FOURTH QUARTER REPORT 2007 This presentation contains forward looking statements. Such statements are based on our current expectations and are subject to certain risks and uncertainties that could negatively affect our business. Please read our earnings reports and our most recent annual report for a better understanding of these risks and uncertainties.
FOURTH QUARTER REPORT CARL-HENRIC SVANBERG President and CEO 2007
Ericsson in 2007 Sales of SEK 187.8 (179.8) b 8% organic growth in constant currencies Significant market share gains Disappointing margin decline - shift in business mix Operating income SEK 30.6 (35.8) b Cash flow of SEK 19.2 (18.5) b 200 180 CAGR 12% 160 140 120 SEK b 100 80 Sales 2003-2007 60 40 20 0 2003 2004 2005 2006 2007 3
The networks market in 2007 Mobile infrastructure market tougher Started at mid single digit growth but ended flattish Operator consolidation, political unrest in some emerging markets Change in competitive landscape continues Fundamentals have not changed 3.3 b subscriptions, up 50 m/month 180 m WCDMA subscriptions, up 6.5 m/month - dramatic data growth 320 m fixed broadband connections by Q3, up 4.5 m/month 4
Q4 in short Continued effects from business mix and technology shift Sales SEK 54.5 (54.2) b Operating income SEK 7.6 (12.2) b operating margin 14% (23%) Cash flow SEK 12.0 (11.0) b Slower networks market in parts of Europe and some emerging markets 5
Q4 in short Continued effects from business mix and technology shift Sales SEK 54.5 (54.2) b Operating income SEK 7.6 (12.2) b operating margin 14% (23%) Cash flow SEK 12.0 (11.0) b Slower networks market in parts of Europe and some emerging markets 6
Long-term business ambitions Growth Grow faster than market Profitability Best in class margins Cash flow Cash conversion > 70% 7
Our planning assumptions for 2008 Planning for flattish mobile infrastructure market Continued good growth for the professional services market Industry fundamentals and consumer behavior support more positive longer-term outlook This slide contains forward looking statements 8
Cost reductions of SEK 4 b Accelerated operational excellence in all areas Savings of SEK 4 b to safeguard our competitive position All areas affected SG&A, sourcing, supply, service delivery main focus areas Reduction of some 1,000 employees in Sweden Through voluntary programs as far as possible Full effects in 2009 SEK ~4 b in charges Recognized as each activity is decided 9
FOURTH QUARTER REPORT HANS VESTBERG Executive Vice President and CFO 2007
Q4 financial highlights 2007 2006 Full year SEK b. Q4 Q3 Q4 2007 2006 Net sales 54.5 43.5 54.2 187.8 179.8 Sales growth (YoY) 0% - - 4% - Gross margin 36.1% 35.6% 42.2% 39.3% 41.7% Operating income 7.6 5.6 12.2 30.6 35.8 Operating margin 14.0% 12.9% 22.5% 16.3% 19.9% Operating margin ex Sony Ericsson 9.8% 9.0% 18.3% 12.5% 16.7% Full year organic sales growth in constant currencies 8% Margins affected by business mix and slower sales in certain markets Q4 opex SEK 15.2 b. seasonality and newly acquired companies 11
Q4 financial highlights 2007 2006 Full year SEK b. Q4 Q3 Q4 2007 2006 Income after financial items 7.6 5.6 12.2 30.7 36.0 Net income * 5.6 4.0 9.7 21.8 26.3 EPS, SEK * 0.35 0.25 0.61 1.37 1.65 Cash flow from operating activities 12.0-1.6 11.0 19.2 18.5 Strong cash flow in Q4 Improved working capital SEK 1.6 b in payment from 3 UK Cash conversion for full year of 66% (57%) Still room for improvement *Attributable to stockholders of the parent company, excluding minority interest. 12
Networks 2007 2006 Full year SEK b. Q4 Q3 Q4 2007 2006 Net sales 37.5 28.5 39.0 129.0 127.7 Sales growth (YoY) -4% - - 1% - EBITDA margin 15% 13% 26% 19% 22% Operating margin 10% 8% 21% 13% 17% Significantly increased market share in increasingly challenging market Sales affected by weakening USD Market and product mix continues to affect sales and margins LTE gaining momentum - Verizon, Vodafone, DoCoMo, etc 13
