IFRS measurements			28
		Net cash – end of period			28
		Other information			29
		Number of employees			29
		Restructuring charges by function			30
		Restructuring charges by segment			30


15		Ericsson \| Second Quarter Report 2015

CONSOLIDATED INCOME STATEMENT

Apr–Jun

Jan–Jun

SEK million

2015

2014

Change

2015

2014

Change

Net sales

60,671

54,849

11%

114,191

102,354

12%

Cost of sales

–40,536

–34,910

16%

–75,092

–65,094

15%

Gross income

20,135

19,939

39,099

37,260

Gross margin (%)

33.2%

36.4%

34.2%

36.4%

Research and development expenses

–9,896

–9,084

–18,383

–17,359

Selling and administrative expenses

–7,765

–6,541

19%

–14,896

–12,993

15%

Operating expenses

–17,661

–15,625

13%

–33,279

–30,352

10%

Other operating income and expenses

1,059

–206

–181

–185

Shares in earnings of JV and associated companies

–109

–94

Operating income

3,560

3,999

–11%

5,693

6,629

–14%

Financial income

–238

268

446

669

Financial expenses

–290

–465

–1,030

–1,077

Income after financial items

3,032

3,802

–20%

5,109

6,221

–18%

Taxes

–909

–1,140

–1,532

–1,867

Net income

2,123

2,662

–20%

3,577

4,354

–18%

Net income attributable to:

Stockholders of the Parent Company

2,094

2,579

3,413

4,699

Non–controlling interests

164

–345

Other information

Average number of shares, basic (million)

3,247

3,235

3,246

3,234

Earnings per share, basic (SEK)¹⁾

0.64

0.80

1.05

1.45

Earnings per share, diluted (SEK)¹⁾

0.64

0.79

1.04

1.44

¹⁾Based on Net income attributable to stockholders of the Parent Company.

STATEMENT OF COMPREHENSIVE INCOME

Apr–Jun

Jan–Jun

SEK million

2015

2014

2015

2014

Net income

2,123

2,662

3,577

4,354

Other comprehensive income

Items that will not be reclassified to profit or loss

Remeasurements of defined benefits pension plans incl. asset ceiling

–1,562

–574

–4,773

–2,196

Tax on items that will not be reclassified to profit or loss

610

114

1,304

443

Items that may be reclassified to profit or loss

Cash flow hedges

Gains/losses arising during the period

–

Reclassification adjustments for gains/losses included in profit or loss

–

Revaluation of other investments in shares and participations

Fair value remeasurement

–

181

–

Changes in cumulative translation adjustments

–2,626

2,619

1,783

3,020

Share of other comprehensive income on JV and associated companies

–92

117

–96

128

Tax on items that may be reclassified to profit or loss

–

Total other comprehensive income, net of tax

–3,670

2,276

–1,601

1,395

Total comprehensive income

–1,547

4,938

1,976

5,749

Total comprehensive income attributable to:

Stockholders of the Parent Company

–1,515

4,792

1,790

6,032

Non–controlling interest

–32

146

186

–283


16		Ericsson \| Second Quarter Report 2015

CONSOLIDATED BALANCE SHEET


SEK million	Jun 30 2015		Mar 31 2015		Dec 31 2014

ASSETS
Non–current assets
Intangible assets
Capitalized development expenses		4,032		3,522		3,570
Goodwill		39,872		41,140		38,330
Intellectual property rights, brands and other intangible assets		10,739		12,238		12,534

Property, plant and equipment		15,309		14,947		13,341

Financial assets
Equity in JV and associated companies		1,627		1,783		2,793
Other investments in shares and participations		855		836		591
Customer finance, non–current		1,919		2,311		1,932
Other financial assets, non–current		5,010		6,505		5,900

Deferred tax assets		14,054		14,274		12,778
		93,417		97,556		91,769

Current assets
Inventories		32,327		33,657		28,175

Trade receivables		73,932		80,334		77,893
Customer finance, current		2,552		2,633		2,289
Other current receivables		22,919		22,700		21,273

Short–term investments		20,807		30,776		31,171
Cash and cash equivalents		32,962		35,311		40,988
		185,499		205,411		201,789

Total assets		278,916		302,967		293,558

EQUITY AND LIABILITIES
Equity
Stockholders’ equity		135,565		147,855		144,306
Non–controlling interest in equity of subsidiaries		1,160		1,196		1,003
		136,725		149,051		145,309

Non–current liabilities
Post–employment benefits		24,530		24,163		20,385
Provisions, non–current		139		198		202
Deferred tax liabilities		3,010		3,156		3,177
Borrowings, non–current		22,551		23,496		21,864
Other non–current liabilities		1,939		1,815		1,797
		52,169		52,828		47,425

Current liabilities
Provisions, current		5,215		3,858		4,225
Borrowings, current		3,199		2,847		2,281
Trade payables		22,147		24,266		24,473
Other current liabilities		59,461		70,117		69,845
		90,022		101,088		100,824

Total equity and liabilities		278,916		302,967		293,558

Of which interest–bearing liabilities and post–employment benefits		50,280		50,506		44,530
Of which net cash¹⁾		3,489		15,581		27,629

Assets pledged as collateral		2,608		2,590		2,525
Contingent liabilities		693		721		737

¹⁾	Reconciliation of non-IFRS financial measures to the most directly comparable IFRS financial measures can be found on page 28.


