Telefonaktiebolaget LM Ericsson 6K Current report

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM6-K

REPORT OF FOREIGN ISSUER

Pursuant to Rule13a-16 or15d-16

of the Securities Exchange Act of 1934

April 25, 2017

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 Form20-F or Form40-F.Form 20-F ☒ Form40-F ☐

Indicate by check mark if the registrant is submitting the Form6-K in paper as permitted by RegulationS-T Rule 101(b)(1): ☐

Indicate by check mark if the registrant is submitting the Form6-K in paper as permitted by RegulationS-T Rule 101(b)(7): ☐

Announcement of LM Ericsson Telephone Company, April 25, 2017 regarding “Ericsson reports first quarter results 2017”.

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/ NINA MACPHERSON
		Nina Macpherson
		Senior Vice President & Chief Legal Officer

By:		/S/ HELENA NORRMAN
		Helena Norrman
		Senior Vice President
		Corporate Marketing & Communications Officer

Date:April 25, 2017

LOGO

FIRST QUARTER 2017

Stockholm, April 25, 2017


FIRST QUARTER HIGHLIGHTS		Read more (page)

•	Reported sales decreased by -11% YoY. Sales, adjusted for currency, decreased -16% YoY partly due to lower IPR licensing revenues which amounted to SEK 2.0 (3.8) b.	3

•	Provisions and adjustments related to certain customer contracts of SEK -8.4 b., asset write-downs of SEK -3.3 b. and restructuring charges of SEK -1.7 b. were made in the quarter, in line with the announcement on March 28, 2017.	2

•	Gross margin was 13.9%. Adjusted1) gross margin declined to 30.5% (33.9%) mainly due to lower IPR licensing revenues.	4

•	Operating income was SEK -12.3 b. Adjusted¹⁾ operating income declined to SEK 1.1 (4.1) b. due to lower sales and lower gross margin.	4

•	Networks operating margin was -2%. Networks adjusted1) operating margin was solid at 12%, despite lower sales including reduced IPR licensing revenues.	2

•	IT & Cloud operating income was SEK -9.0 b. Adjusted1) operating income for IT & Cloud showed a significant negative development YoY with increased losses. Actions have been initiated to improve performance.	2

•	Media operating income was SEK -2.8 b. Adjusted1) operating income was significantly reduced YoY. Strategic opportunities are being explored.	2

•	Cash flow from operating activities was SEK -1.5 (-2.4) b.	9

¹⁾	Restructuring, write-down of assets as well as provisions and adjustments related to certain customer projects had a significant negative impact on the reported Q1 2017 result. Numbers excluding these items are referred to in the text as “adjusted”, please see page 3 for reconciliation.


SEK b.	Q1 2017			Q1 2016			YoY change			Q4 2016			QoQ change
Net sales		46.4			52.2			-11	%		65.2			-29	%
Sales growth adj. for comparable units and currency		—			—			-16	%		—			-29	%
Gross margin		13.9	%		33.3	%		—			26.1	%		—
Gross margin excluding restructuring charges and adjusted for items affecting comparability in Q1 2017		30.5	%		33.9	%		—			29.4	%		—
Operating income		-12.3			3.5			—			-0.3			—
Operating income excluding restructuring charges and adjusted for items affecting comparability in Q1 2017		1.1			4.1			-73	%		4.4			-75	%
Operating margin		-26.6	%		6.7	%		—			-0.4	%		—
Operating margin excluding restructuring charges and adjusted for items affecting comparability in Q1 2017		2.3	%		7.9	%		—			6.7	%		—
Net income		-10.9			2.1			—			-1.6			—
EPS diluted, SEK		-3.29			0.60			—			-0.48			—
EPS (Non-IFRS), SEK²⁾		-2.42			0.87			—			0.62			—
Cash flow from operating activities		-1.5			-2.4			-35	%		19.4			-108	%
Net cash, end of period		28.3			36.5			-22	%		31.2			-9	%

²⁾	EPS diluted, excl. amortizations and write-downs of acquired intangible assets, and excluding restructuring charges.

Non-IFRS financial measures are reconciled to the most directly reconcilable line items in the financial statements at the end of this report.

1 Ericsson | First Quarter Report 2017

CEO Comments

Our performance in the first quarter continued to be unsatisfactory. Segment Networks delivered a solid result despite lower sales, while losses in segments IT & Cloud and Media increased significantly. In the quarter a more focused business strategy and a new Executive Team were announced. The immediate priority is to improve profitability while also taking action to revitalize technology and market leadership.

Reported sales declined by -11%. Operating income was SEK-12.3 b., after provisions, write-downs and restructuring charges of SEK -13.4 b. Excluding these items the operating income amounted to SEK 1.1 b.

Despite lower sales, Networks delivered a solid result. Sales declined YoY due to lower investment levels in certain markets, lower IPR licensing revenues and the renewed managed services contract with reduced scope in North America. Networks adjusted1) operating margin improved sequentially and was supported by an improved business mix and a more competitive portfolio. The new Ericsson Radio System platform contributed to improving profitability and stabilizing the market share position, after several years of decline.

The concerning developments in IT & Cloud continued with significantly increased losses. IT & Cloud remains a strategic area for Ericsson as our customers will digitalize their operations and invest in a future network architecture based on software-defined logic. However, our performance in this area is not acceptable and the new management team is initiating actions to turn the business around. Actions include accelerating the introduction of the new products, streamlining the services organization and tightening the contract scoping. We will continue to sell complete solutions in telecom core, OSS and BSS, including hardware, software and services. However, we are seeking alternatives for our IT cloud infrastructure hardware business to gain necessary scale to ensure that we can offer competitive solutions to our customers. Tangible improvements in profitability are expected during 2018.

The accelerated losses in Media were caused by a faster than anticipated decline in legacy product sales, not offset by growth in the new portfolio. While continuing to develop our media solutions we are exploring strategic opportunities for Media to allow it to scale and succeed in the evolving media landscape.

Of the total adjustments¹⁾ of SEK -13.4 b., write-downs were SEK -3.3 b. and restructuring charges were SEK -1.7 b. Triggered by negative developments late in the quarter related to certain customer contracts, provisions and adjustments of SEK -8.4 b. were made of which SEK 5.8 b. is estimated to negatively affect cash flow over several years.

The provisions and adjustments of SEK -8.4 b. consist of the following items. Customer settlements and revaluation of customer discounts, due to lower projected customer volumes, reduced net sales by SEK -1.4 b. Operating expenses were impacted by SEK -1.5 b. due to reassessment of the

value of trade receivables. The remaining SEK -5.5 b. is provisions for additional project costs, mainly related to certain transformation projects in IT & Cloud, which due to recent negative developments are not expected to be covered by future project revenues.

In light of the current market environment and company position we are taking a more prudent approach in assessing risk exposures. In this work we have identified certain large, complex transformation projects with challenging profitability and higher inherent risks, that we are focused on mitigating.

On March 28, 2017, we presented a more focused business strategy and a new Executive Team. The new strategy aims to revitalize technology and market leadership, improve group profitability and enable customer success.

The strategy builds on reallocating resources and investments to core portfolio areas, fully leveraging the potential of 5G, IoT and cloud. We will also refocus Managed Services and Network Roll-out to improve profitability. By addressing low-performing operations within Managed Services and optimizing the offering within Network Roll-out, full-year sales are expected to be negatively impacted by up to SEK 10 b. by 2019.

We are not satisfied with the cost structure of the company and the existing cost and efficiency program is not yielding sufficient results. Based on current profitability, we will intensify our efforts to reduce cost with focus on structural changes to generate lasting efficiency gains and increase cost competitiveness. Our target is to surpass previous ambitions. However, we need to increase investment in certain core areas to develop our product portfolio, which can temporarily increase cost levels.

The more focused business strategy is expected to result in a significantly improved profitability already in 2018. Beyond 2018, we believe that we can at least double the underlying 2016 operating margin.

Börje Ekholm

President and CEO

Planning assumptions going forward

•

Industry trends and business mix in mobile broadband from 2016 are expected to prevail in 2017.

•

RAN equipment market in USD estimated to decline by -2% to -6% in 2017.

•

The earlier communicated renewed managed services contract with reduced scope in North America will impact sales negatively YoY in Q2 and Q3 2017.

•

Addressing low-performing operations in Managed Services and optimizing the offering within Network Rollout are expected to reduce full-year sales by up to SEK 10 b. by 2019.

•

The baseline for current IPR licensing contract portfolio is approximately SEK 7 b. on an annual basis.

•

The restructuring charges for 2017 are estimated to be SEK 6-8 b.

¹⁾	Restructuring, write-down of assets as well as provisions and adjustments related to cer- tain customer projects had a significant negative impact on the reported Q1 2017 result. Numbers excluding these items are referred to in the text as “adjusted”, please see page 3 for reconciliation.

2 Ericsson | First Quarter Report 2017

FINANCIAL HIGHLIGHTS


SEK b.	Q1 2017			Q1 2016			YoY change			Q4 2016			QoQ change
Net sales		46.4			52.2			-11	%		65.2			-29	%
Of which Networks		34.9			39.9			-13	%		47.8			-27	%
Of which IT & Cloud		9.5			9.8			-3	%		14.9			-36	%
Of which Media		2.0			2.4			-20	%		2.5			-23	%
Gross income		6.4			17.4			-63	%		17.0			-62	%
Gross margin (%)		13.9	%		33.3	%		—			26.1	%		—
Research and development expenses		-9.1			-7.5			21	%		-8.9			2	%
Selling and administrative expenses		-9.9			-6.7			47	%		-8.8			12	%
Other operating income and expenses		0.1			0.3			-48	%		0.4			-61	%
Operating income		-12.3			3.5			—			-0.3			—
Operating margin		-26.6	%		6.7	%		—			-0.4	%		—
for Networks		-2	%		14	%		—			5	%		—
for IT & Cloud		-94	%		-20	%		—			-12	%		—
for Media		-143	%		-13	%		—			-33	%		—
Financial net		-0.4			-0.5			-7	%		-0.7			-37	%
Taxes		1.9			-0.9			—			-0.6			—
Net income		-10.9			2.1			—			-1.6			—
Restructuring charges		-1.7			-0.6			176	%		-4.6			-63	%

Q1 2017 ADJUSTED FOR RESTRUCTURING CHARGES AND ITEMS AFFECTING COMPARABILITY


SEK b.	Q1 2017 reported			Restructuring charges		Asset write-downs		Provisions and customer project adjustments		Q1 2017 adjusted			Q1 2016 excl. restructuring charges			Q4 2016 excl. restructuring charges
Net sales		46.4			—		—		1.4		47.8			52.2			65.2
Gross income		6.4			1.5		—		6.7		14.6			17.7			19.2
Gross margin (%)		13.9	%		—		—		—		30.5	%		33.9	%		29.4	%
Research and development expenses		-9.1			0.2		1.9		0.2		-6.7			-7.2			-7.4
Selling and administrative expenses		-9.9			0.1		1.4		1.5		-7.0			-6.7			-7.8
Other operating income and expenses		0.1			—		—		—		0.1			0.3			0.4
Operating income		-12.3			1.7		3.3		8.4		1.1			4.1			4.4
for Networks		-0.5			1.4		0.1		3.3		4.3			6.2			4.8
for IT & Cloud		-9.0			0.2		1.5		5.0		-2.2			-1.8			0.0
for Media		-2.8			0.1		1.7		—		-1.0			-0.3			-0.4
Operating margin		-26.6	%		—		—		—		2.3	%		7.9	%		6.7	%

Restructuring, write-down of assets as well as provisions and adjustments related to certain customer projects had a significant negative impact on the reported Q1 2017 result. Numbers excluding these items are referred to in the text as “adjusted”.

Net sales

Sales as reported decreased by -11% YoY. Adjusted sales declined by -8% YoY to SEK 47.8 (52.2) b. Sales, adjusted for comparable units and currency, decreased -16% YoY. The mobile broadband market remained weak in the quarter with continued low investment levels, particularly in Latin America, Africa and parts of Europe.

Sales in North America declined YoY mainly due to the earlier communicated renewed managed services contract with reduced scope effective from Q4 2016. Sales in North East Asia were flat YoY supported by increased Networks sales in Japan, partly offset by lower IT & Cloud sales in mainland China. The transition from 3G to 4G continued and generated sales growth in South East Asia.

As anticipated, sales declined sequentially with more than normal seasonality following hardware deliveries made in Q4 2016, on customer request, previously planned for Q1 2017. Sales declined by -29% QoQ.

Total sales for Managed Services, as defined in 2016, including Broadcast Services, were SEK 6.2 (7.4) b. The decline mainly refers to the earlier communicated re-scoped managed services contract in North America. The definition of Managed Services will be adjusted in 2018, at latest, to mirror the new organization.

IPR licensing revenues

IPR licensing revenues declined YoY to SEK 2.0 (3.8) b. following certain one-time items in same period last year. IPR licensing revenues were flat QoQ.

Asset write-downs, provisions and adjustments

As announced on March 28, the company has decided to focus its business strategy and explore strategic opportunities for the Media as well as the Cloud infrastructure hardware businesses. As a consequence write-down of assets amounting to SEK -3.3 b., of which SEK -1.5 b. in IT & Cloud, SEK -1.7 b. in Media and SEK -0.1 b. in Networks, were made in the quarter.