Professional Services 2007 2006 Full year SEK b. Q4 Q3 Q4 2007 2006 Net sales 12.1 11.0 10.6 42.9 36.8 Of which managed Services 3.3 3.4 2.5 12.2 9.5 Sales growth (YoY) 15% - - 16% - EBITDA margin 16% 17% 16% 16% 16% Operating margin 15% 15% 15% 15% 14% Professional services up 19% in constant currencies Managed services and systems integration show fastest growth 185 million subscribers in managed networks Acquisition of HyC IPTV systems integration company 3 UK contract renegotiated due to network sharing Scope decreased, will affect sales but not margins 14
Multimedia 2007 2006 Full year SEK b. Q4 Q3 Q4 2007 2006 Net sales 4.9 4.0 4.5 15.9 13.9 Sales growth (YoY) 7% - - 14% - EBITDA margin -3% 6% 13% 4% 6% Operating margin -9% 1% 12% -1% 5% Mix of existing sound businesses and new investment areas Sales and margins vary over quarters Building positions IPTV and IMS Acquisitions developing well LHS, Mobeon, Drutt and Tandberg Weak quarter but full year more representative 15
Multimedia 2007 2006 Full year SEK b. Q4 Q3 Q4 2007 2006 Net sales 4.9 4.0 4.5 15.9 13.9 Sales growth (YoY) 7% - - 14% - EBITDA margin -3% 6% 13% 4% 6% Operating margin -9% 1% 12% -1% 5% Mix of existing sound businesses and new investment areas Sales and margins vary over quarters Building positions IPTV and IMS Acquisitions developing well LHS, Mobeon, Drutt and Tandberg Weak quarter but full year more representative 16
Q1 05 Q2 05 Q3 05 Q4 05 Q1 06 Q2 06 Q3 06 Q4 06 Q1 07 Q2 07 Q3 07 Q407 20000 18000 16000 14000 20 000 18 000 16 000 12000 10000 8000 6000 4000 2000 0 14 000 12 000 10 000 8 000 6 000 4 000 2 000 17 0 Q1 05 Q2 05 Q3 05 Q4 05 Q1 06 Q2 06 Q3 06 Q4 06 Q1 07 Q2 07 Q3 07 Q407 Regional 2007 comments 20 000 18 000 16 000 14 000 12 000 10 000 8 000 6 000 4 000 2 000 CAGR -5% Q1 04 Q2 04 Q3 04 Q40 04 Latin America FY: +12% North America FY: -15% Western Europe FY: -1% Asia Pacific FY: +14% Q1 04 Q2 04 Q3 04 Q40 04 Q1 05 Q2 05 Q3 05 Q4 05 Q1 06 Q2 06 Q3 06 Q4 06 Q1 07 Q2 07 Q3 07 Q407 16000 14000 12000 10000 8000 6000 4000 2000 0 0 Q1 04 Q2 04 Q3 04 Q40 04 Q1 05 Q2 05 Q3 05 Q4 05 Q1 06 Q2 06 Q3 06 Q4 06 Q1 07 Q2 07 Q3 07 Q407 CAGR 8% 20 000 Central Europe, Middle East 20000 and Africa 18000 FY: +5% 18 000 16 000 CAGR 24% 14 000 12 000 10 000 8 000 6 000 4 000 2 000 0 CAGR 10% CAGR 13% Q40 04 Q3 04 Q2 04 Q1 04 Q4 05 Q3 05 Q2 05 Q1 05 Q4 06 Q3 06 Q2 06 Q1 06 Q407 Q3 07 Q2 07 Q1 07 Q40 04 Q3 04 Q2 04 Q1 04 Year over year growth
Regional Q4 comments Verizon going for LTE Strong ending after slower year Continued 2G expansions Accelerated 3G buildouts Latin America Q: +41% FY: +12% North America Q: +9% FY: -15% Effects from operator consolidation, UK, Italy Focus shifted to 3G Good services momentum Western Europe Q: -10% FY: -1% Asia Pacific Q: -2% FY: +14% Central Europe, Middle East and Africa Q:-1% FY: +5% China ended strong Pakistan, Bangladesh and Thailand affected by unrest Australia down after major rollouts 2006 Network buildouts and expansions Middle East slower 3G taking off in Central Europe 18
Sony Ericsson 2007 highlights 103 million units, up 38% year-on-year market share of >9% Margins remain strong when company shift to broader portfolio Leadership position in music - 145 million music enabled phones 19
Summary Good year but disappointing second half Significantly strengthened market share Network margins affected by mix shift Planning for flattish mobile networks market 2008 Actions to safeguard competitive position Competitive landscape continues to evolve Fundamentals support more positive longer-term outlook Proposed unchanged dividend of SEK 0.50 per share 20
FOURTH QUARTER REPORT Q & A 2007 21