17		Ericsson \| Second Quarter Report 2015

CONSOLIDATED STATEMENT

OF CASH FLOWS

Apr–Jun

Jan–Jun

Jan–Dec

SEK million

2015

2014

2015

2014

Operating activities

Net income

2,123

2,662

3,577

4,354

11,143

Adjustments to reconcile net income to cash

Taxes

–1,360

–3,281

–1,322

–1,235

Earnings/dividends in JV and associated companies

356

340

305

Depreciation, amortization and impairment losses

2,579

2,414

5,260

4,774

9,945

Other

404

966

953

2,185

3,413

5,862

6,549

9,099

22,343

Changes in operating net assets

Inventories

383

–1,188

–3,636

–3,287

–2,924

Customer finance, current and non–current

405

–341

147

217

–710

Trade receivables

3,630

–892

5,667

7,065

1,182

Trade payables

–1,400

1,644

–3,068

1,534

1,265

Provisions and post–employment benefits

1,685

–225

1,519

–689

–859

Other operating assets and liabilities, net

–5,038

–2,806

–10,000

–2,483

–1,595

–335

–3,808

–9,371

2,357

–3,641

Cash flow from operating activities

3,078

2,054

–2,822

11,456

18,702

Investing activities

Investments in property, plant and equipment

–2,424

–1,320

–4,791

–2,354

–5,322

Sales of property, plant and equipment

1,075

1,150

327

522

Acquisitions/divestments of subsidiaries and other operations, net

–169

–1,512

–227

–2,361

–4,394

Product development

–843

–185

–1,137

–382

–1,523

Other investing activities

–280

–388

–162

–557

–3,392

Short–term investments

9,678

7,012

10,077

222

6,596

Cash flow from investing activities

7,037

3,660

4,910

–5,105

–7,513

Cash flow before financing activities

10,115

5,714

2,088

6,351

11,189

Financing activities

Dividends paid

–11,035

–9,828

–11,060

–9,828

–9,846

Other financing activities

431

–2,393

1,330

–7,462

–8,379

Cash flow from financing activities

–10,604

–12,221

–9,730

–17,290

–18,225

Effect of exchange rate changes on cash

–1,860

1,499

–384

1,932

5,929

Net change in cash and cash equivalents

–2,349

–5,008

–8,026

–9,007

–1,107

Cash and cash equivalents, beginning of period

35,311

38,096

40,988

42,095

Cash and cash equivalents, end of period

32,962

33,088

32,962

33,088

40,988


18		Ericsson \| Second Quarter Report 2015

CONSOLIDATED STATEMENT

OF CHANGES IN EQUITY

SEK million

Jan–Jun

2015

Jan–Jun

2014

Jan–Dec

2014

Opening balance

145,309

141,623

Total comprehensive income

1,976

5,749

12,709

Sale/repurchase of own shares

106

Stock purchase plan

414

360

717

Dividends paid

–11,060

–9,828

–9,846

Transactions with non–controlling interests

–2

–

Closing balance

136,725

137,958

145,309

CONSOLIDATED INCOME STATEMENT

– ISOLATED QUARTERS

2015

2014

Isolated quarters, SEK million

Net sales

60,671

53,520

67,986

57,643

54,849

47,505

Cost of sales

–40,536

–34,556

–43,100

–37,362

–34,910

–30,184

Gross income

20,135

18,964

24,886

20,281

19,939

17,321

Gross margin (%)

33.2%

35.4%

36.6%

35.2%

36.4%

36.5%

Research and development expenses

–9,896

–8,487

–9,668

–9,281

–9,084

–8,275

Selling and administrative expenses

–7,765

–7,131

–8,107

–6,000

–6,541

–6,452

Operating expenses

–17,661

–15,618

–17,775

–15,281

–15,625

–14,727

Other operating income and expenses

1,059

–1,240

–837

–1,134

–206

Shares in earnings of JV and associated companies

–109

Operating income

3,560

2,133

6,302

3,876

3,999

2,630

Financial income

–238

684

179

429

268

401

Financial expenses

–290

–740

–639

–557

–465

–612

Income after financial items

3,032

2,077

5,842

3,748

3,802

2,419

Taxes

–909

–623

–1,677

–1,124

–1,140

–727

Net income

2,123

1,454

4,165

2,624

2,662

1,692

Net income attributable to:

Stockholders of the Parent Company

2,094

1,319

4,223

2,646

2,579

2,120

Non–controlling interests

135

–58

–22

–428

Other information

Average number of shares, basic (million)

3,247

3,244

3,241

3,238

3,235

3,233

Earnings per share, basic (SEK)¹⁾

0.64

0.41

1.30

0.82

0.80

0.66

Earnings per share, diluted (SEK)¹⁾

0.64

0.40

1.29

0.81

0.79

0.65

¹⁾Based on Net income attributable to stockholders of the Parent Company.


19		Ericsson \| Second Quarter Report 2015

CONSOLIDATED STATEMENT

OF CASH FLOWS – ISOLATED QUARTERS

2015

2014

Isolated quarters, SEK million

Operating activities

Net income

2,123

1,454

4,165

2,624

2,662

1,692

Adjustments to reconcile net income to cash

Taxes

–1,360

–1,921

475

–388

–1,348

Earnings/dividends in JV and associated companies

–22

–25

–10

356

–16

Depreciation, amortization and impairment losses

2,579

2,681

2,690

2,481

2,414

2,360

Other

944

965

267

404

549

3,413

3,136

8,270

4,974

5,862

3,237

Changes in operating net assets

Inventories

383

–4,019

1,203

–840

–1,188

–2,099

Customer finance, current and non–current

405

–258

174

–1,101

–341

558

Trade receivables

3,630

2,037

–4,661

–1,222

–892

7,957

Trade payables

–1,400

–1,668

1,250

–1,519

1,644

–110

Provisions and post–employment benefits

1,685

–166

–152

–18

–225

–464

Other operating assets and liabilities, net

–5,038

–4,962

2,512

–1,624

–2,806

323

–335

–9,036

326

–6,324

–3,808

6,165

Cash flow from operating activities

3,078

–5,900

8,596

–1,350

2,054

9,402

Investing activities

Investments in property, plant and equipment

–2,424

–2,367

–1,553

–1,415

–1,320

–1,034

Sales of property, plant and equipment

1,075

139

274

Acquisitions/divestments of subsidiaries and other operations, net

–169

–58

–1,747

–286

–1,512

–849

Product development

–843

–294

–986

–155

–185

–197

Other investing activities

–280

118

–1,533

–1,302

–388

–169

Short–term investments

9,678

399

4,066

2,308

7,012

–6,790

Cash flow from investing activities

7,037

–2,127

–1,697

–711

3,660

–8,765

Cash flow before financing activities

10,115

–8,027

6,899

–2,061

5,714

637

Financing activities

Dividends paid

–11,035

–25

–15

–3

–9,828

–

Other financing activities

431

899

371

–1,288

–2,393

–5,069

Cash flow from financing activities

–10,604

��

874

356

–1,291

–12,221

–5,069

Effect of exchange rate changes on cash

–1,860

1,476

1,691

2,306

1,499

433

Net change in cash and cash equivalents

–2,349

–5,677

8,946

–1,046

–5,008

–3,999

Cash and cash equivalents, beginning of period

35,311

40,988

32,042

33,088

38,096

42,095

Cash and cash equivalents, end of period

32,962

35,311

40,988

32,042

33,088

38,096


20		Ericsson \| Second Quarter Report 2015

ACCOUNTING POLICIES

The Group

This interim report is prepared in accordance with IAS 34. The term “IFRS” used in this document refers to the application of IAS and IFRS as well as interpretations of these standards as issued by IASB’s Standards Interpretation Committee (SIC) and IFRS Interpretations Committee (IFRIC). The accounting policies adopted are consistent with those of the annual report for the year ended December 31, 2014, and should be read in conjunction with that annual report.

There is no significant difference between IFRS effective as per June 30, 2015 and IFRS as endorsed by the EU.