As also announced on March 28, provisions and adjustments triggered by negative developments late in the quarter, related to certain large customer projects were required. These provisions and adjustments amounted to SEK -8.4 b. Customer settlements and revaluation of customer discounts, due to lower

3 Ericsson | First Quarter Report 2017

projected customer volumes, reduced net sales by SEK -1.4 b. Operating expenses were impacted by SEK -1.5 b. due to reassessment of the value of trade receivables. The remaining SEK -5.5 b. is provisions for additional project costs, mainly related to certain transformation projects in IT & Cloud, which due to recent negative developments are not expected to be covered by future project revenues.

Gross margin

Gross margin declined to 13.9% (33.3%) and from 26.1% QoQ, mainly due to the additional provisions and adjustments.

The adjusted gross margin declined to 30.5% (33.9%) following lower IPR licensing revenues and lower gross margins in IT & Cloud and Media. Sequentially the adjusted gross margin improved from 29.4% driven by higher margins in Networks and a higher share of IPR licensing revenues, partly offset by reduced gross margins in IT & Cloud.

Operating expenses

Operating expenses increased to SEK 18.9 (14.2) b. and sequentially from SEK 17.7 b., due to the write-down of assets as well as additional provisions and adjustments.

Adjusted R&D expenses and selling and administrative expenses, i.e operating expenses, declined to SEK 13.7 (13.9) b. and from SEK 15.2 b. in Q4 2016. The QoQ reduction was mainly due to seasonality.

Other operating income and expenses

Other operating income and expenses declined YoY and QoQ. The revaluation and realization effects of currency hedge contracts were SEK 0.0 (0.2) b. Such effects were SEK -0.4 b. in Q4, 2016.

As of Q1 2017, the funding of foreign exchange forecast hedging will be managed through foreign exchange loans (USD) instead of foreign exchange derivatives. Therefore, any revaluation and realization effects will be included in financial expenses instead of in other operating income and expenses.

The hedge balance is in USD. The SEK strengthened against the USD between Dec 31, 2016 (SEK/USD rate 9.06) and March 31, 2017 (SEK/USD rate 8.93).

Restructuring charges

Total restructuring charges were SEK -1.7 (-0.6) b. For full-year 2017, the restructuring charges are estimated to beSEK 6-8 b.

Operating income

Operating income decreased to SEK -12.3 (3.5) b., mainly due to the additional provisions and adjustments, asset write-downs and increased restructuring charges. The adjusted operating income decreased to SEK 1.1 b. from SEK 4.1 b. This was mainly due to lower sales and lower gross margin.

Operating income decreased sequentially from SEK -0.3 b., mainly due to the additional provisions and adjustments as well as asset write-downs, partly offset by reduced restructuring charges. The adjusted operating income decreased to SEK 1.1 b. from SEK 4.4 b. due to lower sales, partly offset by increased gross margin and lower operating expenses.

Financial net

Financial net was flat YoY and improved QoQ as Q4 2016 was negatively impacted by depreciated local currencies in certain markets.

Taxes

Taxes were positive in the quarter following the negative income.

Net income and EPS

Net income and EPS diluted decreased YoY and QoQ, following the negative operating income. EPS diluted was SEK -3.29 (0.60) and EPS (Non-IFRS) was SEK -2.42 (0.87).

Employees

The number of employees on March 31, 2017 was 110,898 compared with 111,464 on Dec 31, 2016. A majority of the headcount reductions was in Sweden. In addition, 1,600 employees in Sweden, who left the company on voluntary basis, are still included in the headcount numbers without impacting salary costs.

4 Ericsson | First Quarter Report 2017

REGIONAL SALES


	First quarter 2017								Change
SEK b.	Networks		IT & Cloud		Media		Total		YoY			QoQ
North America		9.2		2.3		0.3		11.8		-10	%		-20	%
Latin America		2.0		0.8		0.0		2.9		-29	%		-42	%
Northern Europe and Central Asia		1.2		0.4		0.1		1.7		-24	%		-38	%
Western and Central Europe		2.5		0.7		0.4		3.6		-17	%		-21	%
Mediterranean		2.8		1.4		0.2		4.4		1	%		-35	%
Middle East		2.4		1.0		0.1		3.5		-3	%		-45	%
Sub-Saharan Africa		1.4		0.5		0.0		1.9		-9	%		-29	%
India		1.8		0.6		0.0		2.4		-10	%		-20	%
North East Asia		4.6		0.9		0.0		5.6		0	%		-42	%
South East Asia and Oceania		4.8		0.7		0.1		5.6		7	%		-16	%
Other¹⁾		2.0		0.2		0.6		2.9		-40	%		4	%

Total		34.9		9.5		2.0		46.4		-11	%		-29	%

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

North America

North America sales declined, mainly due to the earlier communicated reduced scope of a renewed managed services contract. Mobile broadband infrastructure sales were stable. IT & Cloud sales increased, driven by digital transformation projects reaching milestones in the quarter.

Latin America

Sales declined as mobile broadband investments continue to be impacted by the macroeconomic environment and declining sales in Mexico.

Northern Europe and Central Asia

Sales decreased, impacted by continued lower investments in mobile broadband infrastructure and last year’s project completion in Russia.

Western and Central Europe

Sales declined as operators continued to reduce investments in mobile broadband infrastructure in order to focus on cash flow as well as shifting investments into fiber deployments.

Mediterranean

Sales increased slightly with higher investments in mobile broadband infrastructure while the weak development of related capacity business continued. The managed services business continued to develop favorably.

Middle East

Sales declined slightly in a continued challenging macroeconomic environment. Networks product sales declined as operators remained cautious on mobile broadband capacity investments while the networks services business grew.

Sub-Saharan Africa

Sales declined due to a continued challenging macroeconomic environment in key markets following political uncertainty and on the back of low commodity prices impacting demand.

India

Following a fast pace of 4G deployments in Q4 2016, driven by the spectrum auctions late 2016, sales were down impacted by consolidations and tariff competition between operators.

North East Asia

Sales remained stable. Sales in Mainland China declined due to continued reduced investments by one customer. Sales in Japan and Korea increased, driven by network modernizations and financial year-end sales in Japan.

South East Asia and Oceania

Sales growth was driven primarily by mobile broadband investments in Vietnam. Networks services developed favorably, mainly driven by managed services and network optimization.

Other

IPR licensing revenues amounted to SEK 2.0 (3.8) b. IPR licensing revenues in Q1 2016 were positively impacted by one-off items.

5 Ericsson | First Quarter Report 2017

SEGMENT RESULTS

NETWORKS


SEK b.	Q1 2017			Q1 2016			YoY change			Q4 2016			QoQ change
Net sales		34.9			39.9			-13	%		47.8			-27	%
Of which products		19.4			22.8			-15	%		27.5			-29	%
Of which services		15.5			17.1			-10	%		20.3			-24	%
Sales growth adj. for comparable units and currency		—			—			-18	%		—			-27	%
Gross income		8.0			13.0			-39	%		11.8			-32	%
Gross income excluding restructuring charges		9.2			13.3			-30	%		13.1			-30	%
Gross margin		23	%		33	%		—			25	%		—
Gross margin excluding restructuring charges		26	%		33	%		—			27	%		—
Operating income		-0.5			5.8			-109	%		2.4			-123	%
Operating income excluding restructuring charges		0.9			6.2			-85	%		4.8			-81	%
Operating margin		-2	%		14	%		—			5	%		—
Operating margin excluding restructuring charges		3	%		16	%		—			10	%		—
EBITA margin		-1	%		15	%		—			5	%		—
Restructuring charges		-1.4			-0.4			—			-2.4			-40	%

Q1 2017 ADJUSTED FOR RESTRUCTURING CHARGES AND ITEMS AFFECTING COMPARABILITY


SEK b.	Q1 2017 reported			Restructuring charges		Asset write-downs		Provisions and customer project adjustments		Q1 2017 adjusted			Q1 2016 excl. restructuring charges			Q4 2016 excl. restructuring charges
Net Sales		34.9			—		—		1.3		36.2			39.9			47.8
Gross income		8.0			1.3		—		2.0		11.3			13.3			13.1
Gross margin		23	%		—		—		—		31	%		33	%		27	%
Operating income		-0.5			1.4		0.1		3.3		4.3			6.2			4.8
Operating margin		-2	%		—		—		—		12	%		16	%		10	%

Net sales

Sales as reported decreased by -13% YoY. Adjusted sales declined -9%. Networks product sales declined YoY mainly due to continued low investments in mobile broadband in certain markets and lower IPR licensing revenues amounting to SEK 1.6 (3.1) b. Network services sales declined YoY mainly due to lower managed services sales following the earlier communicated renewed contract in North America with reduced scope. Sales, adjusted for comparable units and currency, decreased by -18%.

In 2016, a number of markets, in regions such as Latin America, and Middle East and Africa, were impacted by a weak macroeconomic environment with a negative effect on mobile broadband investments. The mobile broadband market remained weak in the first quarter.

The earlier communicated renewed managed services contract, with reduced scope, in North America was the main reason behind the sales decline YoY in the region. Sales in North East Asia increased YoY with sales growth in Japan and Korea.

The transition from 3G to 4G continued to drive sales growth YoY in Asia Pacific. A large mobile broadband coverage project in Vietnam was the main contributor to growth.

Reported sales declined by -27% QoQ and adjusted net sales declined by -24%, impacted by hardware deliveries made in Q4 2016 on customer request previously planned for Q1 2017.

The transition to the new Ericsson Radio System platform is tracking towards the target of approximately 50% of total deliveries in 2017.

Gross margin

Gross margin decreased YoY due to increased provisions and adjustments as well as lower IPR licensing revenues. The adjusted gross margin declined YoY due to lower IPR licensing revenues. Sequentially, the adjusted gross margin improved following a higher share of capacity business, improved services margins and a higher IPR licensing revenue share of sales.

Operating income and margin

Operating income decreased YoY and QoQ, mainly due to increased provisions and adjustments and lower sales. The adjusted operating income declined YoY due to lower sales and gross margin. Sequentially, the adjusted operating income declined due to lower sales, partly offset by improved gross margin and lower operating expenses.

The effects of revaluation and realization of currency hedge contracts were SEK 0.0 (0.1) b. in the quarter. In Q4 2016, the effects of currency hedge contracts were negative atSEK -0.3 b.

6 Ericsson | First Quarter Report 2017

IT & CLOUD


SEK b.	Q1 2017			Q1 2016			YoY change			Q4 2016			QoQ change
Net sales		9.5			9.8			-3	%		14.9			-36	%
Of which products		4.1			4.8			-14	%		6.7			-39	%
Of which services		5.4			5.1			8	%		8.2			-34	%
Sales growth adj. for comparable units and currency		—			—			-7	%		—			-35	%
Gross income		-2.1			3.3			-164	%		4.7			-145	%
Gross income excluding restructuring charges		-1.9			3.4			-158	%		5.3			-136	%
Gross margin		-22	%		33	%		—			31	%		—
Gross margin excluding restructuring charges		-20	%		34	%		—			36	%		—
Operating income		-9.0			-2.0			—			-1.8			—
Operating income excluding restructuring charges		-8.8			-1.8			—			0.0			—
Operating margin		-94	%		-20	%		—			-12	%		—
Operating margin excluding restructuring charges		-92	%		-18	%		—			0	%		—
EBITA margin		-86	%		-17	%		—			-11	%		—
Restructuring charges		-0.2			-0.2			26	%		-1.8			-87	%

Q1 2017 ADJUSTED FOR RESTRUCTURING CHARGES AND ITEMS AFFECTING COMPARABILITY


SEK b.	Q1 2017 reported			Restructuring charges		Asset write-downs		Provisions and customer project adjustments		Q1 2017 adjusted			Q1 2016 excl. restructuring charges			Q4 2016 excl. restructuring charges
Net Sales		9.5			—		—		0.1		9.6			9.8			14.9
Gross income		-2.1			0.2		—		4.5		2.7			3.4			5.3
Gross margin		-22	%		—		—		—		28	%		34	%		36	%
Operating income		-9.0			0.2		1.5		5.0		-2.2			-1.8			0.0
Operating margin		-94	%		—		—		—		-23	%		-18	%		0	%

Net sales

Sales as reported declined by -3% YoY due to lower product sales while services sales increased. Sales of legacy portfolio products, in network infrastructure as well as in OSS & BSS, continued to decline and were not offset by growth in the new portfolio. To prepare for 5G, customers are digitalizing Core and IT, leading to an increased demand for transformation services while the demand for legacy products is decreasing. The services share of sales has increased from 51% Q1 2016 to 57% Q1 2017. IPR and licensing revenues declined YoY to SEK 0.2 (0.4) b.

Sales adjusted for comparable units and currency decreased by -7% YoY.

Sales declined by -36% QoQ after a seasonally strong Q4. Sales in North East Asia and Europe declined more than normal seasonality following milestone completions in large projects in 2016.

Gross margin

Gross margin decreased YoY and QoQ mainly due to increased provisions and adjustments. Adjusted gross margin declined YoY due to lower services margins, lower IPR licensing revenues and an increased services share of segment sales. The services margin continues to be impacted by the ongoing large transformation projects and the service capability build-up to handle the introduction of new platforms. In addition, IT managed services margins are negatively impacted by projects in their initial transformation phase. IT & Cloud product margins were stable.

