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0001193125-15-352573.txt : 201510260001193125-15-352573.hdr.sgml : 2015102620151026063938ACCESSION NUMBER:0001193125-15-352573CONFORMED SUBMISSION TYPE:6-KPUBLIC DOCUMENT COUNT:33CONFORMED PERIOD OF REPORT:20151026FILED AS OF DATE:20151026DATE AS OF CHANGE:20151026

FILER:

COMPANY DATA:COMPANY CONFORMED NAME:ERICSSON LM TELEPHONE COCENTRAL INDEX KEY:0000717826STANDARD INDUSTRIAL CLASSIFICATION:RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT [3663]IRS NUMBER:000000000STATE OF INCORPORATION:V7FISCAL YEAR END:1231

FILING VALUES:FORM TYPE:6-KSEC ACT:1934 ActSEC FILE NUMBER:000-12033FILM NUMBER:151174108

BUSINESS ADDRESS:STREET 1:TORSHAMNSGATAN 21 - 23CITY:STOCKHOLM SWEDENSTATE:V7ZIP:164 83BUSINESS PHONE:46107190000

MAIL ADDRESS:STREET 1:S 164 83 STOCKHOLMCITY:SWEDENSTATE:V7ZIP:0000

FORMER COMPANY:FORMER CONFORMED NAME:LM ERICSSON TELEPHONE CODATE OF NAME CHANGE:19911030

6-K1d56702d6k.htm6-K

6-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN ISSUER

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

of the Securities Exchange Act of 1934

October26, 2015

Commission File Number

000-12033

LM ERICSSONTELEPHONE COMPANY

(Translation of registrants name into English)

Torshamnsgatan 21, Kista

SE-164 83, Stockholm, Sweden

(Address of principal executive offices)

Indicate bycheck mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F. Form20-FxForm40-F

Indicate by check mark if the registrant is submitting the Form 6-K inpaper as permitted by Regulation S-T Rule 101(b)(1):

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

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THEREOF FROM THE DATE ON WHICH THIS REPORT IS FURNISHED TO THE SECURITIES AND EXCHANGE COMMISSION, TO THE EXTENT NOT SUPERSEDED BY DOCUMENTS ORREPORTS SUBSEQUENTLY FILED WITH OR FURNISHED TO THE SECURITIES AND EXCHANGE COMMISSION.

SIGNATURES

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

TELEFONAKTIEBOLAGET LM ERICSSON (publ)

By:

/s/NINAMACPHERSON

Nina Macpherson

Senior Vice President and

General Counsel

By:

/s/HELENANORRMAN

Helena Norrman

Senior Vice President

Corporate Communications

Date: October26, 2015

ERICSSON

THIRD QUARTER

REPORT 2015

AS ADJUSTED FOR INCORPORATION BYREFERENCE

Stockholm, October23, 2015

THIRD QUARTER HIGHLIGHTS Read more (page)

> Reported sales increased by 3% YoY. 3

>The mobile broadband business in North America remained stable QoQ, but at a lower level compared to the same period last year. 3

> Reported sales in Networks declined sequentially impacted by a slowdown of the 4G deployments in Mainland China. 6

> Gross margin declined YoY to 33.9% (35.2%). 3

> The global cost and efficiency program is progressing according to plan, contributing to lower cost level YoY. 3

> Network Rollout, within Global Services, reached a break-even result. 4

> Cash flow from operating activities was SEK 1.6 (-1.4) b. 9

SEK b. Q3 2015 Q3 2014 YoY change Q2 2015 QoQ change 9 months 2015 9 months 2014

Net sales 59.2 57.6 3% 60.7 -2% 173.4 160.0

Gross margin 33.9% 35.2% - 33.2% - 34.1% 36.0%

Operating income 5.1 3.9 31% 3.6 43% 10.8 10.5

Operating margin 8.6% 6.7% - 5.9% - 6.2% 6.6%

Netincome 3.1 2.6 19% 2.1 47% 6.7 7.0

EPS diluted, SEK 0.94 0.81 16% 0.64 47% 1.98 2.25

Cash flow from operating activities 1.6 -1.4 - 3.1 -49% -1.3 10.1

Net cash, end of period 1) -0.2 29.4 - 3.5 - -0.2 29.4

1) Reconciliation of non-IFRS financial measures to the most directly comparable IFRS financial measures can be found onpage 30

1 Ericsson | Third Quarter Report 2015

CEOCOMMENTS

Reported sales increased by 3% YoY. Profitability improved YoY, with lower operating expenses as asignificant contributor.