21		Ericsson \| Second Quarter Report 2015

NET SALES BY SEGMENT BY QUARTER

2015

2014

Isolated quarters, SEK million

Networks

31,163

26,436

34,110

30,030

28,964

24,383

Global Services

26,392

23,901

29,777

24,467

23,059

20,356

Of which Professional Services

20,001

18,131

21,405

17,794

16,554

15,078

Of which Managed Services

8,150

7,501

7,741

7,175

6,485

5,754

Of which Network Rollout

6,391

5,770

8,372

6,673

6,505

5,278

Support Solutions

3,092

3,074

4,009

3,057

2,824

2,765

Modems

109

Total

60,671

53,520

67,986

57,643

54,849

47,505

2015

2014

Sequential change, percent

Networks

18%

–22%

14%

19%

–30%

Global Services

10%

–20%

22%

13%

–25%

Of which Professional Services

10%

–15%

20%

10%

–20%

Of which Managed Services

–3%

11%

13%

–12%

Of which Network Rollout

11%

–31%

25%

23%

–37%

Support Solutions

–23%

31%

–46%

Modems

–

Total

13%

–21%

18%

15%

–29%

2015

2014

Year over year change, percent

Networks

–2%

13%

–13%

Global Services

14%

17%

10%

–7%

–5%

Of which Professional Services

21%

20%

14%

10%

–1%

Of which Managed Services

26%

30%

18%

15%

–4%

–2%

Of which Network Rollout

–2%

–14%

–19%

–23%

Support Solutions

11%

–21%

30%

21%

13%

Modems

–

Total

11%

13%

–1%

–9%

2015

2014

Year to date, SEK million

Jan–Jun

Jan–Mar

Jan–Dec

Jan–Sep

Jan–Jun

Jan–Mar

Networks

57,599

26,436

117,487

83,377

53,347

24,383

Global Services

50,293

23,901

97,659

67,882

43,415

20,356

Of which Professional Services

38,132

18,131

70,831

49,426

31,632

15,078

Of which Managed Services

15,651

7,501

27,155

19,414

12,239

5,754

Of which Network Rollout

12,161

5,770

26,828

18,456

11,783

5,278

Support Solutions

6,166

3,074

12,655

8,646

5,589

2,765

Modems

133

109

182

Total

114,191

53,520

227,983

159,997

102,354

47,505

2015

2014

Year to date, year over year change, percent

Jan–Jun

Jan–Mar

Jan–Dec

Jan–Sep

Jan–Jun

Jan–Mar

Networks

–5%

–13%

Global Services

16%

17%

–3%

–6%

–5%

Of which Professional Services

21%

20%

Of which Managed Services

28%

30%

–3%

–2%

Of which Network Rollout

–14%

–19%

–21%

–23%

Support Solutions

10%

11%

21%

17%

13%

Modems

–

Total

12%

13%

–5%

–9%


22		Ericsson \| Second Quarter Report 2015

OPERATING INCOME

BY SEGMENT BY QUARTER

2015

2014

Isolated quarters, SEK million

Networks

2,435

590

4,319

3,175

3,574

2,476

Global Services

1,640

1,681

1,937

1,607

1,487

1,036

Of which Professional Services

2,403

2,109

2,472

2,059

2,095

1,893

Of which Network Rollout

–763

–428

–535

–452

–608

–857

Support Solutions

–240

443

–108

–378

Modems

–85

–739

–456

–745

Unallocated¹⁾

–282

–220

–312

–59

–228

–149

Total

3,560

2,133

6,302

3,876

3,999

2,630

2015

2014

Year to date, SEK million

Jan–Jun

Jan–Mar

Jan–Dec

Jan–Sep

Jan–Jun

Jan–Mar

Networks

3,025

590

13,544

9,225

6,050

2,476

Global Services

3,321

1,681

6,067

4,130

2,523

1,036

Of which Professional Services

4,512

2,109

8,519

6,047

3,988

1,893

Of which Network Rollout

–1,191

–428

–2,452

–1,917

–1,465

–857

Support Solutions

–158

–31

–474

–366

Modems

–2,025

–1,940

–1,201

–745

Unallocated¹⁾

–502

–220

–748

–436

–377

–149

Total

5,693

2,133

16,807

10,505

6,629

2,630

¹⁾ “Unallocated” consists mainly of costs for corporate staff, non–operational capital gains and losses.