Adjusted gross margin declined QoQ due to reduced services margins in large transformation projects as well as in IT managed services projects in the initial transformation phase.

Operating income and margin

Operating income decreased YoY and QoQ, mainly due to increased provisions, adjustments and write-downs.

Adjusted operating income declined YoY due to lower gross margin and lower sales. The decline was partly offset by reduced operating expenses.

Adjusted operating income declined QoQ due to lower sales and lower gross margins. The decline was partly offset by reduced operating expenses.

7 Ericsson | First Quarter Report 2017

MEDIA


SEK b.	Q1 2017			Q1 2016			YoY change			Q4 2016			QoQ change
Net sales		2.0			2.4			-20	%		2.5			-23	%
Sales growth adj. for comparable units and currency		—			—			-22	%		—			-23	%
Gross income		0.6			1.1			-49	%		0.6			-1	%
Gross income excluding restructuring charges		0.6			1.1			-46	%		0.7			-13	%
Gross margin		28	%		45	%		—			22	%		—
Gross margin excluding restructuring charges		30	%		45	%		—			27	%		—
Operating income		-2.8			-0.3			—			-0.8			—
Operating income excluding restructuring charges		-2.7			-0.3			—			-0.4			—
Operating margin		-143	%		-13	%		—			-33	%		—
Operating margin excluding restructuring charges		-140	%		-12	%		—			-17	%		—
EBITA margin		-95	%		-4	%		—			-26	%		—
Restructuring charges		-0.1			0.0			—			-0.4			-87	%

Q1 2017 ADJUSTED FOR RESTRUCTURING CHARGES AND ITEMS AFFECTING COMPARABILITY


SEK b.	Q1 2017 reported			Restructuring charges		Asset write-downs		Provisions and customer project adjustments		Q1 2017 adjusted			Q1 2016 excl. restructuring charges			Q4 2016 excl. restructuring charges
Sales		2.0			—		—		—		2.0			2.4			2.5
Gross income		0.6			0.0		—		—		0.6			1.1			0.7
Gross margin		28	%		—		—		—		31	%		45	%		27	%
Operating income		-2.8			0.1		1.7		—		-1.0			-0.3			-0.4
Operating margin		-143	%		—		—		—		-51	%		-12	%		-17	%

Net sales

Sales declined YoY primarily due to lower sales of legacy products and lower IPR licensing revenues. The transition to the next-generation MediaFirst platform is ongoing with contracts signed and ongoing customer trials, which have not yet translated into sales. IPR licensing revenues were SEK 0.2 (0.4) b.

The iconectiv (number portability solutions) sales grew more than 20% YoY. In the quarter, a minority investment in iconectiv by Francisco Partners, subject to regulatory approval, was secured to accelerate value growth.

Sales adjusted for comparable units and currency decreased by -22% YoY.

Sales declined QoQ by -23% after a seasonally strong Q4.

Gross margin

Adjusted gross margin declined YoY due to lower IPR licensing revenues, a changed business mix and costs related to under-absorption of services resources.

Adjusted gross margin increased QoQ as Q4 2016 included certain additional costs of SEK -0.2 b. The margin increase was partly offset by costs related to under-absorption of services resources.

Operating income and margin

Operating income decreased YoY and QoQ, mainly due to asset write-downs.

Adjusted operating income declined YoY due to lower gross margin and lower sales. Operating expenses for legacy products have been significantly reduced, however the reduction was offset by increased investments in new areas including the iconectiv business.

Adjusted operating income declined QoQ due to higher expenses and lower sales, partly offset by an improved gross margin.

8 Ericsson | First Quarter Report 2017

CASH FLOW


SEK b.	Q1 2017		Q1 2016			Q4 2016
Net income reconciled to cash		-9.2		3.6			1.6
Changes in operating net assets		7.7		-6.0			17.9
Cash flow from operating activities		-1.5		-2.4			19.4
Cash flow from investing activities		-13.6		-1.0			-6.6
Cash flow from financing activities		10.9		0.1			-1.0
Net change in cash and cash equivalents		-4.0		-4.3			12.6
Cash conversion (%)		n/a		-65	%		1,247	%

Operating activities

Cash flow from operating activities was SEK -1.5 b. in the quarter, due to the negative net income. However, this was partly offset by changes in operating assets of SEK 7.7 b. supported by lower trade receivables. The reduction of trade receivables QoQ was an effect of lower sales. The cash flow effect from sale of trade receivables in the quarter was SEK 1.4 b. higher than in Q1 2016.

Inventory increased sequentially following high project activity and seasonally lower delivery volumes. Trade payables increased slightly QoQ.

Cash outlays related to restructuring charges were SEK -1.6 (-0.5) b. in the quarter.

Investing activities

Cash flow from investing activities was impacted by investments in property, plant and equipment of SEK -1.0 b. where investments in the Global ICT centers continued to decrease. The cash flow effect from capitalized development expenses amounted to SEK -0.9 b. Investments of SEK 11.9 b. were made in interest-bearing securities following the launch of the new Euro bonds.

Financing activities

Cash flow from financing activities was positively impacted by the launch of two Euro bonds in March, together amounting to EUR 1.0 b. No large acquisition was made in the quarter.

Net cash was SEK 28.3 b. at the end of the quarter.


Working capital KPIs, number of days	Jan-Mar 2017		Jan-Dec 2016		Jan-Sep 2016		Jan-Jun 2016		Jan-Mar 2016
Sales outstanding (target: <90)		117		95		122		115		108
Inventory (target: <65)		73		69		79		81		80
Payable (target: >60)		58		56		56		59		58

9 Ericsson | First Quarter Report 2017

FINANCIAL POSITION


SEK b.	Mar 31 2017			Mar 31 2016			Dec 31 2016
+ Cash and cash equivalents		33.0			35.9			37.0
+ Interest-bearing securities, current		13.5			25.1			13.3
+ Interest-bearing securities, non-current		19.1			—			7.6
Gross cash		65.6			61.0			57.9
– Borrowings, current		9.5			2.4			8.0
– Borrowings, non-current		27.8			22.1			18.7
Net cash		28.3			36.5			31.2
Equity		126.8			145.6			140.5
Total assets		292.2			280.3			283.3
Capital turnover (times)		1.0			1.1			1.2
Return on capital employed (%)		-26.2	%		6.9	%		3.2	%
Equity ratio (%)		43.4	%		52.0	%		49.6	%
Return on equity (%)		-32.8	%		5.4	%		1.2	%

Net cash decreased by SEK -2.9 b. in the quarter mainly as a result of a negative cash flow from operating activities and investments in property, plant and equipment as well as in product development. The net cash position was SEK 28.3 b.

Post-employment benefits were SEK 23.8 b., compared with SEK 23.7 b. on Dec 31, 2016.

The company launched one Euro denominated 500 million 4-year bond with a fixed coupon rate of 0.875% and one Euro denominated 500 million 7-year bond with a fixed coupon rate of 1.875% in the quarter. The bonds were issued under Ericsson’s Euro Medium Term Note Program (EMTN). The Euro bonds were invested in interest-bearing securities.

The EUR 0.5 b. term loan facility issued in Q4 2016 has been terminated.

The average maturity of long-term borrowings as of March 31, 2017, was 4.1 years, compared with 4.5 years 12 months earlier.

In the quarter Standard & Poor’s downgraded Ericsson’s long- term rating from BBB with negative outlook to BBB-with negative outlook.

Debt maturity profile, Parent Company

LOGO

10 Ericsson | First Quarter Report 2017

PARENT COMPANY

Income after financial items was SEK 0.0 (0.4) b. The decrease was mainly due to write-down and restructuring cost of excess premises.

At the end of the quarter, gross cash: cash, cash equivalents, short-term investments, and interest-bearing securities non-current amounted to SEK 51.3 (42.9) b.

In the quarter, a dividend of SEK 3.3 b. was recognized according to the decision by the Annual General Meeting on March 29, 2017. The dividend was paid out in the first week of April.

In accordance with the conditions of the long-term variable compensation program (LTV) for Ericsson employees, 3,851,054 shares from treasury stock were sold or distributed to employees in the first quarter. The holding of treasury stock on March 31, 2017, was 58,341,336 Class B shares.

11 Ericsson | First Quarter Report 2017

OTHER INFORMATION

Ericsson launched Euro corporate bonds

On February 24, 2017, Ericsson announced a successful launch of one Euro denominated 500 million 4-year bond with a fixed coupon rate of 0.875% and one Euro denominated 500 million 7-year bond with a fixed coupon rate of 1.875%. The bonds were issued under Ericsson’s Euro Medium Term Note Program (EMTN).

Ericsson reported restated financials for 2015 and 2016

On March 10, 2017, Ericsson reported restated financials for 2015 and 2016, in accordance with the new segment reporting structure introduced in the Q1 report 2017.

Ericsson presented focused business strategy

On March 28, 2017, Ericsson presented a focused business strategy to revitalize technology and market leadership, improve group profitability and enable customer success. The company announced that it will reallocate resources and increase investments in the following core portfolio areas: networks, digital services (OSS, BSS and telecom core) and Internet of Things (IoT). In addition, the company will implement a refocused strategy for Managed Services to improve profitability and also explore strategic opportunities for the Media and Cloud infrastructure hardware businesses. The refocused strategy will have the following financial consequences in the short term: write down of assets to be made in Q1, 2017, with an estimated impact on operating income of SEK 3-4 b, restructuring charges estimated to approximately SEK 6-8 b. for 2017, of which approximately SEK 2 b. in Q1.

Separately, the company announced that it will make provisions of an estimated SEK 7-9 b. in Q1, triggered by recent negative developments related to certain large customer projects.

Ericsson simplified organizational structure and named Executive Team

On March 28, 2017, Ericsson announced that it would simplify its organizational structure by replacing the Executive Leadership Team and the Global Leadership Team by a single Executive Team. In addition, the geographical setup with ten regions will become five market areas, and the business areas are re-defined and reduced to three. Effective April 1, 2017, Ericsson’s Executive Team members are:

President and CEO – Börje Ekholm,

Business Area Networks – Fredrik Jejdling,

Business Area Managed Services – Peter Laurin,

Business Area Digital Services – Ulf Ewaldsson,

Market Area North America – Rima Qureshi,

Market Area Europe & Latin America – Arun Bansal,

Market Area Middle East & Africa – Rafiah Ibrahim,

Market Area North East Asia – Chris Houghton,

South East Asia, Oceania & India – Nunzio Mirtillo,

Technology & Emerging Business – Niklas Heuveldop,

Finance & Common Functions – Carl Mellander,

Human Resources – MajBritt Arfert,

Marketing & Communications – Helena Norrman,

Sustainability & Corporate Responsibility – Elaine Weidman Grunewald,

Legal Affairs – Nina Macpherson,

Advisor to the CEO – Jan Frykhammar,

Advisor to the CEO – Magnus Mandersson.

Per Borgklint, Anders Lindblad, Jean-Philippe Poirault and Charlotta Sund leave the Executive Leadership Team effective April 1, 2017.

Resolutions at the AGM

On March 29, 2017, Ericsson held its AGM in Kista, Stockholm. The proposed dividend of SEK 1.00 per share was approved by the AGM.

In accordance with the proposal of the Nomination Committee, Leif Johansson was re-elected Chairman of the Board of Directors.

Nora Denzel, Börje Ekholm, Kristin Skogen Lund, Kristin S. Rinne, Sukhinder Singh Cassidy, Helena Stjernholm and Jacob Wallenberg were re-elected to the Board. Jon Fredrik Baksaas, Jan Carlson and Eric A. Elzvik were elected new Board members. Ulf J. Johansson left the Board.

In accordance with the Board of Directors’ proposal, the AGM resolved to approve the Guidelines for remuneration to Group Management and the implementation of a Long-Term Variable Compensation Program 2017 for the Executive Team.

The rating for Ericsson was downgraded to BBB- by Standard & Poor’s

On March 30, 2017, Standard & Poor’s announced that they had downgraded the senior unsecured debt ratings to BBB- with negative outlook from BBB with negative outlook.

Patent infringement lawsuits

In 2012 and 2013, Intellectual Ventures (“IV”) filed patent infringement lawsuits in the United States District Court for the District of Delaware accusing a number of Ericsson’s U.S. customers of infringing 16 U.S. patents, seeking an injunction and monetary damages. The first of these cases is set to go to trial in January 2018. IV subsequently filed another wave of lawsuits in the District of Delaware accusing a number of Ericsson’s U.S. customers of infringing 12 U.S. patents, seeking monetary damages. The first of these cases is set to go to trial in July 2017. The claims and scope of these lawsuits have recently become more well defined.

12 Ericsson | First Quarter Report 2017

RISK FACTORS

Ericsson’s operational and financial risk factors and uncertainties are described in our Annual Report 2016.

Risk factors and uncertainties in focus short term for the Parent Company and the Ericsson Group include, but are not limited to:

•

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 Networks and IT & Cloud segments including new network build-outs and new managed services or digital transformation 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;

•

New and ongoing partnerships which may not be successful and expose us to future costs;

•

Changes in foreign exchange rates, in particular USD;

•

Political unrest and uncertainty 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 strategy execution, specific restructuring or cost-savings initiatives, profitability restoring efforts and/or organizational changes will be sufficient, successful or executed in time to deliver any improvements in earnings;

•

Cyber security incidents, which may have a material negative impact.