Business

Sales growth remained strong in India as well as in South East Asia and Oceania compared to the same period last year, while sales declined in North East Asia as well as in Northern Europeand Central Asia.

The mobile broadband business in North America remained stable QoQ, but at a lower levelcompared to the same period last year.

In the quarter, there was a slowdown of the 4G deployments in MainlandChina. We also saw a somewhat slower pace of mobile broadband investments in markets such as Russia, Brazil and parts of the Middle East which had a weak macro development.

Professional Services sales increased by 15% YoY, with double-digit growth in eight out of ten regions, driven by strong performance across the portfolio.

Profitability

The main contributors to the profit improvement were lower operating expenses and a break-even result in Network Rollout. The negative effect of revaluation and realization of currencyhedge contracts was lower than a year ago.

Global Services operating margin increased to 9% as an effect ofthe improved Network Rollout profitability and a solid result in Professional Services. Segment Networks profitability remained stable in the quarter, with an operating margin of 10%, despite lower sales.

Cost and efficiency program

The global cost and efficiency program, with the target to achieve annual net savings of SEK 9 b. during 2017, is progressing according to plan. Since the announcement in November lastyear, a number of activities have been implemented globally, contributing to lower cost levels.

Cash flow

After a weak first quarter our cash flow from operating activities has now been positive for the last twoquarters despite major payouts related to the ongoing cost and efficiency program. Cash flow year to date has been negatively impacted by increased working capital. This was driven by a business mix with a high share of coverage projects in MainlandChina and emerging markets.

Targeted growth areas

Our strategic growth initiatives build on a combination of excelling in our core business and establishing leadership intargeted growth areas. We see continued good progress in these areas which had a sales growth of more than 10% YoY.

In targeted growth area TV& Media we made two important customer announcements in North America, confirming our strong position in the fast-growing TV& Media market. Inaddition, Ericsson signed an agreement to acquire the Nasdaq-listed company Envivio, a global leader in software-based video encoding.

There is an increased customer interest in future network architecture for 5G, virtualization, efficient video delivery and internet of things (IoT). With our ongoing strategicinitiatives, we are well positioned to create value for our customers and shareholders in a transforming market.

Hans Vestberg

President and CEO

2 Ericsson | Third QuarterReport 2015

FINANCIALHIGHLIGHTS

SEK b. Q3 2015 Q3 2014 YoY change Q2 2015 QoQ change 9 months 2015 9 months 2014

Net sales 59.2 57.6 3% 60.7 -2% 173.4 160.0

Of which Networks 28.8 30.0 -4% 31.2 -8% 86.4 83.4

Of which Global Services 27.1 24.5 11% 26.4 3% 77.3 67.9

Of which Support Solutions 3.3 3.1 8% 3.1 6% 9.5 8.6

Of which Modems - 0.1 - 0.0 - 0.1 0.1

Gross income 20.1 20.3 -1% 20.1 0% 59.2 57.5

Gross margin (%) 33.9% 35.2% - 33.2% - 34.1% 36.0%

Research and development expenses -8.5 -9.3 -8% -9.9 -14% -26.9 -26.6

Selling and administrative expenses -6.4 -6.0 7% -7.8 -18% -21.3 -19.0

Other operating income and expenses 0.1 -1.1 - 1.1 -92% -0.1 -1.3

Operating income 5.1 3.9 31% 3.6 43% 10.8 10.5

Operating margin 8.6% 6.7% - 5.9% - 6.2% 6.6%

forNetworks 10% 11% - 8% - 7% 11%

for Global Services 9% 7% - 6% - 7% 6%

for Support Solutions 0% -4% - -8% - -2% -5%

for Modems - - - - - - -

Financial net -0.6 -0.1385% -0.5 18% -1.2 -0.5

Taxes -1.3 -1.1 19% -0.9 47% -2.9 -3.0

Net income 3.1 2.6 19% 2.1 47% 6.7 7.0

Restructuring charges -1.0 -0.3 251% -2.7 -64% -4.3 -0.7

Net sales

Reported sales increased by 3% YoY.

The mobile broadband business in North America remained stable QoQ, but at a lower level compared to the sameperiod last year.