OPERATING MARGIN

BY SEGMENT BY QUARTER

2015

2014

As percentage of net sales, isolated quarters

Networks

13%

11%

12%

10%

Global Services

Of which Professional Services

12%

13%

Of which Network Rollout

–12%

–7%

–6%

–7%

–9%

–16%

Support Solutions

–8%

11%

–4%

–13%

Modems

–

Total

2015

2014

As percentage of net sales, year to date

Jan–Jun

Jan–Mar

Jan–Dec

Jan–Sep

Jan–Jun

Jan–Mar

Networks

12%

11%

10%

Global Services

Of which Professional Services

12%

13%

Of which Network Rollout

–10%

–7%

–9%

–10%

–12%

–16%

Support Solutions

–3%

–5%

–7%

Modems

–

Total


23		Ericsson \| Second Quarter Report 2015

NET SALES

BY REGION BY QUARTER


	2015				2014
Isolated quarters, SEK million	Q2		Q1		Q4		Q3		Q2		Q1

North America		14,578		12,246		13,082		14,033		15,179		12,215
Latin America		5,067		4,574		6,564		5,882		5,414		4,710
Northern Europe & Central Asia¹⁾²⁾		2,556		2,726		4,069		3,151		2,717		2,436
Western & Central Europe²⁾		5,131		4,741		6,097		4,646		4,582		4,381
Mediterranean²⁾		5,887		4,982		7,513		5,218		5,487		4,785
Middle East		6,515		4,517		6,865		6,039		4,514		3,859
Sub Saharan Africa		2,653		2,158		2,603		2,447		1,886		1,813
India		3,049		3,531		2,362		2,000		1,645		1,695
North East Asia		6,943		6,030		9,225		7,033		6,406		4,908
South East Asia & Oceania		4,897		4,259		4,956		3,794		3,662		3,446
Other¹⁾²⁾		3,395		3,756		4,650		3,400		3,357		3,257
Total		60,671		53,520		67,986		57,643		54,849		47,505
¹⁾Of which in Sweden		598		1,091		1,047		1,090		1,008		999
²⁾Of which in EU		11,453		10,904		14,325		10,736		10,320		9,720

	2015				2014
Sequential change, percent	Q2		Q1		Q4		Q3		Q2		Q1

North America		19%		–6%		–7%		–8%		24%		–11%
Latin America		11%		–30%		12%		9%		15%		–30%
Northern Europe & Central Asia¹⁾²⁾		–6%		–33%		29%		16%		12%		–34%
Western & Central Europe²⁾		8%		–22%		31%		1%		5%		–16%
Mediterranean²⁾		18%		–34%		44%		–5%		15%		–32%
Middle East		44%		–34%		14%		34%		17%		–35%
Sub Saharan Africa		23%		–17%		6%		30%		4%		–30%
India		–14%		49%		18%		22%		–3%		–14%
North East Asia		15%		–35%		31%		10%		31%		–43%
South East Asia & Oceania		15%		–14%		31%		4%		6%		–20%
Other¹⁾²⁾		–10%		–19%		37%		1%		3%		–55%
Total		13%		–21%		18%		5%		15%		–29%
¹⁾Of which in Sweden		–45%		4%		–4%		8%		1%		–25%
²⁾Of which in EU		5%		–24%		33%		4%		6%		–24%

	2015				2014
Year–over–year change, percent	Q2		Q1		Q4		Q3		Q2		Q1

North America		–4%		0%		–5%		–3%		–1%		–23%
Latin America		–6%		–3%		–3%		11%		–3%		8%
Northern Europe & Central Asia¹⁾²⁾		–6%		12%		11%		7%		0%		7%
Western & Central Europe²⁾		12%		8%		17%		6%		1%		1%
Mediterranean²⁾		7%		4%		6%		–8%		–11%		–9%
Middle East		44%		17%		16%		38%		13%		22%
Sub Saharan Africa		41%		19%		1%		–9%		–29%		–15%
India		85%		108%		20%		56%		29%		6%
North East Asia		8%		23%		7%		16%		–4%		–19%
South East Asia & Oceania		34%		24%		16%		5%		–3%		–17%
Other¹⁾²⁾		1%		15%		–35%		55%		23%		12%
Total		11%		13%		1%		9%		–1%		–9%
¹⁾Of which in Sweden		–41%		9%		–21%		37%		–21%		–2%
²⁾Of which in EU		11%		12%		12%		6%		–5%		–1%


24		Ericsson \| Second Quarter Report 2015

NET SALES

BY REGION BY QUARTER,CONT.


	2015				2014
Year to date, SEK million	Jan–Jun		Jan–Mar		Jan–Dec		Jan–Sep		Jan–Jun		Jan–Mar

North America		26,824		12,246		54,509		41,427		27,394		12,215
Latin America		9,641		4,574		22,570		16,006		10,124		4,710
Northern Europe & Central Asia¹⁾²⁾		5,282		2,726		12,373		8,304		5,153		2,436
Western & Central Europe²⁾		9,872		4,741		19,706		13,609		8,963		4,381
Mediterranean²⁾		10,869		4,982		23,003		15,490		10,272		4,785
Middle East		11,032		4,517		21,277		14,412		8,373		3,859
Sub Saharan Africa		4,811		2,158		8,749		6,146		3,699		1,813
India		6,580		3,531		7,702		5,340		3,340		1,695
North East Asia		12,973		6,030		27,572		18,347		11,314		4,908
South East Asia & Oceania		9,156		4,259		15,858		10,902		7,108		3,446
Other¹⁾²⁾		7,151		3,756		14,664		10,014		6,614		3,257
Total		114,191		53,520		227,983		159,997		102,354		47,505
¹⁾Of which in Sweden		1,689		1,091		4,144		3,097		2,007		999
²⁾Of which in EU		22,357		10,904		45,101		30,776		20,040		9,720

