2 ERICSSON IN BRIEF 1999
- : In November, itu established wcdma as the standard for g mobile systems under the name imt Direct Spread. The decision was welcomed by Erics- son, which can now offer its operator customers all three major versions of this standard. : In terms of number of employees, the takeover of Qualcomm’s infrastructure division was Ericsson’s largest acquisition during , provid- ing Ericsson with a complete product portfolio of second- and third-generation mobile systems. It also accelerated the pace of work in the standardiza- tion area, which was appreciated by the industry as a whole, particularly by the operators. : Ericsson acquired the American companies Torrent and TouchWave and the Danish company Telebit a/s to further strengthen its position in the market for ip and datacom solutions. : In December, Ericsson and Microsoft announced that they would cooperate in the devel- opment and marketing of total solutions for wire- less Internet access. The parties will establish a
ERICSSON’S MISSION is jointly owned company to market and supply to understand its mobile e-mail solutions. Ericsson will be the customers’ opportunities majority owner in the new company. and needs, and to provide : During , Ericsson achieved major communication solutions successes with engine, a solution for migrating better than any circuit-switched fixed telecommunications net- competitor. works to a next-generation network that can handle circuit-switched and ip-based, packet-linked traf- IN DOING SO, Ericsson fic. bt in the U.K., kpn in the Netherlands, Telia shall generate a in Denmark and Telefónica in Spain chose engine competitive economic during the year. return for its shareholders. : At the beginning of July, Kurt Hellström was appointed president of Erics- son, succeeding Sven-Christer Nilsson, who left the Company. Group Chairman Lars Ramqvist was appointed Chief Executive Officer. •
UNCERTAIN FACTORS IN THE FUTURE
“Safe Harbor” Statement under the U.S. Private Securi- ties Litigation Reform Act of 1995: Some statements in this Annual Report are forward looking and actual results may differ materially from those stated. In addition to the factors discussed, among other factors that may affect results are product demand, the effect of economic conditions, exchange- rate and interest-rate movements, the impact of competing products and their pricing, product development, commercialization and technological R380, dual-band telephone with difficulties, political risks in the countries in which the built-in PDA, based on EPOC. Company has operations or sales, supply constraints, Communication tool, calendar, built-in modem. and the results of customer financing efforts. • 3 ERICSSON IN BRIEF 1999
1999 1998 Percent SEK m . SEK m . change Orders booked 223,828 187,415 19 Net sales 215,403 184,438 17 Income before taxes 16,386 18,210 –10 Earnings per share, SEK 6.17 6.66 –7 Earnings per share according to U.S. GAAP, SEK 7.68 7.87 –2 Dividend per share, SEK 2.00 * 2.00 - Number of employees, December 31 103,290 103,667 -
* For 1999, proposed by the Board of Directors
NET SALES AND ORDERS BOOKED (SEK m.) ERICSSON’S 10 LARGEST MARKETS, (PERCENT OF TOTAL SALES)
United States 11 SEK m. China 9 220,000 Britain 7 Brazil 7 Spain 6 180,000 Italy 6 Turkey 5 Japan 4 140,000 Sweden 4 Germany 3
100,000
60,000 MARKET CAPITALIZATION YEAR-END 1995–1999 (SEK m.)
20,000 SEK m.
0 1995 1996 1997 1998 1999 1,000,000
Net sales Orders booked 800,000
600,000
400,000 LIABILITIES AND EQUITY (SEK m.)
200,000 SEK m.
200,000 0 1995 1996 1997 1998 1999
160,000
INCOME PER SHARE (SEK), AND RETURN ON CAPITAL EMPLOYED (PERCENT) 120,000 Percent SEK
32 8 80,000 24 6
40,000 16 4
8 2 1995 1996 1997 1998 1999 0 1995 1996 1997 1998 1999 0 0 1995 1996 1997 1998 1999 Equity Long-term liabilties Minority interests Current liabilties Return on capital employed, % Income per share, SEK 4 ERICSSON SHARE DATA 1999
percent in to sek , b. The index for As of December , , Ericsson’s share capital the om Stockholm Stock Exchange rose . per- consisted of sek ,,, (,,,), cent during the year. represented by ,,, shares. The par value of each share is sek .. As of December , , the shares were divided into ,, Series A shares, In all, about percent of Ericsson’s shares are each carrying one vote, and ,,, Series B owned by Swedish and international institutions. At shares, each carrying one-thousandth of a vote. the end of , about () percent of the share- During the number of shares was increased holders were outside Sweden, with () percent in by ,, through conversions of convertible the U.S., () percent in Britain, () percent in debentures. During the period January to January Germany, and () percent in other countries. , , convertible debentures related to convert- ible liabilities for were converted to , B shares. Between January and February , , The Ericsson Savings Fund (Ericssons Allemans- additional debentures related to convertible liabili- fond) was started in . The Fund, which has , ties for were convertible to shares, with rights participants, invests in Ericsson’s shares. At the end to dividend for . of the Fund held , shares. The price per unit at year-end was sek , (sek ,). A convertible debenture loan amounting to sek Ericsson’s Series A and Series B shares are traded on , m. was issued in with preferential rights the om Stockholm Stock Exchange, and the Series to Ericsson’s employees. Employees who joined B shares are also traded on the exchanges in Düssel- Ericsson after October , , were given an dorf, Frankfurt, Hamburg, London and Paris, and opportunity to purchase convertible debentures on the “Swiss Exchange” in Switzerland. Ericsson issued by ab Aulis, an Ericsson company. shares are also traded in the United States in the In , an option plan was implemented for form of American Depositary Receipts (adrs) key personnel, who were allotted seven-year through the nasdaq system, under the symbol call options in Ericsson. The size of the allotment ericy. Each adr represents one Series B share. was decided by earnings per share for , and the American Depositary Debentures (adds) are also employee salary and bonus category. Based on the traded on the nasdaq system under the symbol same principles, some , key employees and ericz. Each add represents one convertible deben- senior executives will receive seven-year call ture related to the ⁄ convertible debenture options based on earnings in . At an Extraordi- loan. Ericsson shares have been traded in Euros in nary General Meeting in November, , it was Frankfurt and Paris since January , . decided to implement a stock opion plan also for Nearly five billion shares were traded in . fiscal year . In accordance with this resolution, Of this number, about () percent were traded . million options will be issued to approximate- on the om Stockholm Stock Exchange, () ly , employees. percent via the nasdaq exchange and () per- cent on the London Stock Exchange. Trading on other exchanges amounted to about percent of the The Board proposes a bonus issue by way of an total, unchanged from the previous year. increase of the par value of the share from sek . to sek ., followed by a split :. Trading with the new par value of sek . is expected to com- The total market value of the Ericsson share rose mence in the beginning of May .•
SHARE TREND 1995–1999 SHARE TURNOVER 1999
B share Afv General Index Million shares 600 London Nasdaq 520 800 440 Stockholm 360 700 280 600
200 500
400 120 300 80 200
100 40 0 1995 1996 1997 1998 1999 Jan Mar May Jul Sep Nov 5 ERICSSON SHARE DATA 1999
SHARE DATA
1999 1998 4) 1997 4) 1996 4) 1995 1) 4) Earnings per share 6.17 6.66 6.08 3.64 2.92 P/E ratio, “B” shares 2) 89 29 25 29 22 1) After 4:1 split. Dividend 2.0 3) 2.00 1.75 1.25 0.88 2) P/E ratio = Price per Direct return % 0.4 1.0 1.2 1.2 1.3 share at December 31, divided by earnings OM Stockholm Stock Exchange share prices (SEK) per share after full A at December 30 575.0 209.5 157 109 69 conversion. B at December 30 548.0 193 149 106 65 3) For 1999, proposed by B high for year 571.0 268 192 106 89 the board of directors. B low for year 175.0 118.5 102.5 56.5 48 4) After 1:1 bonus issue.