Professional Services sales increased YoY, driven by strong performance across the portfoliowith double-digit growth in eight out of ten regions. Networks sales decreased mainly due to lower business activity in Russia, Japan and the Middle East.

Sequentially, reported sales decreased by -2%. In the quarter there was a slowdown of the 4G deployments in Mainland China. There was also a somewhat slower pace of mobile broadbandinvestments in certain markets such as Russia, Brazil and parts of the Middle East which had a weak macro development.

Reported IPR revenues were stable both YoY and QoQ. The majority of the licenses contracts are in USD and the stronger USD supported the YoY comparison.

Gross margin

Gross margin decreased YoY due to a higher share of Global Services sales and increased restructuring charges.

Sequentially, gross margin increased due to lower restructuring charges. This was partly offset by a higher share of Global Services sales.

Restructuring charges and cost and efficiency program

The global cost and efficiency program is progressing according to plan. The target remains, to achieve annual net savingsof SEK 9 b. during 2017 relative to 2014.

Total restructuring charges for full-year 2015 are expected to beapproximately SEK 5 b.

Operating expenses

Restructuring charges impacted operating expenses negatively by SEK 0.6 (0.1) b.

3 Ericsson | Third Quarter Report 2015

Otheroperating income and expenses

Other operating income and expenses improved YoY. The revaluation andrealization effects of currency hedge contracts were SEK -0.3 b. This was more than offset by several minor positive items. The effect of currency hedge contracts is to be compared to SEK 0.6 b. in Q2 2015 and SEK -1.3 b. in Q3 2014.

The main part of the currency hedge contract balance is in USD. The SEK has weakened towards the USD between June30,2015 (SEK/USD rate 8.24) and Sept 30, 2015 (SEK/USD rate 8.38).

Operating income

Operating income increased YoY due to a lower negative effect of currency hedge contracts, lower operating expenses and abreak-even result in Network Rollout. This was partly offset by a decline in Network sales. Operating income increased QoQ driven by lower restructuring charges and lower operating expenses.

Financial net

The negative financial net increased YoY and QoQ, mainly related to effects of foreign currency revaluation. In addition, the lower cash position and lower interest rates have resulted inreduced financial income.

Net income and EPS

Net income and EPS diluted increased YoY following higher operating income. Net income and EPS diluted increased QoQ.

Employees

The number of employees on Sept 30, 2015 was 116,240 compared with 117,183 on June30, 2015. In the quarter, close to 5,000 employees left the company. The decrease was partly offsetby recruitments to Global Service Delivery Centers, employees joining through acquisitions and in-sourcing from new managed services contracts. Some of the headcount reduction was related to the global cost and efficiency program. The majority ofthe earlier announced reductions in Sweden, of approximately 1,700 employees, is expected to be completed by the end of this year. The number of Ericssons services professionals on Sept 30, 2015 was 65,000 (65,000 June30, 2015).

MODEMS

The discontinuation of the modems business is now completed.

4 Ericsson | Third Quarter Report 2015

REGIONALSALES

Third quarter 2015 Change

SEK b. Networks Global Services Support Solutions Total YoY QoQ

North America 6.4 6.9 1.0 14.4 2% -2%

LatinAmerica 2.5 2.9 0.2 5.6 -5% 11%

Northern Europe and Central Asia 1.4 1.0 0.1 2.5 -20% -1%

Western and Central Europe 1.4 3.0 0.2 4.5 -2% -12%

Mediterranean 2.2 3.2 0.2 5.5 5% -7%

Middle East 2.7 2.6 0.4 5.7 -5% -12%

Sub-SaharanAfrica 1.2 1.3 0.1 2.7 10% 1%

India 2.4 1.1 0.1 3.6 81% 19%

North East Asia 4.1 2.0 0.2 6.3 -10% -9%

South East Asia and Oceania 2.4 2.2 0.1 4.8 25% -3%

Other 1) 2.0 0.8 0.8 3.5 4% 4%

Total 28.8 27.1 3.3 59.2 3% -2%

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

North America

The mobile broadband business inNorth America remained stable QoQ. Operators continued to focus on cash flow optimization and consolidation, leading to lower investment levels compared to the same period last year. ICT transformation and professional services developed favorably.In the quarter, two important TV& Media agreements were announced.