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. Ericsson operates globally in accordance with Group policies and directives for business ethics and conduct and has a dedicated anti-corruption program. However, in some of the countries where the company operates, corruption risks can be high and compliance failure could have a material adverse impact on our business, financial condition and brand.

Stockholm, April 25, 2017

Telefonaktiebolaget LM Ericsson (publ)

Börje Ekholm, President and CEO

Org. Nr 556016-0680

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

Date for next report: July 18, 2017

13 Ericsson | First Quarter Report 2017

EDITOR’S NOTE

Ericsson invites media, investors and analysts to a conference call on April 25, 2017; one starts at 09.00 (CET) and the other at 14.00 (CET).

Live audio webcasts of the conference calls as well as supporting slides will be available at:

www.ericsson.com/press and

www.ericsson.com/investors

Replay of the conference calls will be available approximately one hour after each call has ended and will remain available until May 2, 2017.

For further information, please contact:

Helena Norrman, Senior Vice President, Chief Marketing and Communications Officer

Phone: +46 10 719 34 72

E-mail: investor.relations@ericsson.com or media.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,
Head of 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

14 Ericsson | First Quarter Report 2017

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 and profitability; (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, such as those factors described under the risk factor section. 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 failure to successfully implement our business and operational initiatives

15 Ericsson | First Quarter Report 2017

FINANCIAL STATEMENTS

AND OTHER INFORMATION


Contents

Financial statements
Consolidated income statement			17
Statement of comprehensive income			17
Consolidated balance sheet			18
Consolidated statement of cash flows			19
Consolidated statement of changes in equity			20
Consolidated income statement – isolated quarters			20
Consolidated statement of cash flows – isolated quarters			21
Parent Company income statement			22
Parent Company statement of comprehensive income			22
Parent Company balance sheet			23

Additional information
Accounting policies			24
Net sales by segment by quarter			25
Sales growth adjusted for comparable units and currency			26
Gross income and gross margin by segment by quarter			26
Operating income and operating margin by segment by quarter			27
EBITA and EBITA margin by segment by quarter			27
Net sales by region by quarter			28
Net sales by region by quarter (cont.)			29
Top 5 countries in sales			29
Net sales by region by segment			30
Provisions			31
Information on investments			31
Other information			32
Number of employees			32

Items excluding restructuring charges
Restructuring charges by function			33
Restructuring charges by segment			33
Gross income and gross margin excluding restructuring by segment by quarter			34
Operating income and operating margin excluding restructuring by segment by quarter			34

Alternative performance measures
Sales growth adjusted for comparable units and currency			35
Items excluding restructuring charges			36
EBITA and EBITA margin			37
Cash conversion			37
Gross cash and net cash, end of period			37
Capital employed			38
Capital turnover			38
Return on capital employed			38
Equity ratio			39
Return on equity			39
Earnings per share (non-IFRS)			39
Items excluding restructuring, write-downs, as well as provisions and adjustments related to certain customer projects			40

16 Ericsson | First Quarter Report 2017

FINANCIAL STATEMENTS

CONSOLIDATED INCOME STATEMENT


	Jan-Mar									Jan-Dec
SEK million	2017			2016			Change			2016

Net sales		46,369			52,209			-11	%		222,608
Cost of sales		-39,931			-34,819			15	%		-156,243

Gross income		6,438			17,390			-63	%		66,365
Gross margin (%)		13.9	%		33.3	%					29.8	%

Research and development expenses		-9,068			-7,485			21	%		-31,635
Selling and administrative expenses		-9,861			-6,720			47	%		-28,866

Operating expenses		-18,929			-14,205			33	%		-60,501

Other operating income and expenses		141			273						404
Shares in earnings of JV and associated companies		11			17						31

Operating income		-12,339			3,475			-455	%		6,299

Financial income		-82			-89						-115
Financial expenses		-350			-377						-2,158

Income after financial items		-12,771			3,009			-524	%		4,026

Taxes		1,916			-903						-2,131

Net income		-10,855			2,106			-615	%		1,895


Net income attributable to:
Stockholders of the Parent Company		-10,897			1,966						1,716
Non-controlling interests		42			140						179

Other information
Average number of shares, basic (million)		3,272			3,258						3,263
Earnings per share, basic (SEK)¹⁾		-3.33			0.60						0.53
Earnings per share, diluted (SEK)¹⁾		-3.29			0.60						0.52

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

STATEMENT OF COMPREHENSIVE INCOME


	Jan-Mar				Jan-Dec
SEK million	2017		2016		2016

Net income		-10,855		2,106		1,895

Other comprehensive income

Items that will not be reclassified to profit or loss
Remeasurements of defined benefits pension plans incl. asset ceiling		398		-3,502		-1,766
Tax on items that will not be reclassified to profit or loss		-169		953		520

Items that may be reclassified to profit or loss
Available-for-sale financial assets
Gains/losses arising during the period		32		—		-7
Reclassification adjustments on gains/losses included in profit or loss		3		—		—
Revaluation of other investments in shares and participations
Fair value remeasurement		2		-4		-2
Changes in cumulative translation adjustments		-21		-1,133		4,235
Share of other comprehensive income on JV and associated companies		10		-376		-362
Tax on items that may be reclassified to profit or loss		-9		—		1

Total other comprehensive income, net of tax		246		-4,062		2,619

Total comprehensive income		-10,609		-1,956		4,514


Total comprehensive income attributable to:
Stockholders of the Parent Company		-10,674		-2,093		4,285
Non-controlling interest		65		137		229

17 Ericsson | First Quarter Report 2017

CONSOLIDATED BALANCE SHEET


SEK million	Mar 31 2017		Dec 31 2016

ASSETS
Non-current assets
Intangible assets
Capitalized development expenses		6,460		8,076
Goodwill		43,042		43,387
Intellectual property rights, brands and other intangible assets		5,869		7,747

Property, plant and equipment		16,645		16,734

Financial assets
Equity in JV and associated companies		792		775
Other investments in shares and participations		1,112		1,179
Customer finance, non-current		2,728		2,128
Interest-bearing securities, non-current		19,124		7,586
Other financial assets, non-current		4,466		4,442

Deferred tax assets		17,435		15,522

		117,673		107,576
Current assets
Inventories		33,938		30,307

Trade receivables		65,687		68,117
Customer finance, current		2,882		2,625
Other current receivables		25,525		24,431
Interest-bearing securities, current		13,548		13,325
Cash and cash equivalents		32,954		36,966

		174,534		175,771

Total assets		292,207		283,347


EQUITY AND LIABILITIES
Equity
Stockholders’ equity		126,105		139,817
Non-controlling interest in equity of subsidiaries		736		675

		126,841		140,492

Non-current liabilities
Post-employment benefits		23,774		23,723
Provisions, non-current		4,867		946
Deferred tax liabilities		1,888		2,147
Borrowings, non-current		27,823		18,653
Other non-current liabilities		2,699		2,621

		61,051		48,090

Current liabilities
Provisions, current		5,694		5,411
Borrowings, current		9,514		8,033
Trade payables		25,814		25,318
Other current liabilities		63,293		56,003

		104,315		94,765

Total equity and liabilities		292,207		283,347


Of which interest-bearing liabilities		37,337		26,686

Assets pledged as collateral		3,064		2,584
Contingent liabilities		1,729		1,186

18 Ericsson | First Quarter Report 2017

CONSOLIDATED STATEMENT OF CASH FLOWS

Jan–Mar

Jan–Dec

SEK million

2017

2016

Operating activities

Net income

–10,855

2,106

1,895

Adjustments to reconcile net income to cash

Taxes

–4,345

–1,208

–6,200

Earnings/dividends in JV and associated companies

–7

–16

Depreciation, amortization and impairment losses

5,431

2,097

9,119

Other

527

652

3,135

Net income reconciled to cash

–9,249

3,631

8,007

Changes in operating net assets

Inventories

–3,585

–4,212

–613

Customer finance, current and non-current

–834

–251

–950

Trade receivables

2,397

3,408

5,933

Trade payables

626

–617

2,775

Provisions and post-employment benefits

4,645

–14

3,106

Other operating assets and liabilities, net

4,459

–4,317

–4,248

7,708

–6,003

6,003

Cash flow from operating activities

–1,541

–2,372

14,010

Investing activities

Investments in property, plant and equipment

–1,015

–1,474

–6,129

Sales of property, plant and equipment

482

Acquisitions/divestments of subsidiaries and other operations, net

–108

–622

Product development

–865

–1,208

–4,483

Other investing activities

110

735

–3,004

Interest-bearing securities

–11,886

1,013

5,473

Cash flow from investing activities

–13,584

–998

–8,283

Cash flow before financing activities

–15,125

–3,370

5,727

Financing activities

Dividends paid

–4

–33

–12,263

Other financing activities

10,902

521

Cash flow from financing activities

10,898

–11,742

Effect of exchange rate changes on cash

215

–981

2,757

Net change in cash and cash equivalents

–4,012

–4,290

–3,258

Cash and cash equivalents, beginning of period

36,966

40,224

Cash and cash equivalents, end of period

32,954

35,934

36,966

19 Ericsson | First Quarter Report 2017

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Jan–Mar

Jan–Dec

SEK million

2017

2016

Opening balance

140,492

147,366

Total comprehensive income

–10,609

–1,956

4,514

Sale/repurchase of own shares

–216

Stock issue (net)

—

131

Stock purchase plan

210

238

957

Dividends paid

–3,277

¹⁾

–33

–12,263

Transactions with non-controlling interests

—

Closing balance

126,841

145,644

140,492

¹⁾	Includes accrual of SEK 3,273 million for the dividend approved by the Annual General Meeting on March 29, 2017.

CONSOLIDATED INCOME STATEMENT - ISOLATED QUARTERS

2017

2016

Isolated quarters, SEK million

Net sales

46,369

65,215

51,076

54,108

52,209

Cost of sales

–39,931

–48,195

–36,616

–36,613

–34,819

Gross income

6,438

17,020

14,460

17,495

17,390

Gross margin (%)

13.9

26.1

28.3

32.3

33.3

Research and development expenses

–9,068

–8,890

–7,855

–7,405

–7,485

Selling and administrative expenses

–9,861

–8,799

–6,238

–7,109

–6,720

Operating expenses

–18,929

–17,689

–14,093

–14,514

–14,205

Other operating income and expenses

141

364

–3

–230

273

Shares in earnings of JV and associated companies

–23

Operating income

–12,339

–280

341

2,763

3,475

Financial income

–82

–226

139

–89

Financial expenses

–350

–744

–371

–666

–377

Income after financial items

–12,771

–963

–256

2,236

3,009

Taxes

1,916

–634

–670

–903

Net income

–10,855

–1,597

–180

1,566

2,106

Net income attributable to:

Stockholders of the Parent Company

–10,897

–1,604

–233

1,587

1,966

Non-controlling interests

–21

140

Other information

Average number of shares, basic (million)

3,272

3,268

3,264

3,261

3,258

Earnings per share, basic (SEK)¹⁾

–3.33

–0.49

–0.07

0.49

0.60

Earnings per share, diluted (SEK)¹⁾

–3.29

–0.48

–0.07

0.48

0.60

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

20 Ericsson | First Quarter Report 2017

CONSOLIDATED STATEMENT OF CASH FLOWS – ISOLATED QUARTERS

2017

2016

Isolated quarters, SEK million

Operating activities

Net income

–10,855

–1,597

–180

1,566

2,106

Adjustments to reconcile net income to cash

Taxes

–4,345

–300

–1,282

–3,410

–1,208

Earnings/dividends in JV and associated companies

–7

–21

–16

Depreciation, amortization and impairment losses

5,431

2,610

2,308

2,104

2,097

Other

527

865

630

988

652

Net income reconciled to cash

–9,249

1,557

1,498

1,321

3,631

Changes in operating net assets

Inventories

–3,585

4,286

980

–1,667

–4,212

Customer finance, current and non-current

–834

–106

223

–816

–251

Trade receivables

2,397

3,713

–624

–564

3,408

Trade payables

626

3,306

–2,371

2,457

–617

Provisions and post-employment benefits

4,645

2,772

130

218

–14

Other operating assets and liabilities, net

4,459

3,884

–2,153

–1,662

–4,317

7,708

17,855

–3,815

–2,034

–6,003

Cash flow from operating activities

–1,541

19,412

–2,317

–713

–2,372

Investing activities

Investments in property, plant and equipment

–1,015

–1,699

–1,384

–1,572

–1,474

Sales of property, plant and equipment

277

111

Acquisitions/divestments of subsidiaries and other operations, net

–50

–480

–108

Product development

–865

–1,291

–885

–1,099

–1,208

Other investing activities

110

–2,341

–508

–890

735

Interest-bearing securities

–11,886

–1,505

610

5,355

1,013

Cash flow from investing activities

–13,584

–6,609

–2,040

1,364

–998

Cash flow before financing activities

–15,125

12,803

–4,357

651

–3,370

Financing activities

Dividends paid

–4

—

–163

–12,067

–33

Other financing activities

10,902

–1,039

–1,295

2,761

Cash flow from financing activities

10,898

–1,039

–1,458

–9,306

Effect of exchange rate changes on cash

215

801

1,285

1,652

–981

Net change in cash and cash equivalents

–4,012

12,565

–4,530

–7,003

–4,290

Cash and cash equivalents, beginning of period

36,966

24,401

28,931

35,934

40,224

Cash and cash equivalents, end of period

32,954

36,966

24,401

28,931

35,934

21 Ericsson | First Quarter Report 2017

PARENT COMPANY INCOME STATEMENT

Jan-Mar

Jan-Dec

SEK million

2017

2016

Net sales

—

Cost of sales

—

Gross income

—

Operating expenses

–289

–223

–1,185

Other operating income and expenses

572

574

2,698

Operating income

283

351

1,513

Financial net

–331

14,039

Income after financial items

–48

362

15,552

Transfers to (–) / from untaxed reserves

—

–1,100

Taxes

–10

–45

–206

Net income

–58

317

14,246

PARENT COMPANY STATEMENT OF COMPREHENSIVE INCOME

Jan-Mar

Jan-Dec

SEK million

2017

2016

Net income

–58

317

14,246

Available-for-sale financial assets

Gains/losses arising during the period

—

–7

Reclassification adjustments on gains/losses included in profit or loss

—

Revaluation of other investments in shares and participations

Fair value remeasurement

—

–5

Tax on items that may be reclassified to profit or loss

–8

—

Total other comprehensive income, net of tax

–5

–12

Total comprehensive income

–31

312

14,234

22 Ericsson | First Quarter Report 2017

PARENT COMPANY BALANCE SHEET


SEK million	Mar 31 2017		Dec 31 2016

ASSETS
Fixed assets
Intangible assets		487		547
Tangible assets		414		396
Financial assets*		123,786		111,981