	2015				2014
Year to date, year–over–year change, percent	Jan–Jun		Jan–Mar		Jan–Dec		Jan–Sep		Jan–Jun		Jan–Mar

North America		–2%		0%		–8%		–9%		–12%		–23%
Latin America		–5%		–3%		3%		5%		2%		8%
Northern Europe & Central Asia¹⁾²⁾		3%		12%		6%		5%		3%		7%
Western & Central Europe²⁾		10%		8%		7%		3%		1%		1%
Mediterranean²⁾		6%		4%		–5%		–9%		–10%		–9%
Middle East		32%		17%		22%		25%		17%		22%
Sub Saharan Africa		30%		19%		–13%		–18%		–23%		–15%
India		97%		108%		25%		28%		16%		6%
North East Asia		15%		23%		1%		–2%		–11%		–19%
South East Asia & Oceania		29%		24%		0%		–5%		–10%		–17%
Other¹⁾²⁾		8%		15%		–2%		28%		18%		12%
Total		12%		13%		0%		0%		–5%		–9%
¹⁾Of which in Sweden		–16%		9%		–6%		0%		–13%		–2%
²⁾Of which in EU		12%		12%		4%		0%		–3%		–1%

TOP 5 COUNTRIES IN SALES


	Q2				Jan–Jun
Country	2015		2014		2015		2014

United States		24%		28%		24%		27%
China		9%		6%		8%		5%
India		5%		3%		6%		3%
United Kingdom		3%		3%		3%		3%
Italy		3%		3%		3%		3%


25		Ericsson \| Second Quarter Report 2015

NET SALES BY REGION BY SEGMENT


	Q2 2015										Jan–Jun 2015
SEK milion	Networks		Global Services		Support Solutions		Modems		Total		Networks		Global Services		Support Solutions		Modems		Total

North America		6,664		7,067		847		–		14,578		11,815		13,367		1,642		–		26,824
Latin America		2,254		2,631		182		–		5,067		4,396		4,846		399		–		9,641
Northern Europe & Central Asia		1,544		945		67		–		2,556		3,358		1,783		141		–		5,282
Western & Central Europe		1,901		3,084		146		–		5,131		3,540		6,019		313		–		9,872
Mediterranean		2,403		3,292		192		–		5,887		4,318		6,212		339		–		10,869
Middle East		4,047		2,145		323		–		6,515		6,444		4,082		506		–		11,032
Sub Saharan Africa		1,241		1,256		156		–		2,653		1,998		2,420		393		–		4,811
India		1,828		1,063		158		–		3,049		3,931		2,167		482		–		6,580
North East Asia		4,796		1,953		194		–		6,943		8,757		3,962		254		–		12,973
South East Asia & Oceania		2,518		2,278		101		–		4,897		4,933		4,042		181		–		9,156
Other		1,967		678		726		24		3,395		4,109		1,393		1,516		133		7,151
Total		31,163		26,392		3,092		24		60,671		57,599		50,293		6,166		133		114,191
Share of Total		51%		44%		5%		0%		100%		51%		44%		5%		0%		100%

	Q2 2015
Sequential change, percent	Networks		Global Services		Support Solutions		Modems		Total

North America		29%		12%		7%		–		19%
Latin America		5%		19%		–16%		–		11%
Northern Europe & Central Asia		–15%		13%		–9%		–		–6%
Western & Central Europe		16%		5%		–13%		–		8%
Mediterranean		25%		13%		31%		–		18%
Middle East		69%		11%		77%		–		44%
Sub Saharan Africa		64%		8%		–34%		–		23%
India		–13%		–4%		–51%		–		–14%
North East Asia		21%		–3%		223%		–		15%
South East Asia & Oceania		4%		29%		26%		–		15%
Other		–8%		–5%		–8%		–		–10%
Total		18%		10%		1%		–		13%

	Q2 2015
Year over year change, percent	Networks		Global Services		Support Solutions		Modems		Total

North America		–14%		11%		–23%		–		–4%
Latin America		–14%		0%		17%		–		–6%
Northern Europe & Central Asia		–12%		3%		37%		–		–6%
Western & Central Europe		4%		19%		–9%		–		12%
Mediterranean		–2%		15%		8%		–		7%
Middle East		59%		21%		64%		–		44%
Sub Saharan Africa		45%		32%		114%		–		41%
India		106%		50%		229%		–		85%
North East Asia		11%		–3%		120%		–		8%
South East Asia & Oceania		39%		32%		–19%		–		34%
Other		–10%		32%		12%		–		1%
Total		8%		14%		9%		–		11%