Latin America

In the quarter the mobile broadband investment levels in Brazil were reduced somewhat driven mainly by local currencydepreciation towards the USD. This was partly offset by continued mobile broadband investments in Mexico. ICT transformation and professional services business developed favorably, mainly in the OSS and BSS domain.

Northern Europe and Central Asia

The mobile broadband business declined in the quarter, due to continued low investment levels in Russia. This was partly offset by coverage investments in Ukraine. In the Nordics,efficiency and ICT transformation were the main drivers of the good development in Professional Services and Support Solutions.

Western and Central Europe

Sales in mobilebroadband declined partly due to the completion of some key projects in the quarter. Operators remained focused on network quality and operational efficiency which were the main drivers of the continued strong development in Professional Services.

Mediterranean

Mobile broadband investments in quality and capacity contributed positively to sales. Operator focus on efficiency was the main growth driver in Professional Services.

Middle East

Networks sales declined as a few key mobile broadband coverage projects related to 3G were finalized. Some countries in the region are experiencing slower GDP growth and local currencydepreciation towards USD creating a temporary slowdown of mobile broadband investments. Transformation projects in the OSS, BSS and TV domains were the main drivers of the strong development of Professional Services and Support Solutions sales.

Sub-Saharan Africa

Sales growth was driven by a continued positive development of professional services business as operators are focusing on network quality and efficiency. The mobile broadband business wasstable.

India

The high level of mobile broadband investments, which started in the beginning of 2015, continued in the quarter with the main driver being mobile data traffic growth. The managed servicesbusiness developed favorably as operators focus on network optimization and efficiency.

North East Asia

Lower operator investments in Japan continued. In Mainland China there was a slowdown of the 4G deployments.Given the high 4G subscriber penetration in Mainland China, operators see new business opportunities and through the acquisition of Sunrise Technologies Ericsson has strengthened its position to support customers in their transformation.

South East Asia and Oceania

Sales growth was primarily driven by continued mobile broadband coverage projects. Important mobile broadband agreements were announced in Indonesia in the quarter. The managed servicesbusiness developed favorably as operators focus on network optimization and efficiency.

Other

Reported IPR revenues were stable YoY. The majority of the license agreements are in USD and the stronger USD supportedthe YoY comparison.

Broadcast services sales continued to grow.

5 Ericsson | Third Quarter Report 2015

SEGMENTRESULTS

NETWORKS

SEK b. Q3 2015 Q3 2014 YoY change Q2 2015 QoQ change 9 months 2015 9 months 2014

Net sales 28.8 30.0 -4% 31.2 -8% 86.4 83.4

Operating income 2.8 3.2 -13% 2.4 14% 5.8 9.2

Operating margin 10% 11% - 8% - 7% 11%

Restructuring charges -0.6 -0.1 - -1.8 -69% -2.6 -0.3

Net sales

Reported sales decreased by -4% YoY. The decline was mainly due to lower sales in the Middle East, North East Asia as well as in Northern Europe and Central Asia. Sales declined in Radio,partly offset by sales growth in Microwave and IP routing.

In the quarter, there was a slowdown of the 4Gdeployments in Mainland China. There was also a somewhat slower pace of mobile broadband investments in markets such as Russia, Brazil and parts of the Middle East which had a weak macro development.

Sales in India contributed positively while mobile broadband business in North America remained stable QoQ, but at a lowerlevel compared to the same period last year.

Operating income and margin

Operating income decreased YoY due to higher restructuring charges and lower sales. Lower operating expenses contributedpositively. Operating margin was stable YoY.

Sequentially, operating income and margin improved, mainly due tolower operating expenses and restructuring charges. This was partly offset by lower sales.

In the quarter, theeffect of currency hedge contracts was negative at SEK -0.2 (-1.0) b. In Q2 2015 the effect of currency hedge contracts was positive at SEK 0.5 b.

6 Ericsson | Third Quarter Report 2015

GLOBALSERVICES

SEK b. Q3 2015 Q3 2014 YoY change Q2 2015 QoQ change 9 months 2015 9 months 2014

Net sales 27.1 24.5 11% 26.4 3% 77.3 67.9

Of which Professional Services 20.5 17.8 15% 20.0 3% 58.7 49.4

Of which Managed Services 8.0 7.2 11% 8.2 -2% 23.6 19.4

Of which Network Rollout 6.5 6.7 -2% 6.4 2% 18.7 18.5

Operating income 2.4 1.6 47% 1.6 44% 5.7 4.1

Ofwhich Professional Services 2.4 2.1 16% 2.4 -1% 6.9 6.0

Of which Network Rollout 0.0 -0.5 -95% -0.8 -97% -1.2-1.9

Operating margin 9% 7% 6% 7% 6%

for Professional Services 12% 12% 12% 12% 12%

for Network Rollout 0% -7% -12% -6% -10%

Restructuring charges -0.4 -0.1 193% -0.7 -48% -1.5 -0.2

Net sales

Reported sales increased by 11% YoY. Network Rollout sales declined. The positive momentum in Professional Services continued, with double-digit growth in eight out of ten regions, drivenby strong performance across the portfolio.