CHANGES IN CAPITAL STOCK 1995–1999
Number of shares Capital stock 1995 January 1 217,229,118 2,172,291,180 1995 Split 4:1 651,687,354 - 1995 New issue 87,009,390 217,523,475 1995 Conversions 1,689,035 4,222,588 1996 Conversions 3,547,308 8,868,270 1997 Conversions 13,333,854 33,334,635 1998 Bonus issue 1:1 975,097,150 2,437,742,875 1998 Conversions 1,759,181 4,397,952 1999 Conversions 5,786,131 14,465,328 1999 December 31 1,957,138,521 4,892,846,303
LARGEST SHAREHOLDERS, BY VOTING RIGHTS, DECEMBER 31, 1999 Number Voting rights of shares percent
AB Industrivärden 46,520,000 28.0 Investor AB 68,376,700 22.3 Wallenberg-stiftelser 27,293,024 16.5 Svenska Handelsbankens Pensionsstiftelse 10,640,000 5.6 Livförsäkrings AB Skandia 21,855,843 5.0 Pensionskassan SHB Försäkringsförening 7,920,000 4.8 Oktogonen, Stiftelsen 4,020,000 1.9 SEB-stiftelsen 3,140,000 1.5 Svenska Handelsbankens personalstiftelse 2,460,000 1.5 Fjärde AP-Fonden 75,998,018 1.4 SEB-Trygg Försäkring 19,893,560 1.3 Svenska Handelsbankens aktiefonder 10,782,600 0.8 Wallanders och Hedelius’ stiftelse 800,000 0.5
Foreign ownership 897,506,209 2 6
Ericsson well prepared for the new millennium
exciting and eventful for new infrastructure investments by operators. To for Ericsson. It began slowly but finished take full advantage of the new technology, subscri- in high gear. Income before tax for the bers will require new and advanced mobile termi- fourth quarter reached a record level – nals – terminals that are currently being developed Tsek . billion. The performance of the Ericsson by Ericsson. share was highly favorable during the year, increa- sing percent in value. This meant that the value of shareholders’ investments in the company rose The first major step toward the mobile Internet is by sek billion in . now being taken with the help of wap technology. Ericsson is the global leader in mobile commu- Its current position as the focus of market interest nications. More than percent of our sales are clearly demonstrates the growing importance of the generated from mobile systems and terminals. It is mobile Internet, even now before the higher trans- significant that this is where Ericsson’s real mission speeds of third-generation systems can be strength lies, because mobile communications is achieved. now the largest and fastest-growing area in our As one of the initiators of the wap standard, industry – an industry that in the past few years has Ericsson is well prepared. We currently have the undergone more rapid and extensive transformation market’s broadest range of wap knowledge, inclu- than any other. ding hardware, applications development, consul- The mobile Internet and mobile datacom are tants and terminals. In a campaign during late becoming a reality. This development is increasing- autumn, we offered the services of highly qua- ly apparent in trend-setting countries such as Japan lified consultants to companies interested in deve- and the U.S. In Japan, the star player in was loping wap services. i-Mode, a solution for direct connection to the The next step toward third-generation systems Internet via mobile terminals; in the U.S., the deve- is gprs. This is a packet-switched technology that lopment shows in the fact that operators of Mobitex considerably increases the capacity of the mobile networks from Ericsson experienced substantial networks, which also makes it possible to introduce growth in the number of subscribers in . new services and provide better service to the sub- This development has not come as a surprise to scriber. In , Ericsson won well over percent Ericsson. On the contrary, we have been preparing of the world’s gprs orders. for it for a long time. We have been working on We are also leading in edge, a third-generation developing the third generation of mobile systems technology for existing frequency bands. With the for more than a decade. We are currently the only U.S. launch scheduled for the beginning of , supplier offering a large number of test systems to edge will be the first third-generation mobile customers worldwide – systems to be exact. In system to be placed in commercial operation. we received several commercial orders for such During the year Ericsson installed test systems for systems – for example, from ntt DoCoMo in edge and signed the first major contracts. This is Japan. further confirmation that we are leading the way to the next generation of systems. The growing number of mobile subscribers creates demand and development in the market. As early In addition to technology, applications are crucial as we expect the number of subscribers to to the development of the mobile Internet. The key have reached one billion. Some million are is to offer customers simple, fast and secure solu- expected to be using third-generation systems as tions for e-commerce. During the year, Ericsson’s early as . achievements included a strategic partnership with The mobile Internet brings significant business Visa International and a joint development with opportunities to Ericsson, not only because the Sonera SmartTrust for the world’s first digital mobile networks must be upgraded and adapted signature for secure e-commerce using wap with equipment for the new generation of systems. phones. The demand for various types of mobile data ser- In , Ericsson brought together its resources vices also brings a strongly increased need for capa- in service offerings and business consulting. Erics- city in the mobile networks, resulting in demand son Services offers operators a powerful portfolio of 7
TO THE SHAREHOLDERS
Lars Ramqvist, Kurt Hellström, Chairman of the Board and Chief Executive Officer President services, thus strengthening Ericsson’s position as then Ericsson’s position in the market for ip and complete supplier, system integrator and partner. data-communications solutions. The American Ericsson Business Consulting, which targets the companies Torrent and TouchWave contribute enterprise sector, had , highly qualified broad expertise and a complementary product port- employees in countries at year-end, making folio in data communications. Ericsson the leading supplier of Internet-based Ericsson’s incorporation of the Danish compa- business solutions. Customers during the year ny, Telebit a/s, which is world-leading in the next included Reuters, the Dutch daily newspaper, generation of the Internet protocol, ip version , de telegraaf, Scania, lycos and sas. has given Ericsson access to leading-edge expertise Ericsson’s goal is to lead the development of the in a strategically key area. mobile Internet. We will do so, based on our strong position as a complete supplier of communications solutions ranging from backbone networks and The largest single acquisition, by number of mobile infrastructure to applications, consulting employees, was the infrastructure division of Qual- and terminals. comm. This enabled Ericsson to offer a complete product portfolio in both second and third-genera- tion mobile systems. In addition, the acquisition had a favorable effect on standardization, which During the year Ericsson gradually strengthened its stimulated the entire industry. position in next-generation ip-based core networks. Other examples of strategic partnerships that Ericsson’s solution for the successive migration of were deepened or commenced during the year existing circuit-switched networks, to enable them include the partnership with Juniper and Ericsson’s to support ip and atm-based services, has also been cooperation with Microsoft. Together with Micro- highly successful. The year began with a break- soft we have established a company that will through order from bt, which was followed by develop mobile Internet applications, such as wire- orders from Diginet in Latin America, Telia in less e-mail. Denmark, Dutch kpn and Spanish Telefónica. The joint development work of the Symbian During the autumn, Ericsson’s offering was presen- consortium on the epoc operating system has cont- ted under the engine concept. inued to advance favorably. The first mobile phones For third-generation mobile systems, Ericsson using epoc were introduced during the year. has developed a new platform that handles atm and ip traffic. As a real-time router it is called the rxi . The business segment Consumer Products showed A number of important strategic acquisitions unsatisfactory results during most of the year. This were carried out during the year to further streng- trend, however, was broken during the fourth quar- 8
TO THE SHAREHOLDERS