		124,687		112,924

Current assets
Inventories		2		3
Receivables		28,527		38,476
Short-term investments		13,209		12,991
Cash and cash equivalents		18,984		22,311

		60,722		73,781

Total assets		185,409		186,705


STOCKHOLDERS’ EQUITY, PROVISIONS AND LIABILITIES
Equity
Restricted equity		48,148		48,148
Non-restricted equity		41,461		44,753

		89,609		92,901

Provisions		677		885

Non-current liabilities		59,691		50,428

Current liabilities		35,432		42,491

Total stockholders’ equity, provisions and liabilities		185,409		186,705


* Of which interest-bearing securities, non-current		19,124		7,586

23 Ericsson | First Quarter Report 2017

ADDITIONAL INFORMATION

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, 2016, and should be read in conjunction with that annual report.

There is no significant difference between IFRS effective as per December 31, 2017 and IFRS as endorsed by the EU.

None of the new or amended standards and interpretations that became effective January 1, 2017, have had a significant impact on the financial result or position of the Company.

24 Ericsson | First Quarter Report 2017

NET SALES BY SEGMENT BY QUARTER*


	2017			2016
Isolated quarters, SEK million	Q1			Q4			Q3			Q2			Q1

Networks		34,860			47,791			37,020			40,245			39,935
Of which products		19,410			27,519			19,249			23,037			22,795
Of which services		15,450			20,272			17,771			17,208			17,140
IT & Cloud		9,545			14,884			11,716			11,500			9,830
Of which products		4,103			6,682			5,479			5,298			4,773
Of which services		5,442			8,202			6,237			6,202			5,057
Media		1,964			2,540			2,340			2,363			2,444

Total		46,369			65,215			51,076			54,108			52,209


	2017			2016
Sequential change, percent	Q1			Q4			Q3			Q2			Q1

Networks		–27	%		29	%		–8	%		1	%		—
Of which products		–29	%		43	%		–16	%		1	%		—
Of which services		–24	%		14	%		3	%		0	%		—
IT & Cloud		–36	%		27	%		2	%		17	%		—
Of which products		–39	%		22	%		3	%		11	%		—
Of which services		–34	%		32	%		1	%		23	%		—
Media		–23	%		9	%		–1	%		–3	%		—

Total		–29	%		28	%		–6	%		4	%		–29	%


	2017			2016
Year over year change, percent	Q1			Q4			Q3			Q2			Q1

Networks		–13	%		—			—			—			—
Of which products		–15	%		—			—			—			—
Of which services		–10	%		—			—			—			—
IT & Cloud		–3	%		—			—			—			—
Of which products		–14	%		—			—			—			—
Of which services		8	%		—			—			—			—
Media		–20	%		—			—			—			—

Total		–11	%		–11	%		–14	%		–11	%		–2	%


	2017			2016
Year to date, SEK million	Jan-Mar			Jan-Dec			Jan-Sep			Jan-Jun			Jan-Mar

Networks		34,860			164,991			117,200			80,180			39,935
Of which products		19,410			92,600			65,081			45,832			22,795
Of which services		15,450			72,391			52,119			34,348			17,140
IT & Cloud		9,545			47,930			33,046			21,330			9,830
Of which products		4,103			22,232			15,550			10,071			4,773
Of which services		5,442			25,698			17,496			11,259			5,057
Media		1,964			9,687			7,147			4,807			2,444

Total		46,369			222,608			157,393			106,317			52,209


	2017			2016
Year to date, year over year change, percent	Jan–Mar			Jan–Dec			Jan–Sep			Jan–Jun			Jan–Mar

Networks		–13	%		–11	%		—			—			—
Of which products		–15	%		–12	%		—			—			—
Of which services		–10	%		–8	%		—			—			—
IT & Cloud		–3	%		–7	%		—			—			—
Of which products		–14	%		–16	%		—			—			—
Of which services		8	%		1	%		—			—			—
Media		–20	%		–7	%		—			—			—

Total		–11	%		–10	%		–9	%		–7	%		–2	%

*	Net sales by segment has been restated for each quarter of 2016 and for the full year 2015. Comparisons against isolated quarters in 2015 are not available by segment.

25 Ericsson | First Quarter Report 2017

SALES GROWTH ADJUSTED FOR COMPARABLE UNITS AND CURRENCY*


	2017			2016
Sequential change, percent	Q1			Q4			Q3			Q2			Q1

Networks		–27	%		—			—			—			—
IT & Cloud		–35	%		—			—			—			—
Media		–23	%		—			—			—			—

Total		–29	%		23	%		–9	%		6	%		–28	%


	2017			2016
Isolated quarter, year over year change, percent	Q1			Q4			Q3			Q2			Q1

Networks		–18	%		—			—			—			—
IT & Cloud		–7	%		—			—			—			—
Media		–22	%		—			—			—			—

Total		–16	%		–15	%		–14	%		–7	%		–1	%


	2017			2016
Year to date, year over year change, percent	Jan-Mar			Jan-Dec			Jan-Sep			Jan-Jun			Jan-Mar

Networks		–18	%		—			—			—			—
IT & Cloud		–7	%		—			—			—			—
Media		–22	%		—			—			—			—

Total		–16	%		–10	%		–8	%		–4	%		–1	%

*	Sales growth adjusted for comparable units and currency has not been restated by segment for 2016.

GROSS INCOME AND GROSS MARGIN BY SEGMENT BY QUARTER


	2017			2016
Isolated quarters, SEK million	Q1			Q4			Q3			Q2			Q1

Networks		7,980			11,783			9,867			12,522			13,011
IT & Cloud		–2,100			4,676			3,833			4,061			3,281
Media		558			561			760			912			1,098

Total		6,438			17,020			14,460			17,495			17,390


	2017			2016
Isolated quarters, As percentage of net sales	Q1			Q4			Q3			Q2			Q1

Networks		23	%		25	%		27	%		31	%		33	%
IT & Cloud		–22	%		31	%		33	%		35	%		33	%
Media		28	%		22	%		32	%		39	%		45	%

Total		14	%		26	%		28	%		32	%		33	%


	2017			2016
Year to date, SEK million	Jan-Mar			Jan-Dec			Jan-Sep			Jan-Jun			Jan-Mar

Networks		7,980			47,183			35,400			25,533			13,011
IT & Cloud		–2,100			15,851			11,175			7,342			3,281
Media		558			3,331			2,770			2,010			1,098

Total		6,438			66,365			49,345			34,885			17,390


	2017			2016
Year to date, As percentage of net sales	Jan-Mar			Jan-Dec			Jan-Sep			Jan-Jun			Jan-Mar

Networks		23	%		29	%		30	%		32	%		33	%
IT & Cloud		–22	%		33	%		34	%		34	%		33	%
Media		28	%		34	%		39	%		42	%		45	%

Total		14	%		30	%		31	%		33	%		33	%

26 Ericsson | First Quarter Report 2017

OPERATING INCOME AND OPERATING MARGIN BY SEGMENT BY QUARTER


	2017			2016
Isolated quarters, SEK million	Q1			Q4			Q3			Q2			Q1

Networks		–538			2,380			2,839			4,789			5,762
IT & Cloud		–8,997			–1,819			–1,740			–1,546			–1,977
Media		–2,804			–841			–758			–480			–310

Total		–12,339			–280			341			2,763			3,475


	2017			2016
Isolated quarters, As percentage of net sales	Q1			Q4			Q3			Q2			Q1

Networks		–2	%		5	%		8	%		12	%		14	%
IT & Cloud		–94	%		–12	%		–15	%		–13	%		–20	%
Media		–143	%		–33	%		–32	%		–20	%		–13	%

Total		–27	%		0	%		1	%		5	%		7	%


	2017			2016
Year to date, SEK million	Jan-Mar			Jan-Dec			Jan-Sep			Jan-Jun			Jan-Mar

Networks		–538			15,770			13,390			10,551			5,762
IT & Cloud		–8,997			–7,082			–5,263			–3,523			–1,977
Media		–2,804			–2,389			–1,548			–790			–310

Total		–12,339			6,299			6,579			6,238			3,475


	2017			2016
Year to date As percentage of net sales	Jan–Mar			Jan–Dec			Jan–Sep			Jan–Jun			Jan–Mar

Networks		–2	%		10	%		11	%		13	%		14	%
IT & Cloud		–94	%		–15	%		–16	%		–17	%		–20	%
Media		–143	%		–25	%		–22	%		–16	%		–13	%

Total		–27	%		3	%		4	%		6	%		7	%

EBITA AND EBITA MARGIN BY SEGMENT BY QUARTER


	2017			2016
Isolated quarters, SEK million	Q1			Q4			Q3			Q2			Q1

Networks		–353			2,586			3,042			4,994			5,970
IT & Cloud		–8,237			–1,571			–1,443			–1,306			–1,713
Media		–1,874			–655			–567			–290			–98

Total		–10,464			360			1,032			3,398			4,159


	2017			2016
Isolated quarters As percentage of net sales	Q1			Q4			Q3			Q2			Q1

Networks		–1	%		5	%		8	%		12	%		15	%
IT & Cloud		–86	%		–11	%		–12	%		–11	%		–17	%
Media		–95	%		–26	%		–24	%		–12	%		–4	%

Total		–23	%		1	%		2	%		6	%		8	%


	2017			2016
Year to date, SEK million	Jan-Mar			Jan-Dec			Jan-Sep			Jan-Jun			Jan-Mar

Networks		–353			16,592			14,006			10,964			5,970
IT & Cloud		–8,237			–6,033			–4,462			–3,019			–1,713
Media		–1,874			–1,610			–955			–388			–98

Total		–10,464			8,949			8,589			7,557			4,159


	2017			2016
Year to date As a percentage of net sales	Jan–Mar			Jan–Dec			Jan–Sep			Jan–Jun			Jan–Mar

Networks		–1	%		10	%		12	%		14	%		15	%
IT & Cloud		–86	%		–13	%		–14	%		–14	%		–17	%
Media		–95	%		–17	%		–13	%		–8	%		–4	%

Total		–23	%		4	%		5	%		7	%		8	%

27 Ericsson | First Quarter Report 2017

NET SALES BY REGION BY QUARTER*


	2017			2016
Isolated quarters, SEK million	Q1			Q4			Q3			Q2			Q1

North America		11,811			14,851			13,178			13,358			13,147
Latin America		2,887			4,974			4,383			4,550			4,047
Northern Europe & Central Asia^{1) 2)}		1,735			2,781			2,105			2,158			2,286
Western & Central Europe²⁾		3,645			4,588			3,949			4,828			4,373
Mediterranean²⁾		4,440			6,785			4,667			5,546			4,394
Middle East		3,487			6,397			4,286			4,926			3,579
Sub Saharan Africa		1,927			2,732			2,012			2,313			2,120
India		2,422			3,042			2,597			2,426			2,683
North East Asia		5,561			9,623			6,122			6,041			5,579
South East Asia & Oceania		5,587			6,676			5,081			5,304			5,222
Other^{1) 2)}		2,867			2,766			2,696			2,658			4,779

Total		46,369			65,215			51,076			54,108			52,209

¹⁾ Of which in Sweden		925			843			690			477			1,113
²⁾ Of which in EU		8,239			11,154			8,507			9,635			9,229