Operating income and margin

Operating income and margin improved in Global Services YoY.

Operating margin in Network Rollout improved YoY. The work, to restore Network Rollout to a sustainable profitablebusiness, continues.

Operating margin in Professional Services was stable YoY.

The effect of currency hedge contracts YoY was SEK 0.0 (-0.2) b.

Global Services operating income increased QoQ driven by improved income in Network Rollout and lower restructuringcharges. Professional Services margin was flat QoQ.

Q3 2015 Q2 2015 Q1 2015 Full year 2014

Number of signed Managed Services contracts 18 30 27 71

Number of signed significant consulting& systems integration contracts 1) 16 16 13 56

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

7 Ericsson | Third Quarter Report 2015

SUPPORTSOLUTIONS

SEK b. Q3 2015 Q3 2014 YoY change Q2 2015 QoQ change 9 months 2015 9 months 2014

Net sales 3.3 3.1 8% 3.1 6% 9.5 8.6

Operating income 0.0 -0.1 - -0.2 - -0.2 -0.5

Operating margin 0% -4% - -8% - -2% -5%

Restructuring charges 0.0 -0.1 -52% -0.2 -81% -0.3 -0.1

Net sales

Reported sales increased by 8% YoY.Sales of OSS& BSS continued to show growth while the TV& Media business declined due to lower software licensing sales.

The implementation of the TV& Media strategy showed significant progress in the quarter with two important TV& Media agreements announced in North America. An agreementwas also signed, to acquire the Nasdaq-listed company Envivio, a global leader in software-based video encoding. The acquisition is expected to close in the fourth quarter, 2015, subject to customary closing conditions.

Operating income and margin

Operating income and margin improved YoY mainly driven by sales growth in OSS& BSS and lower restructuring charges.

The effect of currency hedge contracts YoY was SEK 0.0 (-0.1) b.

Operating income increased QoQ due to reduced restructuring charges, lower operating expenses and higher sales.

8 Ericsson | Third Quarter Report 2015

CASH FLOW

SEK b. Q3 2015 Q3 2014 Q2 2015

Net income reconciled to cash 6.8 5.0 3.4

Changesin operating net assets -5.2 -6.3 -0.3

Cash flow from operating activities 1.6 -1.4 3.1

Cash flow from investing activities -0.1 -0.7 7.0

Cash flow from financing activities -0.3 -1.3 -10.6

Net change in cash and cash equivalents 1.0 -1.0 -2.3

Cash conversion (%)1) 23% -27% 90%

1) Reconciliation of non-IFRS financial measures to the most directly comparable IFRS financial measures can be found on page 30

Cash flow from operating activities YTD has been negatively impacted by increased working capital. This was driven by abusiness mix with a high share of coverage projects in Mainland China and emerging markets.

Cash flow fromoperating activities improved YoY. Sequentially, cash flow from operating activities declined. This was mainly due to increased working capital. In addition provisions decreased in the quarter as a result of payments of SEK 1.1 b related torestructuring charges.

Cash flow from investing activities was negatively impacted by the construction of newICT centers in Sweden and Canada, however at a slower pace in this quarter. In addition, payouts of SEK -1.0 b. were made mainly related to the acquisition of Sunrise Technologies in China. Higher activity in technology platform development alsoimpacted cash flow from investing activities negatively, with higher capitalized development expenses than a year ago. A decrease in short-term investments of SEK 3.6 b. resulted in a cash flow from investing activities close to zero.

Cash flow from financing activities was negatively impacted by dividends paid by subsidiaries to minority owners of SEK0.3 b.

Working capital KPIs, number of days Jan-Sep 2015 Jan-Jun 2015 Jan-Mar 2015 Jan-Dec 2014 Jan-Sep 2014

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