	Jan–Jun 2015
Year over year change, percent	Networks		Global Services		Support Solutions		Modems		Total

North America		–17%		17%		–6%		–		–2%
Latin America		–13%		4%		2%		–		–5%
Northern Europe & Central Asia		7%		–7%		31%		–		3%
Western & Central Europe		–2%		19%		8%		–		10%
Mediterranean		–3%		14%		–8%		–		6%
Middle East		48%		12%		35%		–		32%
Sub Saharan Africa		26%		36%		19%		–		30%
India		121%		54%		209%		–		97%
North East Asia		24%		–2%		26%		–		15%
South East Asia & Oceania		34%		26%		–16%		–		29%
Other		–6%		72%		7%		–		8%
Total		8%		16%		10%		–		12%


26		Ericsson \| Second Quarter Report 2015

PROVISIONS

2015

2014

Isolated quarters, SEK million

Opening balance

4,056

4,427

4,567

4,579

4,928

5,362

Additions

2,777

915

996

675

430

625

Utilization/Cash out

–1,217

–1,204

–794

–648

–642

–977

Of which restructuring

–472

–437

–213

–231

–246

–512

Reversal of excess amounts

–161

–236

–420

–132

–298

–88

Reclassification, translation difference and other

–101

154

161

Closing balance

5,354

4,056

4,427

4,567

4,579

4,928

2015

2014

Year to date, SEK million

Jan–Jun

Jan–Mar

Jan–Dec

Jan–Sep

Jan–Jun

Jan–Mar

Opening balance

4,427

5,362

Additions

3,692

915

2,726

1,730

1,055

625

Utilization/Cash out

–2,421

–1,204

–3,061

–2,267

–1,619

–977

Of which restructuring

–909

–437

–1,202

–989

–758

–512

Reversal of excess amounts

–397

–236

–938

–518

–386

–88

Reclassification, translation difference and other

154

338

260

167

Closing balance

5,354

4,056

4,427

4,567

4,579

4,928

INFORMATION ON INVESTMENTS

Investments in assets subject to depreciation, amortization, impairment and write–downs

2015

2014

Isolated quarters, SEK million

Additions

Property, plant and equipment

2,424

2,367

1,553

1,415

1,320

1,034

Capitalized development expenses

843

294

986

155

185

197

IPR, brands and other intangible assets

1,014

935

621

Total

3,293

2,672

3,553

2,505

2,126

1,308

Depreciation, amortization and impairment losses

Property, plant and equipment

1,152

1,214

1,187

1,078

1,048

1,004

Capitalized development expenses

333

342

311

315

333

IPR, brands and other intangible assets, etc.

1,094

1,125

1,161

1,092

1,051

1,023

Total

2,579

2,681

2,690

2,481

2,414

2,360


27		Ericsson \| Second Quarter Report 2015

RECONCILIATION TABLE, NON-IFRS

MEASUREMENTS – CASH CONVERSION


	2015				2014
Isolated quarters, SEK million	Q2		Q1		Q4		Q3		Q2		Q1

Net income		2,123		1,454		4,165		2,624		2,662		1,692
Net income reconciled to cash		3,413		3,136		8,270		4,974		5,862		3,237
Cash flow from operating activities		3,078		–5,900		8,596		–1,350		2,054		9,402
Cash conversion		90.2%		–188.1%		103.9%		–27.1%		35.0%		290.5%

NET CASH – END OF PERIOD


SEK million	Jun 30 2015		Mar 31 2015		Dec 31 2014

Cash and cash equivalents		32,962		35,311		40,988
+ Short term investments		20,807		30,776		31,171
– Borrowings, non-current		22,551		23,496		21,864
– Borrowings, current		3,199		2,847		2,281
– Post employment benefits		24,530		24,163		20,385
Net cash, end of period		3,489		15,581		27,629


28		Ericsson \| Second Quarter Report 2015

OTHER INFORMATION


	Apr–Jun				Jan–Jun				Jan–Dec
SEK million	2015		2014		2015		2014		2014

Number of shares and earnings per share
Number of shares, end of period (million)		3,305		3,305		3,305		3,305		3,305
Of which class A–shares (million)		262		262		262		262		262
Of which class B–shares (million)		3,043		3,043		3,043		3,043		3,043
Number of treasury shares, end of period (million)		57		69		57		69		63
Number of shares outstanding, basic, end of period (million)		3,248		3,236		3,248		3,236		3,242
Numbers of shares outstanding, diluted, end of period (million)		3,281		3,268		3,281		3,268		3,275
Average number of treasury shares (million)		58		70		59		71		68
Average number of shares outstanding, basic (million)		3,247		3,235		3,246		3,234		3,237
Average number of shares outstanding, diluted (million)¹⁾		3,280		3,268		3,278		3,266		3,270
Earnings per share, basic (SEK)		0.64		0.80		1.05		1.45		3.57
Earnings per share, diluted (SEK)¹⁾		0.64		0.79		1.04		1.44		3.54