	2017			2016
Sequential change, percent	Q1			Q4			Q3			Q2			Q1

North America		–20	%		13	%		–1	%		2	%		–21	%
Latin America		–42	%		13	%		–4	%		12	%		–34	%
Northern Europe & Central Asia^{1) 2)}		–38	%		32	%		–2	%		–6	%		–22	%
Western & Central Europe²⁾		–21	%		16	%		–18	%		10	%		–25	%
Mediterranean²⁾		–35	%		45	%		–16	%		26	%		–38	%
Middle East		–45	%		49	%		–13	%		38	%		–41	%
Sub Saharan Africa		–29	%		36	%		–13	%		9	%		–26	%
India		–20	%		17	%		7	%		–10	%		–15	%
North East Asia		–42	%		57	%		1	%		8	%		–37	%
South East Asia & Oceania		–16	%		31	%		–4	%		2	%		–3	%
Other^{1) 2)}		4	%		3	%		1	%		–44	%		–44	%

Total		–29	%		28	%		–6	%		4	%		–29	%

¹⁾ Of which in Sweden		10	%		22	%		45	%		–57	%		15	%
²⁾ Of which in EU		–26	%		31	%		–12	%		4	%		–27	%

	2017			2016
Year-over-year change, percent	Q1			Q4			Q3			Q2			Q1

North America		–10	%		–11	%		–8	%		–8	%		8	%
Latin America		–29	%		–19	%		–22	%		–10	%		–12	%
Northern Europe & Central Asia^{1) 2)}		–24	%		–5	%		–19	%		–18	%		–18	%
Western & Central Europe²⁾		–17	%		–21	%		–21	%		–15	%		–17	%
Mediterranean²⁾		1	%		–4	%		–17	%		–7	%		–14	%
Middle East		–3	%		5	%		–25	%		–24	%		–21	%
Sub Saharan Africa		–9	%		–4	%		–25	%		–13	%		–2	%
India		–10	%		–4	%		–28	%		–20	%		–24	%
North East Asia		0	%		8	%		–4	%		–13	%		–7	%
South East Asia & Oceania		7	%		25	%		5	%		8	%		23	%
Other^{1) 2)}		–40	%		–67	%		–6	%		–3	%		54	%

Total		–11	%		–11	%		–14	%		–11	%		–2	%

¹⁾ Of which in Sweden		–17	%		–13	%		–39	%		–20	%		2	%
²⁾ Of which in EU		–11	%		–12	%		–20	%		–16	%		–15	%

*	Net sales by region has been restated. Broadcast services, previously reported in Region Other, is now reported per geographical region. In addition, part of the business related to former Telcordia has been transferred from the geographic regions to Region Other.

28 Ericsson | First Quarter Report 2017

NET SALES BY REGION BY QUARTER,CONT.*


	2017			2016
Year to date, SEK million	Jan-Mar			Jan-Dec			Jan-Sep			Jan-Jun			Jan-Mar

North America		11,811			54,534			39,683			26,505			13,147
Latin America		2,887			17,954			12,980			8,597			4,047
Northern Europe & Central Asia^{1) 2)}		1,735			9,330			6,549			4,444			2,286
Western & Central Europe²⁾		3,645			17,738			13,150			9,201			4,373
Mediterranean²⁾		4,440			21,392			14,607			9,940			4,394
Middle East		3,487			19,188			12,791			8,505			3,579
Sub Saharan Africa		1,927			9,177			6,445			4,433			2,120
India		2,422			10,748			7,706			5,109			2,683
North East Asia		5,561			27,365			17,742			11,620			5,579
South East Asia & Oceania		5,587			22,283			15,607			10,526			5,222
Other^{1) 2)}		2,867			12,899			10,133			7,437			4,779

Total		46,369			222,608			157,393			106,317			52,209

¹⁾ Of which in Sweden		925			3,123			2,280			1,590			1,113
²⁾ Of which in EU		8,239			38,525			27,371			18,864			9,229

	2017			2016
Year to date, year-over-year change, percent	Jan-Mar			Jan-Dec			Jan-Sep			Jan-Jun			Jan-Mar

North America		–10	%		–6	%		–3	%		–1	%		8	%
Latin America		–29	%		–16	%		–15	%		–11	%		–12	%
Northern Europe & Central Asia^{1) 2)}		–24	%		–15	%		–18	%		–18	%		–18	%
Western & Central Europe²⁾		–17	%		–18	%		–17	%		–16	%		–17	%
Mediterranean²⁾		1	%		–10	%		–12	%		–10	%		–14	%
Middle East		–3	%		–16	%		–24	%		–23	%		–21	%
Sub Saharan Africa		–9	%		–11	%		–14	%		–8	%		–2	%
India		–10	%		–20	%		–25	%		–22	%		–24	%
North East Asia		0	%		–3	%		–8	%		–10	%		–7	%
South East Asia & Oceania		7	%		15	%		12	%		15	%		23	%
Other^{1) 2)}		–40	%		–25	%		16	%		27	%		54	%

Total		–11	%		–10	%		–9	%		–7	%		–2	%

¹⁾ Of which in Sweden		–17	%		–18	%		–19	%		–6	%		2	%
²⁾ Of which in EU		–11	%		–15	%		–17	%		–16	%		–15	%

*	Net sales by region has been restated. Broadcast services, previously reported in Region Other, is now reported per geographical region. In addition, part of the business related to former Telcordia has been transferred from the geographic regions to Region Other.

TOP 5 COUNTRIES IN SALES


	Q1						Jan-Dec
Country Percentage of Net sales	2017			2016			2016

United States		26	%		27	%		25	%
China		7	%		9	%		9	%
India		5	%		5	%		5	%
Japan		5	%		4	%		3	%
Vietnam		4	%		1	%		1	%

29 Ericsson | First Quarter Report 2017

NET SALES BY REGION BY SEGMENT


	Q1 2017
SEK million	Networks			IT & Cloud			Media			Total

North America		9,229			2,287			295			11,811
Latin America		2,015			845			27			2,887
Northern Europe & Central Asia		1,208			424			103			1,735
Western & Central Europe		2,519			690			436			3,645
Mediterranean		2,844			1,367			229			4,440
Middle East		2,397			1,015			75			3,487
Sub Saharan Africa		1,354			538			35			1,927
India		1,825			586			11			2,422
North East Asia		4,625			889			47			5,561
South East Asia & Oceania		4,828			692			67			5,587
Other		2,016			212			639			2,867

Total		34,860			9,545			1,964			46,369

Share of total		75	%		21	%		4	%		100	%


	Q1 2017
Sequential change, percent	Networks			IT & Cloud			Media			Total

North America		–22	%		–11	%		–42	%		–20	%
Latin America		–43	%		–35	%		–79	%		–42	%
Northern Europe & Central Asia		–39	%		–37	%		–20	%		–38	%
Western & Central Europe		–8	%		–47	%		–21	%		–21	%
Mediterranean		–25	%		–49	%		–27	%		–35	%
Middle East		–47	%		–42	%		–15	%		–45	%
Sub Saharan Africa		–36	%		–10	%		775	%		–29	%
India		–28	%		21	%		–39	%		–20	%
North East Asia		–35	%		–63	%		–18	%		–42	%
South East Asia & Oceania		–15	%		–21	%		–29	%		–16	%
Other		9	%		–21	%		–2	%		4	%

Total		–27	%		–36	%		–23	%		–29	%


	Q1 2017
Year over year change, percent	Networks			IT & Cloud			Media			Total

North America		–15	%		32	%		–44	%		–10	%
Latin America		–32	%		–19	%		–52	%		–29	%
Northern Europe & Central Asia		–31	%		4	%		–18	%		–24	%
Western & Central Europe		–21	%		6	%		–20	%		–17	%
Mediterranean		4	%		–6	%		8	%		1	%
Middle East		–3	%		–1	%		–7	%		–3	%
Sub Saharan Africa		–8	%		–16	%		150	%		–9	%
India		–15	%		17	%		–52	%		–10	%
North East Asia		8	%		–30	%		4	%		0	%
South East Asia & Oceania		8	%		3	%		10	%		7	%
Other		–44	%		–52	%		–15	%		–40	%

Total		–13	%		–3	%		–20	%		–11	%

30 Ericsson | First Quarter Report 2017

PROVISIONS

2017

2016

Isolated quarters, SEK million

Opening balance

6,357

3,245

3,387

3,532

3,838

Additions

6,365

4,349

666

839

492

Utilization/Cash out

–2,085

–976

–716

–794

–667

Of which restructuring

–1,586

–785

–529

–639

–487

Reversal of excess amounts

–66

–253

–129

–240

–67

Reclassification, translation difference and other

–11

–8

–64

Closing balance

10,560

6,357

3,245

3,387

3,532

2017

2016

Year to date, SEK million

Jan–Mar

Jan–Dec

Jan–Sep

Jan–Jun

Jan–Mar

Opening balance

6,357

3,838

Additions

6,365

6,346

1,997

1,331

492

Utilization/Cash out

–2,085

–3,153

–2,177

–1,461

–667

Of which restructuring

–1,586

–2,440

–1,655

–1,126

–487

Reversal of excess amounts

–66

–689

–436

–307

–67

Reclassification, translation difference and other

–11

–14

–64

Closing balance

10,560

6,357

3,245

3,387

3,532

INFORMATION ON INVESTMENTS

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

2017

2016

Isolated quarters, SEK million

Additions

Property, plant and equipment

1,015

1,699

1,384

1,572

1,474

Capitalized development expenses¹⁾

865

1,291

885

1,099

1,208

IPR, brands and other intangible assets

–4

Total

1,881

2,990

2,265

2,684

2,687

Depreciation, amortization and impairment losses

Property, plant and equipment

1,075

1,318

1,106

1,083

1,062

Capitalized development expenses

2,481

652

511

386

351

IPR, brands and other intangible assets

1,875

640

691

635

684

Total

5,431

2,610

2,308

2,104

2,097

¹⁾Including reclassification

2017

2016

Year to date, SEK million

Jan–Mar

Jan–Dec

Jan–Sep

Jan–Jun

Jan–Mar

Additions

Property, plant and equipment

1,015

6,129

4,430

3,046

1,474

Capitalized development expenses¹⁾

865

4,483

3,192

2,307

1,208

IPR, brands and other intangible assets

Total

1,881

10,626

7,636

5,371

2,687

Depreciation, amortization and impairment losses

Property, plant and equipment

1,075

4,569

3,251

2,145

1,062

Capitalized development expenses

2,481

1,900

1,248

737

351

IPR, brands and other intangible assets

1,875

2,650

2,010

1,319

684

Total

5,431

9,119

6,509

4,201

2,097

¹⁾	Including reclassification

31 Ericsson | First Quarter Report 2017

OTHER INFORMATION


	Jan–Mar						Jan–Dec
SEK million	2017			2016			2016

Number of shares and earnings per share
Number of shares, end of period (million)		3,331			3,305			3,331
Of which class A-shares (million)		262			262			262
Of which class B-shares (million)		3,069			3,043			3,069
Number of treasury shares, end of period (million)		58			46			62
Number of shares outstanding, basic, end of period (million)		3,273			3,259			3,269
Numbers of shares outstanding, diluted, end of period (million)		3,314			3,293			3,309
Average number of treasury shares (million)		59			47			60
Average number of shares outstanding, basic (million)		3,272			3,258			3,263
Average number of shares outstanding, diluted (million)¹⁾		3,313			3,292			3,303
Earnings per share, basic (SEK)		–3.33			0.60			0.53
Earnings per share, diluted (SEK)¹⁾		–3.29			0.60			0.52
Earnings per share (Non–IFRS), diluted (SEK)²⁾		–2.42			0.87			2.66

Ratios
Days sales outstanding		117			108			95
Inventory turnover days		73			80			69
Payable days		58			58			56
Equity ratio (%)		43.4	%		52.0	%		49.6	%
Return on equity (%)		–32.8	%		5.4	%		1.2	%
Return on capital employed (%)		–26.2	%		6.9	%		3.2	%
Capital turnover (times)		1.0			1.1			1.2
Cash conversion (%)		16.7	%		–65.3	%		175.0	%

Exchange rates used in the consolidation³⁾
SEK/EUR– closing rate		9.54			9.23			9.56
SEK/USD– closing rate		8.93			8.11			9.06

Other
Regional inventory, end of period		19,047			18,089			16,231
Export sales from Sweden		21,460			23,254			107,036

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

²⁾	Excluding amortizations and write–downs of acquired intangibles and restructuring charges.