ter. Targeted production speed was achieved at the fits from its leading position in mobile telephony end of the year. During the year, a number of new and its unique ability to offer customers compre- phones were presented, together with a range of hensive solutions. Our long-term financial targets new accessories, several of which were strikingly remain unchanged. We intend to grow faster than innovative and attracted much attention in the the market, which means growing by at least market, especially among younger consumers. percent, with a return on capital employed of – Ericsson’s Chatboard, fm-radio attachment and percent, positive cash flow before strategic acquisi- mp player are proof that innovations are now tions and operating margin of at least percent. receiving great attention within the company. We expect sales to increase by more than Ericsson now has a very competitive product percent during the year , and earnings to grow portfolio, which will be expanded in with substantially. We intend to achieve this with a more products based on the entirely new technical positive cash flow. platform developed in . Measures have been We are convinced that Ericsson will reach its taken with the objective of gaining market share objective of being the leading company in and regaining the position as number two in the tomorrow’s integrated data and telecommunica- world. tions market. The combination of our expertise in systems, applications and in mobile terminals is a strong indication that in the future Ericsson will We can now conclude that the unfavorable opera- continue to provide its owners a favorable return on tional performance that was developing at mid-year their investment in the company. has been reversed. The dramatic trend of rising It is pleasing to note that an increasingly larger costs was broken. Negative cash flow has turned number of Ericssson employees can now also bene- positive. Ericsson’s business is once again under fit from the favorable trend of the Ericsson share good control and improving. through participation in the personnel convertibles Ericsson is entering the new millennium with and options programs. It is in fact their skills and strong momentum, a clear vision of our strategic professional efforts that have paved the way to direction, a first-class product portfolio and a uni- Ericsson’s successes. • que position of market leadership in the most expansive area of the industry. The continuing growth of mobile communications in all markets, improving conditions in several key markets and the strong market interest in the mobile Internet all indicate that the year will be one of the Chairman and ceo most exciting in Ericsson’s history. For the full year , we believe in continued strong market growth, where Ericsson gains bene- President 9
FINANCIAL OBJECTIVES Ericsson to grow faster than the market
’ most important units – business units, product units, and market overall objectives is to create strong, units – have a distinct profitability responsibility. competitive, value growth for its share- This means that each unit, in addition to being holders. responsible for profit, is also responsible for its OO share of capital employed. Ericsson’s long-term objective remains unchanged. The objective is that the company will grow faster A very strong fourth quarter with record levels of than the market, which involves long-term growth orders, sales, income and cash flow made the year’s of at least percent annually. This growth objecti- results better than expected. ve should be viewed over a five-year period, since We did not successfully fulfill all our long-term the Company does not expect certain growth mar- objectives in , mainly due to the weak perfor- kets, particularly mobile data communications, to mance during the first half of the year. accelerate until we are a few years into the st • The sales growth was percent for comparable century. units vs. target + percent. The growth objective is to be reached by main- • We reached a positive cash flow before acquisi- taining or improving positions within all three of tions, sek +. b. OUR LONG-TERM Ericsson’s business segments: Network Operators • We reached a capital turnover of . turns vs. financial goals are and Services Providers, Consumer Products and target .. retained. We shall grow by Enterprise Solutions. • roce at percent was slightly below the targe- at least 20 percent per ted ‒ percent. year, which is faster than • Operating margin at . percent of sales is below the market. Return on Ericsson strives to have a positive cash flow before the target of at least percent. capital employed will be strategic acquisitions. Growth of at least percent 20 to 25 percent, and with a positive cash flow requires a return on capi- cash flow will be positive tal employed of between and percent for Continued market growth is expected throughout before strategic Ericsson as a whole. To reach this objective Ericsson , where Ericsson will gain benefits from its acquisitions. The must maintain an average operating margin of at leading position in mobile telephony and the operating margin will be least percent and a capital turnover rate of two or growth in mobile Internet. at least 10 percent. better. Sales is expected to increase by more than However, return requirements may vary for percent, and earnings to show a substancial growth. STEN FORNELL, different segments. A lower operating margin can These objectives are intended to be achieved with a EXECUTIVE VICE PRESIDENT also be offset by a higher rate of capital turnover. positive cash flow. • CHIEF FINANCIAL OFFICER In the Ericsson organization, all the different i · overview 10 D media industryarebecomingincreasinglyblurred. boundaries betweendataandtelecomthe more frequentlyincludedinthenewalliances.The companies withacleardatacomfocusaremoreand Internet companies,entertainmentcompaniesand nies thatarenottraditionaltelecomcompanies. degree areshapingthemarket,alsoincludecompa- or asoperatorsinalimitedgeographicalregion. one ofthemanydataandtelecommarketsegments themselves inthemarket,oftenasnicheoperators are beingcreatedfornewoperatorstoestablish operators. Atthesametime,fantasticopportunities tions, partnershipsandstrategicalliancesamong tion, inturn,haspromptedmanymergers, acquisi- ization ofthemajortelecomoperators.Globaliza- lation hasswepttheworldandtriggeredaglobal- the pastdecades,awaveofprivatizationandderegu- are transformingtheglobaltelecomindustry. Over – thusfar, atleast–ofthemomentouschangesthat world’s telecomoperators. to thebenefitofEricssonandothersuppliers sharp increaseindemandfortelecommunications– Internet use.Bothdevelopmenttrendsarefuelinga mobile telephonyandanequallyrapidexpansionin continued andsharplyacceleratinggrowthof more evidentthananyothersindrivingthistrend: are tryingtoenterthelucrative wirelessindustry. of severalexampleshowfixed networkoperators October, when history oftelecommunications thus fartookplacein two telecomoperators.Thelargest merger inthe what couldbecomethelargest dealtodatebetween fone begananattempttotakeoverMannesmannin merged duringtheyear. Attheendof to millionsofU.S.homes. at&t or partnershipswith,severalcable international operations.Throughacquisitionsof, the jointventureConcertfortwooperators’ alliances. Together with been extremelyactiveduring at&t - communications toexplode Internet andmobile can operatorSprintfor The globalalliances,whichtoanincreasing The closingyearofthe The mobileoperatorsVodafone andAirtouch has gaineddirectaccessinitshomemarket is oneoftheverylarge operatorsthathas rapidly. During markets isnowproceedingextremely verging dataandtelecommunications mci Worldcom acquiredtheAmeri- usd bt , , thecompanystarted the increasinglycon- s wasthehighpoint billion. Thiswasone two factorswere tv in buildingnew , companies, Voda- newly started,successful major traditionaloperatorsareactiveinacquiring transform theInternetaccessmarketalso, Providers). in ordertofocusontheircoreoperations. tomers outsourcingdataandtelecommunications major corporatecustomers–inresponsetocus- operators whotakeovertelecomoperationsfrom on theotherhand,isgrowingbusinessamong on theirowncoreoperations.Anothercleartrend, of operatorsthatinthismannerincreasinglyfocus Cable &Wireless andGlobalCrossingareexamples trend appliestoestablishedandnewoperators. portions oftheiroperationstosuppliers.This Some majoroperatorsarebeginningtooutsource more than some countries,prepaidservicenowaccountsfor nications areimportantfactorsdrivinggrowth.In calls andasharpincreaseinwirelessdatacommu- Prepaid calls,reducedcharges fornormalmobile mobile telephonenetworksisabouttoexplode. Several factorsindicatethattrafficgrowthin As restructuringandconsolidationnowbeginto percent ofalltraffic. isp s (InternetService 11
MARKET AND BUSINESS CONDITIONS – TODAY
The very strong growth in sales of Ericsson’s the demand for established solutions for increasing mobile systems in North America during is an bandwidth, such as isdn and adsl. Similarly, excellent example of how rapidly traffic can grow investments in next-generation atm- and ip-based when these trends take effect. The introduction of networks began to gain momentum. gprs – which is a step toward next-generation mobile telephony – and wap services are other factors that will contribute strongly to traffic Less and less of the value of a mobile phone lies in growth in mobile networks over the coming years. the unit itself. As with personal computers, appli- At year-end , there were nearly million cations and software now account for an ever- mobile phone subscribers around the world, of greater proportion of the value of the product. whom half use gsm systems. In early , the Manufacturers are already developing increasingly number of mobile subscribers is expected to exceed sophisticated products and are increasing the num- one billion. This massive increase, however, will be ber of functions in phones. dwarfed by the growth in traffic, which is expected The assortment of mobile phones – or more accu- to increase by more than fivefold over the coming rately, mobile terminals – is increasing dramatically, five years. and this trend will continue. Tomorrow’s mobile phones may be built into portable cd players, watches, cameras, pocket computers and similar In the fixed networks, the growth curve for tradi- devices. This also means that the major manufactur- tional voice telephony is now starting to level off. ers of such products will become competitors to Instead, the already strong growth of data traffic in companies like Ericsson, Nokia and Motorola but these networks is