Ericsson second quarter results

CEO COMMENT

"Group sales in the quarter declined -8% year-over-year with lower sales in Networks. Sales in Global Services were flat due to decline in network rollout although Professional Services increased 5%," says Hans Vestberg, President and CEO of Ericsson (NASDAQ:ERIC).

"Group sales increased sequentially by 6%. Sales for comparable units, adjusted for currency exchange rate effects and hedging declined year-over-year -15%. Operators showed a continued good demand for mobile broadband driven by smartphone and laptop usage. Sales were however impacted by continued industry component shortages and supply chain bottlenecks. We estimate that this had a negative impact on our sales in the quarter by SEK 3-4 b.

Gross margin improved year-over-year and sequentially due to business mix and efficiency gains. Cash flow declined year-over-year, mainly due to increased working capital. Sony Ericsson continued to show improved results and ST-Ericsson's transition program is on track.

Net income improved year-over-year and sequentially, positively impacted by improved earnings in Sony Ericsson.

The market conditions we saw in the second half of 2009 with mixed operator investment behavior prevailed also in the first half of this year. In the quarter all regions, except North America, showed lower year-over-year sales. Meanwhile, sequential sales showed a more mixed picture with growth in regions such as Mediterranean, North America, Northern Europe and Central Asia, as well as Sub-Saharan Africa.

Over the past years, we have gone through major changes with cost reductions and strengthened portfolio and market presence while maintaining our technology leadership. The cost reduction program, initiated in the first quarter 2009 has been completed, reaching its target. Going forward, cost and capital efficiency will remain top of our agenda," concludes Hans Vestberg.

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