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

NUMBER OF EMPLOYEES


	2017		2016
End of period	Mar 31		Dec 31		Sep 30		Jun 30		Mar 31

North America		11,253		11,547		12,229		13,838		14,081
Latin America		9,252		9,513		9,592		9,616		9,836
Northern Europe & Central Asia¹⁾		18,534		19,136		19,759		20,177		20,167
Western & Central Europe		13,368		13,646		13,574		13,727		12,100
Mediterranean		13,040		12,578		13,110		12,957		12,906
Middle East		3,256		3,346		3,479		3,573		3,608
Sub Saharan Africa		2,012		2,086		2,167		2,347		2,377
India		23,253		22,552		22,340		22,541		22,424
North East Asia		12,962		13,042		13,434		13,547		13,623
South East Asia & Oceania		3,968		4,018		4,113		4,184		4,178

Total		110,898		111,464		113,797		116,507		115,300

¹⁾ Of which in Sweden		14,712		15,303		15,872		16,190		16,290

32 Ericsson | First Quarter Report 2017

ITEMS EXCLUDING

RESTRUCTURING CHARGES

RESTRUCTURING CHARGES BY FUNCTION

2017

2016

Isolated quarters, SEK million

Cost of sales

–1,460

–2,140

–546

–461

–328

Research and development expenses

–214

–1,531

–529

–422

–257

Selling and administrative expenses

–69

–978

–190

–138

–47

Total

–1,743

–4,649

–1,265

–1,021

–632

2017

2016

Year to date, SEK million

Jan–Mar

Jan–Dec

Jan–Sep

Jan–Jun

Jan–Mar

Cost of sales

–1,460

–3,475

–1,335

–789

–328

Research and development expenses

–214

–2,739

–1,208

–679

–257

Selling and administrative expenses

–69

–1,353

–375

–185

–47

Total

–1,743

–7,567

–2,918

–1,653

–632

RESTRUCTURING CHARGES BY SEGMENT

2017

2016

Isolated quarters, SEK million

Networks

–1,447

–2,430

–557

–472

–434

of which cost of sales

–1,254

–1,341

–365

–342

–250

of which operating expenses

–193

–1,089

–192

–130

–184

IT & Cloud

–241

–1,810

–604

–478

–191

of which cost of sales

–168

–671

–109

–106

–76

of which operating expenses

–73

–1,139

–495

–372

–115

Media

–55

–409

–104

–71

–7

of which cost of sales

–38

–128

–72

–13

–2

of which operating expenses

–17

–281

–32

–58

–5

Total

–1,743

–4,649

–1,265

–1,021

–632

2017

2016

Year to date, SEK million

Jan–Mar

Jan–Dec

Jan–Sep

Jan–Jun

Jan–Mar

Networks

–1,447

–3,893

–1,463

–906

–434

of which cost of sales

–1,254

–2,298

–957

–592

–250

of which operating expenses

–193

–1,595

–506

–314

–184

IT & Cloud

–241

–3,083

–1,273

–669

–191

of which cost of sales

–168

–962

–291

–182

–76

of which operating expenses

–73

–2,121

–982

–487

–115

Media

–55

–591

–182

–78

–7

of which cost of sales

–38

–215

–87

–15

–2

of which operating expenses

–17

–376

–95

–63

–5

Total

–1,743

–7,567

–2,918

–1,653

–632

33 Ericsson | First Quarter Report 2017

GROSS INCOME AND GROSS MARGIN

EXCLUDING RESTRUCTURING BY SEGEMENT BY QUARTER


Isolated quarters, SEK million	2017			2016
Isolated quarters, SEK million	Q1			Q4			Q3			Q2			Q1

Networks		9,234			13,124			10,232			12,864			13,261
IT & Cloud		–1,932			5,347			3,942			4,167			3,357
Media		596			689			832			925			1,100

Total		7,898			19,160			15,006			17,956			17,718


As percentage of net sales, isolated quarters	2017			2016
As percentage of net sales, isolated quarters	Jan-Mar			Jan-Dec			Jan-Sep			Jan-Jun			Jan-Mar

Networks		26	%		27	%		28	%		32	%		33	%
IT & Cloud		–20	%		36	%		34	%		36	%		34	%
Media		30	%		27	%		36	%		39	%		45	%

Total		17	%		29	%		29	%		33	%		34	%


Year to date, SEK million	2017			2016
Year to date, SEK million	Q1			Q4			Q3			Q2			Q1

Networks		9,234			49,481			36,357			26,125			13,261
IT & Cloud		–1,932			16,813			11,466			7,524			3,357
Media		596			3,546			2,857			2,025			1,100

Total		7,898			69,840			50,680			35,674			17,718


As percentage of net sales, year to date	2017			2016
As percentage of net sales, year to date	Jan–Mar			Jan–Dec			Jan–Sep			Jan–Jun			Jan–Mar

Networks		26	%		30	%		31	%		33	%		33	%
IT & Cloud		–20	%		35	%		35	%		35	%		34	%
Media		30	%		37	%		40	%		42	%		45	%

Total		17	%		31	%		32	%		34	%		34	%


OPERATING INCOME AND OPERATING MARGIN EXCLUDING RESTRUCTURING BY SEGEMENT BY QUARTER

Isolated quarters, SEK million	2017			2016
Isolated quarters, SEK million	Q1			Q4			Q3			Q2			Q1

Networks		909			4,810			3,396			5,261			6,196
IT & Cloud		–8,756			–9			–1,136			–1,068			–1,786
Media		–2,749			–432			–654			–409			–303

Total		–10,596			4,369			1,606			3,784			4,107


As percentage of net sales, isolated quarters	2017			2016
As percentage of net sales, isolated quarters	Jan-Mar			Jan-Dec			Jan-Sep			Jan-Jun			Jan-Mar

Networks		3	%		10	%		9	%		13	%		16	%
IT & Cloud		–92	%		0	%		–10	%		–9	%		–18	%
Media		–140	%		–17	%		–28	%		–17	%		–12	%

Total		–23	%		7	%		3	%		7	%		8	%


Year to date, SEK million	2017			2016
Year to date, SEK million	Q1			Q4			Q3			Q2			Q1

Networks		909			19,663			14,853			11,457			6,196
IT & Cloud		–8,756			–3,999			–3,990			–2,854			–1,786
Media		–2,749			–1,798			–1,366			–712			–303

Total		–10,596			13,866			9,497			7,891			4,107


As percentage of net sales, year to date	2017			2016
As percentage of net sales, year to date	Jan–Mar			Jan–Dec			Jan–Sep			Jan–Jun			Jan–Mar

Networks		3	%		12	%		13	%		14	%		16	%
IT & Cloud		–92	%		–8	%		–12	%		–13	%		–18	%
Media		–140	%		–19	%		–19	%		–15	%		–12	%

Total		–23	%		6	%		6	%		7	%		8	%

34 Ericsson | First Quarter Report 2017

ALTERNATIVE PERFORMANCE MEASURES

This section includes a reconciliation of certain Alternative Performance Measures (APMs) to the most directly reconcilable line items in the financial statements. The presentation of APMs has limitations as analytical tools and should not be considered in isolation or as a substitute for related financial measures prepared in accordance with IFRS.

APMs are presented to enhance an investor’s evaluation of ongoing operating results, to aid in forecasting future periods and to facilitate meaningful comparison of results between periods.

Management uses these APMs to, among other things, evaluate ongoing operations in relation to historical results, for internal planning and forecasting purposes and in the calculation of certain performance-based compensation.

The APMs presented in this report may differ from similarly titled measures used by other companies.

For additional information, see Alternative Performance Measures in the Ericsson Annual Report 2016.

SALES GROWTH ADJUSTED FOR COMPARABLE UNITS AND CURRENCY

Sales growth adjusted for the impact of acquisitions and divestments as well as the effects of foreign currency fluctuations.


	2017			2016
Isolated quarter, sequential change	Q1			Q4			Q3			Q2			Q1
Reported net sales		46,369			65,215			51,076			54,108			52,209
Acquired/divested business		—			—			–63			–35			—
Net FX impact		234			–2,446			–1,924			1,221			766
Comparable net sales, excluding FX impact		46,603			62,769			49,089			55,294			52,975
Sales growth adjusted for comparable units and currency (%)		–29	%		23	%		–9	%		6	%		–28	%

	2017			2016
Isolated quarter, year over year change	Q1			Q4			Q3			Q2			Q1
Reported net sales		46,369			65,215			51,076			54,108			52,209
Acquired/divested business		—			–49			–96			–95			–73
Net FX impact		–2,435			–2,528			–200			2,329			655
Comparable net sales, excluding FX impact		43,934			62,638			50,780			56,342			52,791
Sales growth adjusted for comparable units and currency (%)		–16	%		–15	%		–14	%		–7	%		–1	%

	2017			2016
Year to date, year over year change	Jan–Mar			Jan–Dec			Jan–Sep			Jan–Jun			Jan–Mar
Reported net sales		46,369			222,608			157,393			106,317			52,209
Acquired/divested business		—			–313			–264			–168			–73
Net FX impact		–2,435			254			2,783			2,983			655
Comparable net sales, excluding FX impact		43,934			222,549			159,912			109,132			52,791
Sales growth adjusted for comparable units and currency (%)		–16	%		–10	%		–8	%		–4	%		–1	%

35 Ericsson | First Quarter Report 2017

ITEMS EXCLUDING RESTRUCTURING CHARGES

Gross income, operating expenses, and operating income are presented excluding restructuring charges and, for certain measures, as a percentage of net sales.


	2017			2016
Isolated quarters, SEK million	Q1			Q4			Q3			Q2			Q1

Gross income		6,438			17,020			14,460			17,495			17,390
Net sales		46,369			65,215			51,076			54,108			52,209
Gross margin (%)		13.9	%		26.1	%		28.3	%		32.3	%		33.3	%


Gross income		6,438			17,020			14,460			17,495			17,390
Restructuring charges included in cost of sales		1,460			2,140			546			461			328
Gross income, excluding restructuring charges		7,898			19,160			15,006			17,956			17,718

Net sales		46,369			65,215			51,076			54,108			52,209
Gross margin, excluding restructuring charges (%)		17.0	%		29.4	%		29.4	%		33.2	%		33.9	%


Operating expenses		–18,929			–17,689			–14,093			–14,514			–14,205
Restructuring charges included in R&D expenses		214			1,531			529			422			257
Restructuring charges included in selling and administrative expenses		69			978			190			138			47
Operating expenses, excluding restructuring charges		–18,646			–15,180			–13,374			–13,954			–13,901


Operating income		–12,339			–280			341			2,763			3,475
Net sales		46,369			65,215			51,076			54,108			52,209
Operating margin (%)		–26.6	%		–0.4	%		0.7	%		5.1	%		6.7	%


Operating income		–12,339			–280			341			2,763			3,475
Total restructuring charges		1,743			4,649			1,265			1,021			632
Operating income, excluding restructuring charges		–10,596			4,369			1,606			3,784			4,107

Net sales		46,369			65,215			51,076			54,108			52,209
Operating margin, excluding restructuring charges (%)		–22.9	%		6.7	%		3.1	%		7.0	%		7.9	%


	2017			2016
Year to date, SEK million	Jan–Mar			Jan–Dec			Jan–Sep			Jan–Jun			Jan–Mar

Gross income		6,438			66,365			49,345			34,885			17,390
Net sales		46,369			222,608			157,393			106,317			52,209
Gross margin (%)		13.9	%		29.8	%		31.4	%		32.8	%		33.3	%


Gross income		6,438			66,365			49,345			34,885			17,390
Restructuring charges included in cost of sales		1,460			3,475			1,335			789			328
Gross income, excluding restructuring charges		7,898			69,840			50,680			35,674			17,718

Net sales		46,369			222,608			157,393			106,317			52,209
Gross margin, excluding restructuring charges (%)		17.0	%		31.4	%		32.2	%		33.6	%		33.9	%


Operating expenses		–18,929			–60,501			–42,812			–28,719			–14,205
Restructuring charges included in R&D expenses		214			2,739			1,208			679			257
Restructuring charges included in selling and administrative expenses		69			1,353			375			185			47
Operating expenses, excluding restructuring charges		–18,646			–56,409			–41,229			–27,855			–13,901


Operating income		–12,339			6,299			6,579			6,238			3,475
Net sales		46,369			222,608			157,393			106,317			52,209
Operating margin (%)		–26.6	%		2.8	%		4.2	%		5.9	%		6.7	%


Operating income		–12,339			6,299			6,579			6,238			3,475
Total restructuring charges		1,743			7,567			2,918			1,653			632
Operating income, excluding restructuring charges		–10,596			13,866			9,497			7,891			4,107

Net sales		46,369			222,608			157,393			106,317			52,209
Operating margin, excluding restructuring charges (%)		–22.9	%		6.2	%		6.0	%		7.4	%		7.9	%

36 Ericsson | First Quarter Report 2017

EBITA AND EBITA MARGIN

Earnings before interest, taxes, amortization and write-downs of acquired intangibles, also expressed as a percentage of net sales.


	2017			2016
Isolated quarters, SEK million	Q1			Q4			Q3			Q2			Q1

Net income		–10,855			–1,597			–180			1,566			2,106
Taxes		–1,916			634			–76			670			903
Financial income and expenses		432			683			597			527			466
Amortization and write-downs of acquired intangibles		1,875			640			691			635			684
EBITA		–10,464			360			1,032			3,398			4,159
Net sales		46,369			65,215			51,076			54,108			52,209
EBITA margin (%)		–23	%		1	%		2	%		6	%		8	%

	2017			2016
Year to date, SEK million	Jan-Mar			Jan-Dec			Jan-Sep			Jan-Jun			Jan-Mar

Net income		–10,855			1,895			3,492			3,672			2,106
Taxes		–1,916			2,131			1,497			1,573			903
Financial income and expenses		432			2,273			1,590			993			466
Amortization and write–downs of acquired intangibles		1,875			2,650			2,010			1,319			684
EBITA		–10,464			8,949			8,589			7,557			4,159
Net sales		46,369			222,608			157,393			106,317			52,209
EBITA margin (%)		–23	%		4	%		5	%		7	%		8	%

CASH CONVERSION

Cash flow from operating activities divided by the sum of net income and adjustments to reconcile net income to cash, expressed as a percentage.