accelerating, particularly in what also that these companies’ demands for Ericsson’s are called packet-switched networks, which today products for wireless communication will increase. are increasingly based on ip (Internet Protocol). In such a situation, the brand is increasingly Traditional voice traffic continues to generate the important. This is why Ericsson over the past few major share of operator revenues, but a rapid shift years has been investing so heavily in strengthen- toward lower call charges has begun. ing its brand. These investments are only begin- Internet traffic plays an important role in traffic ning, but they have already produced tangible and growth in the fixed networks. During , the positive results. number of Internet users in the world increased from to million. By , nearly million users are expected to be connected to the Internet. At the More and more of Ericsson’s customers are express- same time, the average time that Internet users are ing interest in how their suppliers manage environ- connected is increasing by percent annually. mental issues. These issues influence customers’ During , this resulted in a sharp increase in purchasing decisions to an increasing extent. This is a positive trend for Ericsson, which is well posi- tioned to take advantage of interest for the environ- ment both in its branding and with respect to strengthening the Company’s image in general. Ericsson has long given environmental concerns high priority and can point to major achievement in this area. Efforts to reduce the environmental impact of production and of finished products is good busi- ness. Ericsson has found many clear correlations between the efficient use of resources and cost- effectiveness. Extensive press coverage has actively contributed to that individual consumers now and then express concern for their health and safety when using mobile phones and installing radio base stations. Ericsson supports research in the field, through, among others, the World Health Organization (who). •
MC218, separate WAP-based PDA (personal digital assistant), based on Psion 5. i · overview 12 WCDMA networks. third-generation/ Switch circuit for D fixed andwirelessaccesstothenetwork.Theywill ers onthebasisoftheirabilitytoprovideboth the keyconcepts.Userswillrankdifferentsuppli- digm shiftinwhichmobilityandcontentwillbe Ericsson believesthatthemarketisfacingapara- Moving towardamobilefuture fits offeredtocustomers. in whichmobilitywillbeoneofthegreatestbene- nized fortheirabilitytoofferpersonalizedservices customers. Theleadingcompanieswillberecog- the methodsthatwillbeusedinbattletowin or information–isincludedintheofferaresomeof content –forinstanceintheformofentertainment new servicesandpackagedsolutionsinwhicheven be thewinners.Aggressivemarketing,innovative tors whofocusonvolumeand/orspecializationwill competition, thereiseveryindicationthatopera- from fixedandwirelessnetworks.Intomorrow’s require newstrategiestoprotectrevenuestreams will continuetogroupthemselves.They new businessstrategy. tomorrow’s marketonwhichEricssonisbasingits coming years.Italsoreflectstheassessmentof data andtelecommarketswilldevelopoverthe Company’s viewofhowtheconverging media, The choiceofthisthemewasdictatedbythe Over thecomingyears,globalnetworkoperators to networkoperatorsandenterprises. concept asthethemeforitsmarketing launched the“PowerofMobility” of , Ericsson MARKET ANDBUSINESSCONDITIONS–TOMORROW world heorshemightbelocated. number ore-mailaddressregardlessofwhereinthe a subscribertobereachedatthesametelephone as wellotherformsofmobility, such asenabling means themobilityprovidedbywirelessnetworks works mustallowmobilityinabroadsense.This sonal communications. new servicesorneedhelpinmanagingtheirper- place toturnwhentheyneedservice,wantorder on. And–notleastimportanttohaveasingle receive asingleinvoiceforallservicesused,andso telephone numberandasinglee-mailaddress,to only fortheactualtimetheyuseit),tohaveasingle connected tothenetworkatalltimes(whilepaying demand simplesolutionsthatallowthemtobe required toensurefuturecompetitiveness. tives, andinmanycasesrevolutionarysolutions,are profitability intoday’s service offering.Newinitia- required mustalsobemadewithoutsacrificing no clearperception.Thenetworkupgradesnow we canforeseeandothersofwhichasyethave ingly bandwidth-hungryservices,includingthose that theyareabletomeetthedemandforincreas- ahead. Theymustalsomodernizetheirnetworksso choose therightstrategyastheyfaceyears industries. companies intheentertainmentandinformation portals andformingallianceswithcontent-oriented operators arealreadybeginningtoofferInternet offer thesametermstotheircustomers.Thisiswhy is afuturethreattoestablishedoperatorswhomust electronic commerceandentertainment.Thistrend the valuechainbyofferingonlineservicessuchas These operatorsareseekingrevenueshigherupin offering freeaccesstocommunicationnetworks. New operatorsarenowattractingsubscribersby ult.• quality. ally expandingnetworkcapacity andimproving ing totomorrow’s networkarchitectureby gradu- now offersitscustomersaresolutions formigrat- to offerinnovativetechnology. WhatEricsson all perspectives–anditswell-documented ability leader inmobilecommunications–viewedfrom the Company’s positionastheundisputedglobal gy. Itisastrategythattakesasitsstartingpoint the foundationforEricsson’s newbusiness strate- logic demandsinnovativesolutions,hasprovided tral feature,andinwhichanentirelynewbusiness The visionofafutureinwhichmobilityiscen- To meettheseuserdemands,theoperators’net- It isvitallyimportantthattoday’s operators 13 ERICSSON’S STRATEGIES Developing Ericsson’s business with focus on profitable growth
’ Executive Team new generation of network infrastructure and worked intensively during to further applications. refine the business strategy that was formu- Ericsson’s product portfolio spans over the new lated in and presented in last year’s backbone networks that will handle many different EAnnual Report. The Company’s strategic focus is types of service and includes solutions for accessing now even clearer: Ericsson will be the leader in these networks. tomorrow’s converged data and telecom market by Within business communications, Ericsson is focusing its strengths on solutions for the mobile already the leading supplier of systems and services Internet and mobile telephony. for cordless telephony. Now the goal is also to take It is perfectly clear that communications will the lead in solutions for wireless data networks for play the central role in tomorrow’s world. In this business. world, voice, data, images and video can be com- Ericsson will take advantage of its unique ability municated anywhere and anytime using many to offer total solutions that include infrastructure, different types of device. This will increase produc- terminals, applications and services, while continu- tivity and the quality of life around the globe, thus ing to promote open standards for data and creating a new world in which resources are used telecommunications. more efficiently. ERICSSON’S MISSION Many progressive forces around the world are • CREATE ADDED VALUE FOR CUSTOMERS is to understand its contributing to create these opportunities. Ericsson is AND STRENGTHEN CUSTOMER RELATIONS customers’ opportunities one of the foremost and intends to be a driving force This is an important cornerstone in Ericsson’s busi- and needs, and to in the creation of tomorrow’s sophisticated com- ness strategy. The Company’s new and strongly provide communication munications solutions and a prime model of network- market-oriented organization is a valuable asset, solutions better than any based organizations in which innovators and entre- because it clearly defines responsibility at a high competitor. preneurs work together in global teams. level for all existing global and key accounts and also for important customers among the increasing IN DOING SO, Ericsson ’ number of new telecom operators. Great emphasis shall generate is placed on increasing understanding of user needs a competitive economic • FOCUS ON PROFITABLE GROWTH so that Ericsson will be better able to offer its oper- return for its shareholders. Ericsson will be the industry leader by focusing ator customers the new solutions that users will strongly on the sectors that the Company views as demand. the most lucrative for the future – Internet solu- Ericsson is active in more than countries tions in the widest sense, but with particular around the world and has over years built up the emphasis on solutions for wireless access to the largest customer base of any company in the indus- Internet. Total network solutions and applications try. It is therefore essential – and in line with Erics- and terminals for the mobile Internet are the areas son’s corporate values of professionalism, respect and that offer Ericsson the greatest business opportuni- perseverance – that we do not to leave existing cus- ties and that will be most strongly in focus in a few tomers in the lurch. Ericsson’s business strategy thus years. emphasizes the importance of continuity in business When third-generation mobile phone systems relations, both between Ericsson and its customers, E-box, gateway for management become a reality, extremely strong growth is pre- and between our customers and their customers. of intelligent home equipment. dicted for the mobile Internet. The development of wireless data communication is already picking up speed, and the pace will accelerate over the year, as gprs and other new technologies increase speeds for wireless data transmission.