Ratios
Days sales outstanding		–		–		112		113		105
Inventory turnover days		74		68		74		70		64
Payable days		52		57		57		61		56
Equity ratio (%)		–		–		49.0%		52.0%		49.5%
Capital turnover (times)		1.3		1.2		1.2		1.2		1.2
Cash conversion (%)²⁾		90.2%		35.0%		–43.1%		125.9%		83.7%

Exchange rates used in the consolidation³⁾
SEK/EUR– closing rate		–		–		9.22		9.18		9.47
SEK/USD– closing rate		–		–		8.24		6.72		7.79

Other
Regional inventory, end of period		18,778		17,339		18,778		17,339		17,142
Export sales from Sweden		29,813		28,157		55,964		52,235		113,734

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

²⁾ Reconciliation of non-IFRS financial measures to the most directly comparable IFRS financial measures can be found on page 28.

³⁾Translation method changed from 2015. Monthly rates used to translate transactions are available on www.ericsson.com/thecompany/investors

NUMBER OF EMPLOYEES


	2015				2014
End of period	Jun 30		Mar 31		Dec 31		Sep 31		Jun 30		Mar 31

North America		14,975		15,156		15,516		15,554		15,306		14,902
Latin America		10,823		10,970		11,066		10,901		11,179		9,731
Northern Europe & Central Asia¹⁾		21,441		21,556		21,633		21,691		21,476		21,484
Western & Central Europe		12,400		12,575		12,617		12,606		12,624		11,455
Mediterranean		12,925		13,363		13,387		13,306		12,475		12,253
Middle East		3,717		3,813		3,858		3,831		3,736		3,749
Sub Saharan Africa		2,389		2,442		2,406		2,288		2,284		2,094
India		21,353		21,215		19,971		19,413		18,495		17,991
North East Asia		13,104		13,488		13,464		13,653		13,448		13,490
South East Asia & Oceania		4,056		4,128		4,137		4,265		4,359		4,234
Total		117,183		118,706		118,055		117,508		115,382		111,383
¹⁾Of which in Sweden		17,560		17,569		17,580		17,655		17,497		17,545


29		Ericsson \| Second Quarter Report 2015

RESTRUCTURING CHARGES BY FUNCTION

2015

2014

Isolated quarters, SEK million

Cost of sales

–1,157

–484

–663

–168

–116

–82

Research and development expenses

–1,118

–51

–113

–92

–80

–19

Selling and administrative expenses

–469

–79

–28

–19

–47

–29

Total

–2,744

–614

–804

–279

–243

–130

2015

2014

Year to date, SEK million

Jan–Jun

Jan–Mar

Jan–Dec

Jan–Sep

Jan–Jun

Jan–Mar

Cost of sales

–1,641

–484

–1,029

–366

–198

–82

Research and development expenses

–1,169

–51

–304

–191

–99

–19

Selling and administrative expenses

–548

–79

–123

–95

–76

–29

Total

–3,358

–614

–1,456

–652

–373

–130

RESTRUCTURING CHARGES BY SEGMENT

2015

2014

Isolated quarters, SEK million

Networks

–1,842

–173

–142

–80

–128

–93

Global Services

–691

–419

–600

–122

–81

–32

Of which Professional Services

–175

–140

–435

–85

–63

–25

Of which Network Rollout

–516

–279

–165

–37

–18

–7

Support Solutions

–194

–19

–30

–77

–34

–5

Modems

–12

–3

–32

–

Unallocated

–5

–

Total

–2,744

–614

–804

–279

–243

–130

2015

2014

Year to date, SEK million

Jan–Jun

Jan–Mar

Jan–Dec

Jan–Sep

Jan–Jun

Jan–Mar

Networks

–2,015

–174

–443

–301

–221

–93

Global Services

–1,110

–419

–835

–235

–113

–32

Of which Professional Services

–315

–140

–608

–173

–88

–25

Of which Network Rollout

–795

–279

–227

–62

–25

–7

Support Solutions

–213

–19

–146

–116

–39

–5

Modems

–15

–3

–32

–

Unallocated

–5

–

Total

–3,358

–614

–1,456

–652

–373

–130


30		Ericsson \| Second Quarter Report 2015

Telefonaktiebolaget LM Ericsson (ERIC) 6-KCurrent report (foreign)

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