	2017			2016
Isolated quarters, SEK million	Q1			Q4			Q3			Q2			Q1

Net income		–10,855			–1,597			–180			1,566			2,106
Net income reconciled to cash		–9,249			1,557			1,498			1,321			3,631
Cash flow from operating activities		–1,541			19,412			–2,317			–713			–2,372
Cash conversion (%)		16.7	%		1,246.8	%		–154.7	%		–54.0	%		–65.3	%

	2017			2016
Year to date, SEK million	Jan-Mar			Jan-Dec			Jan-Sep			Jan-Jun			Jan-Mar

Net income		–10,855			1,895			3,492			3,672			2,106
Net income reconciled to cash		–9,249			8,007			6,450			4,952			3,631
Cash flow from operating activities		–1,541			14,010			–5,402			–3,085			–2,372
Cash conversion (%)		16.7	%		175.0	%		–83.8	%		–62.3	%		–65.3	%

GROSS CASH AND NET CASH, END OF PERIOD

Gross cash: Cash and cash equivalents plus interest–bearing securities (current and non–current).

Net cash: Cash and cash equivalents plus interest–bearing securities (current and non–current) less interest–bearing liabilities (which include: non–current borrowings and current borrowings).


	2017		2016
SEK million	Q1		Q4		Q3		Q2		Q1

Cash and cash equivalents		32,954		36,966		24,401		28,931		35,934
+ Interest-bearing securities, current		13,548		13,325		18,663		19,846		25,077
+ Interest-bearing securities, non-current		19,124		7,586		540		—		—
Gross cash, end of period		65,626		57,877		43,604		48,777		61,011
– Borrowings, current		9,514		8,033		9,007		9,653		2,414
– Borrowings, non–current		27,823		18,653		18,283		18,164		22,110
Net cash, end of period		28,289		31,191		16,314		20,960		36,487

37 Ericsson | First Quarter Report 2017

CAPITAL EMPLOYED

Total assets less non–interest–bearing provisions and liabilities.


	2017		2016
SEK million	Q1		Q4		Q3		Q2		Q1

Total assets		292,207		283,347		275,718		277,387		280,325
Non-interest-bearing provisions and liabilities
Provisions, non-current		4,867		946		170		245		158
Deferred tax liabilities		1,888		2,147		2,052		2,036		2,098
Other non-current liabilities		2,699		2,621		2,127		2,030		1,834
Provisions, current		5,694		5,411		3,075		3,142		3,374
Trade payables		25,814		25,318		21,633		23,709		21,549
Other current liabilities		63,293		56,003		52,896		54,394		55,429
Capital employed		187,952		190,901		193,765		191,831		195,883

CAPITAL TURNOVER

Annualized net sales divided by average capital employed.


	2017		2016
Isolated quarters, SEK million	Q1		Q4		Q3		Q2		Q1

Net sales		46,369		65,215		51,076		54,108		52,209
Annualized net sales		185,476		260,860		204,304		216,432		208,836
Average capital employed
Capital employed at beginning of period		190,901		193,765		191,831		195,883		195,150
Capital employed at end of period		187,952		190,901		193,765		191,831		195,883
Average capital employed		189,427		192,333		192,798		193,857		195,517
Capital turnover (times)		1.0		1.4		1.1		1.1		1.1

	2017		2016
Year to date, SEK million	Jan-Mar		Jan-Dec		Jan-Sep		Jan-Jun		Jan-Mar

Net sales		46,369		222,608		157,393		106,317		52,209
Annualized net sales		185,476		222,608		209,857		212,634		208,836
Average capital employed
Capital employed at beginning of period		190,901		195,150		195,150		195,150		195,150
Capital employed at end of period		187,952		190,901		193,765		191,831		195,883
Average capital employed		189,427		193,026		194,458		193,491		195,517
Capital turnover (times)		1.0		1.2		1.1		1.1		1.1

RETURN ON CAPITAL EMPLOYED

The annualized total of operating income plus financial income as a percentage of average capital employed.


	2017			2016
Isolated quarters, SEK million	Q1			Q4			Q3			Q2			Q1

Operating income		–12,339			–280			341			2,763			3,475
Financial income		–82			61			–226			139			–89
Annualized operating income + financial income		–49,684			–876			460			11,608			13,540
Average capital employed
Capital employed at beginning of period		190,901			193,765			191,831			195,883			195,150
Capital employed at end of period		187,952			190,901			193,765			191,831			195,883
Average capital employed		189,427			192,333			192,798			193,857			195,517
Return on capital employed (%)		–26.2	%		–0.5	%		0.2	%		6.0	%		6.9	%

	2017			2016
Year to date, SEK million	Jan-Mar			Jan-Dec			Jan-Sep			Jan-Jun			Jan-Mar

Operating income		–12,339			6,299			6,579			6,238			3,475
Financial income		–82			–115			–176			50			–89
Annualized operating income + financial income		–49,684			6,184			8,537			12,576			13,540
Average capital employed
Capital employed at beginning of period		190,901			195,150			195,150			195,150			195,150
Capital employed at end of period		187,952			190,901			193,765			191,831			195,883
Average capital employed		189,427			193,026			194,458			193,491			195,517
Return on capital employed (%)		–26.2	%		3.2	%		4.4	%		6.5	%		6.9	%

38 Ericsson | First Quarter Report 2017

EQUITY RATIO

Equity, expressed as a percentage of total assets.


	2017			2016
SEK million	Q1			Q4			Q3			Q2			Q1

Total equity		126,841			140,492			134,012			136,691			145,644
Total assets		292,207			283,347			275,718			277,387			280,325
Equity ratio (%)		43.4	%		49.6	%		48.6	%		49.3	%		52.0	%

RETURN ON EQUITY

Annualized net income attributable to stockholders of the Parent Company as a percentage of average Stockholders’ equity.


	2017			2016
Isolated quarters, SEK million	Q1			Q4			Q3			Q2			Q1

Net income attributable to stockholders of the parent company		–10,897			–1,604			–233			1,587			1,966
Annualized		–43,588			–6,416			–932			6,348			7,864
Average stockholders’ equity
Stockholders’ equity, beginning of period		139,817			133,138			135,746			144,699			146,525
Stockholders’ equity, end of period		126,105			139,817			133,138			135,746			144,699
Average stockholders’ equity		132,961			136,478			134,442			140,223			145,612
Return on equity (%)		–32.8	%		–4.7	%		–0.7	%		4.5	%		5.4	%

	2017			2016
Year to date, SEK million	Jan-Mar			Jan-Dec			Jan-Sep			Jan-Jun			Jan-Mar

Net income attributable to stockholders of the parent company		–10,897			1,716			3,320			3,553			1,966
Annualized		–43,588			1,716			4,427			7,106			7,864
Average stockholders’ equity
Stockholders’ equity, beginning of period		139,817			146,525			146,525			146,525			146,525
Stockholders’ equity, end of period		126,105			139,817			133,138			135,746			144,699
Average stockholders’ equity		132,961			143,171			139,832			141,136			145,612
Return on equity (%)		–32.8	%		1.2	%		3.2	%		5.0	%		5.4	%

EARNINGS PER SHARE (NON–IFRS)

EPS, diluted, excluding amortizations and write–down of acquired intangible assets and excluding restructuring charges.


	2017		2016
Isolated quarters, SEK	Q1		Q4		Q3		Q2		Q1

EPS diluted		–3.29		–0.48		–0.07		0.48		0.60
Restructuring charges		0.45		0.97		0.27		0.22		0.13
Amortization and write-downs of acquired intangibles		0.42		0.13		0.14		0.13		0.14
EPS (Non-IFRS)		–2.42		0.62		0.34		0.83		0.87

	2017		2016
Year to date, SEK	Jan-Mar		Jan-Dec		Jan-Sep		Jan-Jun		Jan-Mar

EPS diluted		–3.29		0.52		1.01		1.08		0.60
Restructuring charges		0.45		1.59		0.62		0.35		0.13
Amortization and write-downs of acquired intangibles		0.42		0.55		0.41		0.27		0.14
EPS (Non-IFRS)		–2.42		2.66		2.04		1.70		0.87

39 Ericsson | First Quarter Report 2017

ITEMS EXCLUDING RESTRUCTURING, WRITE-DOWNS AS WELL AS

PROVISIONS AND ADJUSTMENTS RELATED TO CERTAIN CUSTOMER PROJECTS

Net sales, gross income, research and development expenses, selling and administrative expenses and operating income are presented excluding restructuring charges, write-down of assets as well as provisions and adjustments related to certain customer projects. Numbers excluding these items are referred to as “adjusted”. Certain measures are also expressed as a percentage of adjusted net sales.


	2017			2016
Isolated quarters, SEK million	Q1			Q4			Q3			Q2			Q1

Net sales		46,369			65,215			51,076			54,108			52,209
Adjustments related to certain customer projects		1,420			—			—			—			—
Adjusted net sales		47,789			65,215			51,076			54,108			52,209


Gross income		6,438			17,020			14,460			17,495			17,390
Restructuring charges included in cost of sales		1,460			2,140			546			461			328
Provisions and adjustments related to certain customer projects included in cost of sales		6,697			—			—			—			—
Adjusted gross income		14,595			19,160			15,006			17,956			17,718

Adjusted net sales		47,789			65,215			51,076			54,108			52,209
Adjusted gross margin (%)		30.5	%		29.4	%		29.4	%		33.2	%		33.9	%


Research and development expenses		–9,068			–8,890			–7,855			–7,405			–7,485
Restructuring charges included in R&D expenses		214			1,531			529			422			257
Write-down of assets included in R&D expenses		1,934			—			—			—			—
Provisions and adjustments related to certain customer projects included in R&D expenses		217			—			—			—			—
Adjusted research and development expenses		–6,703			–7,359			–7,326			–6,983			–7,228


Selling and administrative expenses		-9,861			–8,799			–6,238			–7,109			–6,720
Restructuring charges included in selling and administrative expenses		69			978			190			138			47
Write-down of assets included in selling and administrative expenses		1,362			—			—			—			—
Provisions and adjustments related to certain customer projects included in selling and administrative expenses		1,479			—			—			—			—
Adjusted selling and administrative expenses		-6,951			–7,821			–6,048			–6,971			–6,673


Operating income		–12,339			–280			341			2,763			3,475
Total restructuring charges		1,743			4,649			1,265			1,021			632
Total write-down of assets		3,296			—			—			—			—
Total provisions and adjustments related to certain customer projects		8,393			—			—			—			—
Adjusted operating income		1,093			4,369			1,606			3,784			4,107

Adjusted net sales		47,789			65,215			51,076			54,108			52,209
Adjusted operating margin (%)		2.3	%		6.7	%		3.1	%		7.0	%		7.9	%

40 Ericsson | First Quarter Report 2017

ITEMS EXCLUDING RESTRUCTURING, WRITE-DOWNS AS WELL AS

PROVISIONS AND ADJUSTMENTS RELATED TO CERTAIN CUSTOMER PROJECTS


	2017			2016
Year to date, SEK million	Jan–Mar			Jan–Dec			Jan–Sep			Jan–Jun			Jan–Mar

Net sales		46,369			222,608			157,393			106,317			52,209
Adjustments related to certain customer projects		1,420			—			—			—			—
Adjusted net sales		47,789			222,608			157,393			106,317			52,209


Gross income		6,438			66,365			49,345			34,885			17,390
Restructuring charges included in cost of sales		1,460			3,475			1,335			789			328
Provisions and adjustments related to certain customer projects included in cost of sales		6,697			—			—			—			—
Adjusted gross income		14,595			69,840			50,680			35,674			17,718

Adjusted net sales		47,789			222,608			157,393			106,317			52,209
Adjusted gross margin (%)		30.5	%		31.4	%		32.2	%		33.6	%		33.9	%


Research and development expenses		–9,068			–31,635			–22,745			–14,890			–7,485
Restructuring charges included in R&D expenses		214			2,739			1,208			679			257
Write-down of assets included in R&D expenses		1,934			—			—			—			—
Provisions and adjustments related to certain customer projects included in R&D expenses		217			—			—			—			—
Adjusted research and development expenses		–6,703			–28,896			–21,537			–14,211			–7,228


Selling and administrative expenses		–9,861			–28,866			–20,067			–13,829			–6,720
Restructuring charges included in selling and administrative expenses		69			1,353			375			185			47
Write-down of assets included in selling and administrative expenses		1,362			—			—			—			—
Provisions and adjustments related to certain customer projects included in selling and administrative expenses		1,479			—			—			—			—
Adjusted selling and administrative expenses		–6,951			–27,513			–19,692			–13,644			–6,673


Operating income		–12,339			6,299			6,579			6,238			3,475
Total restructuring charges		1,743			7,567			2,918			1,653			632
Total write-down of assets		3,296			—			—			—			—
Total provisions and adjustments related to certain customer projects		8,393			—			—			—			—
Adjusted operating income		1,093			13,866			9,497			7,891			4,107

Adjusted net sales		47,789			222,608			157,393			106,317			52,209
Adjusted operating margin (%)		2.3	%		6.2	%		6.0	%		7.4	%		7.9	%

41 Ericsson | First Quarter Report 2017

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