• SOLUTIONS TO TOMORROW’S NEEDS Because established operators control the public communication networks, they have an advantage over the competition. Ericsson can help these operators exploit their advantage by offering cost- effective solutions for the necessary transition to a DEVELOPMENT. STRATEGIC BUSINESS MARKETING AND SENIOR VICEPRESIDENT, TORBJÖRN NILSSON, achieving thisposition. a strong foundationfor wireless dataprovide unique expertisein in mobilesystemsand the lead.Ourdominance Ericsson willtake to themobileInternet, munications shifts in dataandtelecom- AS THEEMPHASIS i · overview 14 increasing efficiency. now inprogressareanotherimportantfactor develop inthefuture. of whattheindustryisliketodayandhowitwill employees mustthereforeincreasetheirawareness expecting ustounderstandtheirneeds.Ericsson ever. Atthesametime,customers’areincreasingly Ericsson’s productsmustberenewedfasterthan DEVELOPTHEINTERNALCULTURE, AWARENESS • and organizations. Company’s positionamonggovernment agencies ities ismotivatedbytheneedtostrengthen increased emphasisoncontactswithpublicauthor- appreciation ofEricssonamongbroadgroups.An other activitiesthatwillincreaserecognitionand communication ofitsmarketingmessagesandin therefore investevenmoreheavilyinaggressive strengthen theEricssonbrand.TheCompanywill consumers, makingitallthemoreimportantto A large shareofEricsson’s salesaremadedirectlyto STRENGTHENTHEMARKET’SPERCEPTIONOF • opportunities. ny worksunceasinglytoidentifynewbusiness priority forEricsson.ItisessentialthattheCompa- quickly broughttomarket–isthereforeahigh product ideascanbeevaluatedquickly–and Creating aninnovativeenvironmentinwhichnew industry suchasdataandtelecommunications. extremely importantinatechnology-intensive patent applications.Astrongportfoliois Ericsson setanewrecordin STIMULATE INNOVATION • upgrades ofEricsson’s internal cantly easierandmorereliable.Themajor ordering ofEricssonproductsandservicessignifi- reduce leadtimesdrasticallyandtomakethe (Time To Customer)project,whichisintendedto working onabroadscaleintheGlobal quickly. To meetthesedemands,Ericssonis ability todevelopnewproductsandservices demands arealsobeingplacedontheCompany’s offer productsofevenhigherquality. Increasing must becomefasterandmorecost-efficient In ordertomeetthemarket’s demands,Ericsson REDUCECOSTSANDINCREASEEFFICIENCY • esrsta r o edd • measures thatarenowneeded. during theautumnisanexample ofthetype approved byanExtraordinary General Meeting and retaintoptalent.Theextended optionplan reviewed tomakeiteasierforEricsson torecruit tions. ness oftheindustry’s constantlychangingcondi- effort toincreaseinternalcompetenceandaware- AND COMPETENCE ERICSSON THROUGHBRANDINGANDMARKETING During Also, salariesandotherbenefits arebeing , Ericsson initiateditsgreatest-ever it in thenumberof infrastructure ttc E and work togethertodevelopnewsolutionsforvoice tion Ericsson rights toJuniper’s ip Juniper intheareaofnext-generationmultiservice- Ericsson hasenteredastrategicalliancewith JUNIPER NETWORKS,USA private homes. market productswithaccesstotheInternet Electrolux andEricssontoresearch,develop A jointventurecompanywasestablishedby ELECTROLUX, SWEDEN which developsInternetsoftware. Thecompanies Ericsson isapartownerofthe Icelandic company, OZ.COM, ICELAND infrastructure andmobileInternet technologies. nt ing andusingsolutionsbasedonMicrosoftWindows its moreadvancedwirelessterminals. will beentitledtouseMicrosoftMobileExplorerfor Ericsson’s The agreementprovidesMicrosoftwithaccessto son willbethemajorityownerofnewcompany. market andsupplywirelesse-mailsolutions.Erics- Ericsson willestablishajoint-venturecompanyto anytime, anywhere,onanydevice.Microsoftand vision ofconvenientandrapidaccesstoinformation has beenformed.Theallianceisbasedonashared and salesoftotalsolutionsforwirelessInternetaccess A strategicalliancethatfocusesonthedevelopment MICROSOFT, USA the Brazilianmarket. Ericsson’s solutionsforenterprisecommunicationsin percent oftheBraziliancompany, whichsells Matec. Priortotheacquisition,Ericssonowned additional Ericsson Telecommunicações inBrazilacquiredan MATEC, BRAZIL most important,inalphabeticalorder, were: strengthen Ericsson’s competitiveness.Someofthe strategic moveswerealsomadeduring the mostattention,butmanyotherimportant announced inthebeginningofDecember, attracted tise throughfar-reaching programsofcooperation. other cases,Ericssonbroadeneditsskillsandexper- companies andbecamepart-ownerinothers.In Ericsson’s ownexpertise,Ericssonacquiredseveral ium-size companieswithskillsthatsupplement line withitsstrategytofocusonsmallandmed- networks. Ericssonhasgaineddistribution The jointventurewillfocusonbuilding,market- A strategicalliancewithMicrosoft,whichwas Server andExchangeplatforms with Ericsson’s ip acquisitions andnewstrategicalliances.In tion substantiallyduring communications. wap . axi percent ofallsharesoutstandingin software, whileEricsson,inturn, m . EricssonandJuniperwill router underthedesigna- its marketposi- through to 15
ERICSSON’S STRATEGIES have cooperated in the past on projects such as ner: Matsushita Communication Industrial Co., the iPulse, an Internet portal for simple Internet com- world’s fourth largest manufacturer of mobile munications. phones. Previous owners were Ericsson, Motorola, Nokia and Psion. QUALCOMM, USA Ericsson has acquired the infrastructure division of SYMBOL TECHNOLOGIES, USA Qualcomm Inc., based in San Diego, ca, in the The companies will jointly market and exchange U.S. The acquisition was part of a larger agreement technical expertise in wireless lan-based telephony between Ericsson and Qualcomm, whereby all and datacom solutions. The alliance is focused on the patent disputes between the two companies were market for local mobility within business enterprises resolved. via a common network for voice and data. The acquisition includes Qualcomm’s produc- WebSwitch and other access products are now being tion and development units for cdma systems in offered to Symbol, which, in turn, provides tele- San Diego, ca and Boulder, co. Ericsson also phones for VoIP (Voice over ip), portable computers acquired Qualcomm’s customer contracts for the and other products. systems, including some customer financing. TELEBIT A/S, DENMARK SARAÏDE-COM, USA Ericsson acquired percent of the Danish compa- Ericsson has become a minority owner of the San ny, which specializes in the development of next- Francisco-based company. Saraïde develops and generation Internet. Telebit is the world leader in provides sophisticated data communications ser- ip version , and was the first company to offer vices for mobile operators. Ericsson’s investment is commercial router solutions for this version of the intended to stimulate the use of innovative services Internet protocol. Software for IPv6 and multi- for mobile data communications. protocol solutions will be integrated into Ericsson’s mobile network offering. SYMBIAN, UK Ericsson’s cooperation within the parameters of the TELULAR, USA Symbian consortium is not affected by the year-end Cooperation focused on the development and sales agreement with Microsoft. Symbian, which devel- of Telular’s terminals for fixed cellular tdma net- ops operating systems for mobile terminals, was works. The alliance provides Ericsson with opportu- joined during the year by another important part- nities to offer turnkey solutions for these networks. The companies will work together on further devel- opment of Telular’s terminals by integrating Ericsson’s radio modules for tdma into the products.
TORRENT NETWORKING TECHNOLOGIES, USA Ericsson acquired the Maryland-based company in the beginning of . Torrent manufactures high- capacity aggregation routers. Its router products offer strong supplements to Ericsson’s own solutions for ip over atm networks. Torrent’s operations have been integrated into Ericsson’s Datacom and ip busi- ness unit under the name of Ericsson IP Infrastruc- ture Inc.
TOUCHWAVE, USA Ericsson acquired TouchWave, an American com- pany based in Silicon Valley, in the beginning of . The company develops and manufactures ip- telephony solutions for enterprise communications. As a result of the acquisition, Ericsson is now able to offer total solutions for ip-pbx systems, which operate with VoIP. The company’s most important product is WebSwitch , an ip-based enterprise switch for small companies. TouchWave is now included in Ericsson’s Enterprise Solutions business segment under the name Ericsson WebCom Inc. •
Bluetooth, module for wireless communication over short distances. i · overview 16 D and otheronlineservicesaregood examplesof downloaded viathenetwork.Electronic commerce connected orthevolumeofinformation thatis ing topay, eitherinrelationtothetimetheyare based servicesarelocatedforwhich usersarewill- applications level.Thisiswhere theinformation- work operatorswillbefoundatthecontentand The primarysourceofrevenuefortomorrow’s net- operator. plays itsownroleingeneratingrevenuesforthe less, voiceordata,andsoon.Eachindividuallayer public orenterprise.Thisappliestofixedwire- model canbeappliedtoalltypesofnetwork– labor intomorrow’s communicationnetworks.The makes iteasiertounderstandthelogicaldivisionof channel forcommunicationandinformation. bone network.Simplyput,itprovidesthephysical network, aswellthecentraltransportorback- work. Itcontainsallfunctionalityforaccesstothe most resemblesatraditionalcommunicationsnet- connection fordataortelecommunication. short, itprovideseverythingneededtosetupa mobility, monitoringthenetwork,andsoon.In work, keepingtrackofsubscribers,handling required forcontrollingandmanagingthenet- Internet oronspecialnetworkservers. ual users.Thesemaybemadeavailableoverthe The contentlevelcontainsapplicationsforindivid- CONNECTIONANDTRANSPORT • CONTROLANDMANAGEMENT • CONTENT, APPLICATIONS ANDPORTALS • for tomorrow’s networks Complete productportfolio distinguishable andmutuallyindependentlevels: will bebuiltaccordingtoamodelwiththreeclearly The nextgenerationofcommunicationsnetworks tomorrow’s dataandtelecommunicationsnetworks. reader mustfirstunderstandthelogicbehind product portfoliothatEricssonisnowbuilding,the generation ofinfrastructurethatwillberequired. media andbroadbandaccess,aswelltothenew Viewing thenetworkfromthese threelevels The connectionandtransportlevelisthatwhich The controllevelcontainsallthefunctionality To understandthelogicbehindstrategic pany’s strategicfocusonwirelessmulti- that itbettercorrespondstotheCom- refine Ericsson’s productportfolio,so , was startedto growth areais applications foundatthislevel.Anotherstrong suppliers. and workswithtechnicalequipmentfrommost ports allformsofaccessandglobalinteroperability work operators’customers. focused ondevelopingattractiveservicesfornet- systems andothermultimedia networks. future systemssuchasthird-generation mobile works, dataand logic forsystemssuchas revenues arelost.Thislevelcontains thesystem operator, thislevelsimplymustfunction,otherwise cation controlandmanagementlevel.Forthe signaling standards,areregulatedatthecommuni- These mechanisms,communicationsprotocolsand nisms forlinkingpublicandprivatenetworks. The Internetwouldnotbepossiblewithoutmecha- Service Architecture( enables communication. platforms withopeninterfacesandsoftwarethat required atthislevelconsistsprimarilyofserver alliance withnetworkoperators.Theequipment entered intopartnershipsorsomeotherformof be developedbyspecializedcompaniesthathave tions. times needtoemployreal-timevoicecommunica- example ofhowtomorrow’s networkswillsome- services andapplications.Voice recognitionisan with goodspeechqualitywillbejustoneofmany a fixedpriceinsteadofbuyingitoverthecounter. download applicationsoftwareovertheInternetfor ing), whichisatechniqueforenablingusersto The sameappliestoinvestmentsduring against thebackgroundofnewbusinesslogic. announced inDecember, shouldalsobe viewed and solutionsfortheselevels. and thecorrespondingneedforEricsson’s systems level, thegreaterwillbeloadatlowerlevels and applicationsthatcanattractend-usersatthis ness logicforEricssonissimple:themoreservices of newapplicationsatthecontentlevel.Thebusi- is extremelyactiveinsupportingthedevelopment companies wap Much ofthenetworkoperator’s profitswillbe Ericsson hasdevelopedaconceptcalledOpen The variousservicesatthislevelwillprimarily In thefuture,traditionalvoicecommunications The partnershipwithMicrosoft,whichwas services areanotherareainwhichEricsson oz.com asp ip networks and,ofcourse,for (Application ServiceProvision- and Saraïde,bothofwhichare osa ERICSSON’S STRATEGIES gsm ) forthislevel. , fixedtelecomnet- osa in the sup- 17
RXI 820, the world’s first real-time router for wireless networks. generated at this level. According to the business only supplier able to offer g systems in accordance model, if operators are to retain their position at with all currently established g variants. this level of the network model, they must protect their competence in this area and make the required investments in server platforms. g offers wireless broadband access. For broadband Ericsson has developed several such server solu- access to the fixed network, Ericsson has focused on tions, launching Telephony Server during , three solutions: adsl for broadband access over which is a technology for voice communication ordinary copper cable, lmds (mini-link bas) for over ip (Voice over ip, VoIP), as well as a solution broadband access to the fixed network over radio, for messaging in ip networks (Messaging over ip), and PipeRider for broadband communication via which can also handle mobility. the cable tv network. Ericsson is also a leader with respect to manage- In tomorrow’s ip-based networks, communica- ment and operations support systems for communi- tion will be switched from the access network to cations networks. In this area, Ericsson works in the transport network via access routers. partnership with companies like Hewlett-Packard, Ericsson has developed a common platform for Compaq, and Bull. the access network that can handle both ip and atm. The rxi is a first-of-a-kind real-time router developed specifically for wireless networks. The level for connection and transport provides the It is intended for use in ip-based networks that mechanisms for the transport of all types of informa- require real-time performance and low fault toler- tion: voice, data or multimedia. In the future, these ance. It handles the latest versions of the Internet mechanisms will be based on ip and atm technolo- protocol, ipv and ipv, and can be expanded incre- gy. For operators, the challenge is to find the most mentally as capacity requirements increase. Another cost-effective solution for building this network access router from Ericsson is the axc (Tigris). level. The architecture required at this level encom- In the backbone network, signals are first for- passes the transport (backbone) and access networks. warded to aggregation routers. With the purchase The development of products for tomorrow’s of Torrent Networking Technologies Inc. last access network receives high priority at Ericsson. spring, Ericsson gained access to a gigabit aggrega- This is also the part of the network architecture tion router, the axi . For traffic in atm-based that accounts for the major share of investments at networks, the company has developed the axd , this level in the network model. which is a scalable atm switch and the cornerstone For mobile access, where Ericsson is the world in Ericsson’s engine concept for incrementally leader, systems are offered for every standard cur- introducing ip and atm technology into the back- rently in operation. Extensive investments in gprs, bone network. which will significantly increase data rates in gsm At the highest level in the network, Ericsson, networks, have also made Ericsson the leader in this through its partnership and equity stake in Juniper area. In next-generation (g) systems, Ericsson has Networks, can offer the axi , a router for data been driving development for some time and is the speeds of gigabits per second and higher. • 18 i · overview
A2618, dual-band phone with exchangeable snap-on covers and extended personalization features. Technical development supports Ericsson’s strategy
’ portfolio ing areas in which synergies in Ericsson’s technical is being enhanced continuously. In order to development can be exploited. strengthen its position in the market for During , Ericsson invested sek , m. datacom and ip networks, Ericsson has (,) in technical development, corresponding Emade a number of strategic acquisitions and entered to percent of net sales. The number of employees important partnerships in recent years. However, active in research and development during the year within its own core business, mobile telephony and was , distributed among research centers in real-time telecommunications networks, Ericsson is countries. a global leader in technology development. The fact that Ericsson’s technical development is Ericsson’s corporate function Technology has as so highly decentralized is primarily due to histori- its primary mission to ensure that product develop- cal reasons. The Company’s research and develop- ment is in line with the Company’s business strate- ment organization has expanded greatly over the gy and to define the strategies that determine when past years thanks to the axe system’s success. new products will be introduced. The corporate One of the advantages of axe is that it is a modular function Technology is also charged with identify- system. As a consequence, it has been easy to dele- 19
TECHNICAL DEVELOPMENT gate design responsibility for local adaptations to the standard for g. This led to the formation of the Ericsson units in the markets in which the Compa- global standards organization gpp. ny’s largest axe customers are active. In many In March , an agreement was reached cases, establishing local technical resources in this between Ericsson and Qualcomm, which meant manner was a political prerequisite for winning that both companies would back a common global contracts at a time when many operators were wcdma standard. The agreement paved the way state-controlled monopolies. for an itu decision in November establishing wcdma as the standard for g under the name imt- Direct Spread. The first release of the In view of the pending technology shift, in which standard was finalized by gpp in December . circuit-switched systems such as axe are merging With the acquisition of Qualcomm’s infrastruc- with ip- and atm-based communications systems, ture division, Ericsson also gained access to is- the demands on Ericsson’s development organization and its enhancement in the form of the technology are also changing. In tomorrow’s systems, it will be called imt- Multi-carrier. necessary to make modifications for local markets Ericsson is pleased that the itu recently also quickly and within the framework of common and established edge as a standard for g. edge pro- open standards. This will require a concentration of vides a natural migration of gsm to g but will resources to fewer and stronger resource centers. also be an important g technology for existing The goal is that it should be possible to imple- tdma operators in the U.S. and Latin America. ment this process without losing valuable exper- These operators will be able to use edge to intro- tise. The new technology organization that is tak- duce g in existing frequency bands, while wcdma ing shape will be sufficiently flexible to handle the will require specially allocated frequencies in the widely varying demands on development resources GHz band, which has been reserved in most parts made by today’s product cycles. of the world for umts and imt-. THE ITU DECISION in 1999 to adopt WCDMA Ericsson’s product development takes place in Third-generation mobile systems offer wireless as a standard for third- special product units. Operations in these units broadband communications at speeds up to generation mobile tele- were streamlined during to encompass only times faster than today. There are many application phony is a major cause for product development. In cases where resources had areas for this technology including wireless Inter- celebration. Ericsson has been built up for sales and marketing, for example, net access, e-mail and the transmission of multi- been promoting this solu- they were transferred to the business unit to which media to portable terminals or postcards directly tion for several years and the product unit belongs. The result of this stream- from mobile phones to the receiver. driving efforts to harmonize lining is greater efficiency and a clearer focus for This revolution in wireless communications will the various proposals for each product unit. also require modifications in the fixed network. third-generation systems. This is why g is such a powerful driving force behind the new network architecture now on the JAN UDDENFELDT, Ericsson’s position as the technology leader in horizon. New solutions have been developed to SENIOR VICE PRESIDENT, mobile systems is undisputed. No other company make this architecture possible. TECHNOLOGY can offer its customers mobile systems according to A platform that handles both atm and ip has every existing analog and digital system up to and been developed. It functions as a media gateway including second-generation mobile systems, that mediates access to the backbone network from which are now in operation all over the world. g networks. Ericsson successfully tested the plat- Neither can any other company offer customers as form in Japan during and expects to make the broad a range of solutions for what is called g product available when g networks start to be (third-generation) mobile systems. At year-end deployed in . , Ericsson had functioning g test systems in The same platform is included in the new rxi operation. The first of these was approved in early ip router, which is a part of Ericsson’s solution by ntt DoCoMo in Japan, which in April for the g network. The platform was developed is expected to be the world’s first operator to specifically for wireless broadband networks and take a commercial system into operation – supplied their demands for real-time functionality; for largely by Ericsson. example, to handle the synchronization of base Ever since discussion of a new global system for stations. third-generation mobile telephony began, Ericsson has played a leading role. The Company can now ’ take satisfaction in the fact that wcdma, the tech- Many of Ericsson’s technical solutions are character- nology that Ericsson began developing in , is ized by their facilitating a smooth migration from now the established standard for g. During , a previously installed systems to a new system. This decision was taken by etsi and arib, the European was the case, for example, with mobile systems for and Japanese standards bodies, to adopt wcdma as tdma, for which operators of analog amps networks i · overview 20 which wasacquiredin obtained fromtheCalifornia-based company product portfolio,asdoestheTigris accessrouter Torrent’s aggregationroutersfitwellintoEricsson’s for routers.With theacquisitionofÅrhus, atm success. Ericsson’s platformfor combined by Ericsson,isbeginningtoachievecommercial ny’s positionwasstrengthened considerably. not yetbeencompletelyrealized,buttheCompa- of becomingaleadingsuppliereveninthisareahas ip Ericsson achievedmajoradvancesinthemarketfor For morethan networks achievedabreakthroughin same network.Thissolutionfornext-generation to handleagrowingvolumeofdatatrafficinthe axd axe switched servicesinthesamenetwork.Existing accommodates circuit-switchedandpacket- fixed networkisprovidedby the newtechnology. allow today’s made incrementally, withoutaffectingend-users. the customerandallowsshiftsintechnologytobe technology toanotherisextremelycost-effectivefor the network.Thismethodofmigratingfromone existing infrastructureandwhichtherebydigitized were offeredatechnologythatwasaddedtothe of the communications. Duringtheseyears,development tion ofEricsson’s successinfixedandwireless increased capacityandreducedsizefor system willconstituteyetanothergiantstepin introduction during generation for severalyears. es. Developmentofthe as theEricsson ing Technologies inMarylandtheU.S.Marketed gigabit routerunderitsownbrand. Ericsson obtainedtherighttomarketJuniper’s backbone routerswasextendedduringtheyear. Juniper Networksregardingthedevelopmentof ships. through severalstrategicacquisitionsandpartner- strengthened itspositioninroutersduring very powerfulsolution.Inaddition,theCompany and datacommunicationduring ip During The The correspondingmigrationtechnologyforthe Ericsson’s In March,EricssonacquiredTorrent Network- A previouslyestablishedpartnershipwith -based communicationisoneapplication area switches, forexample,canbeexpandedwith traffic in axe axd , Ericsson’s scalable , axe system hascontinued. wcdma gsm axi g system, whichisscheduledfor atm work continuedwiththenext- years, networks isanothertechnically customers tomigrateeasily . switch, whichwasdeveloped technology isdesignedto . axe and axe The new-generation axi atm system willcontinue has beenthefounda- engine switch, inorder . , Juniper’s and , which axe The goal ip . switch- and acc , largest installedbaseofnext-generationrouters. tion leader indevelopingthisimportantnext-genera- next versionoftheprotocol.Telebit isaworld expertise inthedevelopmentofIPv6,whichis autumn, Ericssonwasassuredofleading-edge Denmark-based company, Telebit, duringthe mobile phonesasin Never beforehasEricssonintroducedasmany Eight-inch siliconwaferwithdatacomcircuits. many newtechnicalfeatures,includingachip form usingthreevoltsinsteadoffourandwith tion wasmadetoanentirelynewtechnicalplat- ip technology andalreadyhastheworld’s . With the t , atransi- 21
TECHNICAL DEVELOPMENT set and a new radio subsystem employing homo- already taken into production. The chip is based on dyne technology. This platform will be used for technology that was developed by Ericsson and new models to be introduced during the year . offered to other companies as early as , when a Three different terminals were also introduced consortium was established by Ericsson, ibm, during that employ wap (Wireless Applica- Nokia and Toshiba to support the technology. Dur- tion Protocol) technology for more efficient ing , the special interest group that was estab- exchange of information between the Internet and lished for Bluetooth grew from to close to the wireless device. The mc, which was intro- , companies. Bluetooth is thus the de facto duced first, is a separate handheld computer for global standard for radio communication between wireless communication and includes an infrared different devices over short distances. port. The epoc operating system is also built into At the Comdex exhibition in the U.S. in the the mc, making it the first concrete result for autumn of , Ericsson demonstrated its first Ericsson of the Symbian joint venture. The Sym- Bluetooth product, which consisted of a cordless bian partnership, which was started by Ericsson, headset equipped with a microphone that communi-
Motorola, Nokia, Psion and others, was expanded cates with a mobile phone that can be carried in a MINI-LINK BAS, system for in to include the Japanese company Matsushi- pocket or a purse or located elsewhere within the wireless–fixed network access using so-called LMDS point-to- ta. -meter range of current Bluetooth technology. mulitpoint solutions. The r and the r are wap-phones that will be avilable in volumes during . The r can most easily be described as a t with a consid- Toward the end of , Ericsson established its erably larger display and extra keys for wap-navi- strategy for access products. This decision marked a gating in the display. The larger r has a larger concentration of the Company’s development display that can be used to access built-in applica- efforts to three areas: adsl, lmds and ip via cable- tions such as a calendar, an e-mail client and a web tv networks. adsl (Asymmetrical Digital Sub- browser. scriber Line), a technique for increasing capacity in Bluetooth is a new, small and inexpensive radio- existing copper networks, provides very high band- frequency chip that Ericsson Components has width for the downstream link. This technology is particularly suitable for using existing telephone lines for video on demand, high-speed Internet access and similar services. Ericsson has a leading position in this area. Swedish network operator Telia is building an extensive adsl network with the help of Ericsson and other suppliers. lmds (Local Multipoint Distribution Services) is a technology for high-speed radio networks in which microwave transmission provides a high- speed connection to voice and Internet services for small and medium-size business and multiple unit dwellings. Radio technology is thus employed to rapidly and cost-efficiently provide broadband access to the fixed network. Ericsson’s main product in this area is mini- link bas, which is available for European and U.S. radio standards. The U.S.-based Diginet is one customer who has already ordered this access solu- tion from Ericsson for deployment in its network in Latin America. For the third type of broadband access, which is cable tv, Ericsson introduced the PipeRider product in . PipeRider is a cable-tv modem that is used to provide voice and Internet access in the home. In its first generation, PipeRider was designed according to the American docsis stan- dard. Using its router products, Ericsson is also developing infrastructure for ip communication and delivery of voice and data over cable-tv net- works. •
T28 and T28 World, dual-band phones based on new technology and hardware platform. Voice control, lithium polymer battery. TECHNOLOGY SUPPLY ANDINFORMATION SENIOR VICEPRESIDENT, BJÖRN BOSTRÖM, way. can behandledinthis sales forallproducts that percent of is atleast3 which intermsofmoney chain by25percent, requirements inthesupply can reduce personnel ment issubstantial.We potential ofsuchimprove- chain. Theeconomic simplify theentire supply reduce leadtimesandto Globalistosharply TTC THE GOALOF ii · in focus 22 S into operation.Thetarget for product hasbeendeliveredandisreadytobeput from whenthecustomerplacesanorderuntila overriding goaloftheproject,byreducingtime are beingcreatedforcustomers. ogy, simplerandtherebyfasterorderingroutines or more.Atthesametime,usingInternettechnol- reduce leadtimesinthesupplychainby things, aimsatreducingleadtimes. corporate functionSupply& of major stepshavebeentakenwithintheframework given additionalemphasis.Overthepastyear, duced atyear-end all levels.Whentheneworganization wasintro- tiously overaperiodofyearstoreduceleadtimesat problem needstobesolved,andsoon. solutions requestedbyusers,quickresponsewhena suppliers: fastdelivery, rapiddevelopmentofnew this. Thatiswhytheydemandsomuchoftheir often exactlythesameaswhat waspurchasedfor needs foranetworkinonepart oftheworldis is muchappreciated.Whatamobile operator are becomingmoreglobal,this methodofdelivery using thesimplifiedroutines. this manner, butmostproductscanbedelivered all ofEricsson’s productportfoliocanbeorderedin web-based application. requirements andorderacompletepackagevia Ericsson’s productportfoliobasedoncurrent that thecustomercanidentifyasuitablesolutionin cations cables. ply connectingthenecessarypowerandcommuni- and readyforrapidinstallation,whichentailssim- tion. Itshouldbedeliveredcompletelyassembled software installedandbereadytotakeintoopera- radio basestation,forexample,shouldhaveall customers shouldbeasreadytousepossible.A erables. Thismeansthatproductsdeliveredto delivery methodstowhatiscalledhigh-leveldeliv- ttc One ofthemostimportantmeansachieving - S pleasing customersevenmore How tosavemoneywhile ttc Shortening Ericsson hasbeenworkinghardandconscien- Because theoperationsofEricsson’s customers The The transitiontohigh-leveldeliverablesmeans Global goalsisatransitionfromprevious operators andbusinesses–arekeenlyawareof rapid change.Ericsson’s customers–network tions marketrequiresbeingabletodealwith Global, anEricsson-wideprojectledbythe ttc Global managementisawarethatnot ttc , orTime toCustomer, isthe in thedataandtelecommunica- , theneedforspeedwas it ttc that, amongother Global isto percent within Ericsson’s organization. customer totrackhowordersarebeingprocessed simplify customerorders,andtoallowthe than before.Web technologyisbeingusedto time previouslyrequired. capacity increasescouldbeguaranteedinhalfthe earned themmoney, sincedeliveriesofneeded plified orderingroutinespleasedthecustomersand reactions wereoverwhelminglypositive.Thesim- proved thatthemethodsaresound.Customer radio basestationstoGermany. Thisexperience will beremoved. process thatdoesnotaddvalueforthecustomer process cannowbeeliminated.Everystepinthe Most oftheseintermediarypointsintheold reaching theunitthatwouldcompletedelivery. office toanotherwithinEricssonbeforefinally Previously, orderswereoftensentfromoneorder enables substantialsavingsthroughrationalization. operation. where intheworldproductwillbeputinto routines anddeliveryprocedures,regardlessof al customersdemandthesamesimpleordering the sameoperator’s networksomewhereelse.Glob- ol.• world. dard forallitsnetworksaround the this deliverymodelwouldbethe stan- last yearwhentheoperatordecided that possible marksforitsworking methods systems, gavetheCompany highest Ericsson’s largest customers inmobile can behandledinthismanner. cent ofinvoicedsalesforallproductsthat successfully during The methodsdevelopedby terms, thiscorrespondstoatleast supply chainby reduce personnelrequirementsinthe Global hasshownthatitispossibleto because ofeconomicincentives. relationship withthecustomer, butalso because theyimproveandstrengthenthe priority byexecutivemanagement,notonly the products throughoutEricsson.Wide applicationof The newmethodsarenowbeingusedwithmore mobile phone.Combined mobilephoneandprivateradio. Customers arealsoreceivingbetterinformation The transitiontodirectorderingviatheInternet Vodafone Airtouch,whichisoneof R250 PRO,theworld’s firstwater- andshock-resistant ttc Global methodsisbeinggiventhehighest percent. Inmonetary and ttc TIME TOCUSTOMER ttc Global weretested with deliveriesof per- 23
THE MILLENNIUM SHIFT AND IT Millennium shift renews it structure
for Ericsson’s millennium program were to uphold cus- tomer confidence, to protect shareholder investments and to secure the Company’s TinternalT working conditions. All three of these goals were achieved inasmuch as Ericsson did not experience a single serious inci- dent during the transition to the new millennium. After the New Year, work resumed among Erics- son’s customers without interruptions. Ericsson took the yk issue seriously. An exten- sive program to handle the transition was started as PipeRider, modem for data communication over early as . The program encompassed all Erics- cable-TV networks. son companies and operations and was monitored by executive management. The total cost of the Millennium Program was sek , m. Ericsson made a great effort to eliminate and introduction of esoe (Ericsson Standard Office minimize all yk-related problems. All products Environment), was speeded up by the Millenium were tested to determine whether or not they are Program. yk-compliant. In certain cases, customers were esoe means that an Ericsson employee is able to offered upgrades. An extensive review was also sit at any pc anywhere throughout the organization conducted of mission-critical information systems and immediately begin working with familiar soft- and of all steps in the delivery chain from order to ware in a familiar computing environment. This installation. increases internal efficiency and makes it easier to relocate employees temporarily or permanently. Several major virus attacks during also To assist customers around the world, more than confirmed the strength of the esoe concept. , Ericsson employees were on duty on New Thanks to central administration of virus protec- Year’s Eve in more than locations around the tion and frequent updates, Ericsson has withstood world. To coordinate their activities, a number of all severe virus attacks to date without major dam- new routines and systems were implemented and age. By year-end , nearly percent of all tested, including a worldwide communications Ericsson employees had esoe installed in their system for the rapid collection of information. pcs. The goal is to complete the implementation of At the millennium shift, the load on public this standard environment during the year . telephone systems was at times extremely high. In some areas, subscribers experienced problems in making calls, but this was due entirely to over- sap r/ has also been introduced as a standardized loading of the networks. When traffic returned to environment for many of Ericsson’s administrative normal, service levels were also restored to nor- routines. To date, major installations have been mal. completed throughout Ericsson. During , a number of new intranet-based systems for internal administration were taken into As a result of the millennium shift, Ericsson’s inter- operation. “Click to Buy” is one example of the nal it infrastructure is more highly optimized, increased efficiency made possible using intranet more secure and more efficient than ever before. All technology. This is a system for purchasing and software used throughout Ericsson was reviewed. ordering non-product related goods that will grad- Many systems and applications were phased out ually replace traditional methods, which are often entirely, while others were upgraded. Work to cumbersome and bureaucratic. For input goods, the create uniform standards, including the continued electronic transfer of information already exists. • ORGANIZATION HUMAN RESOURCESAND SENIOR VICEPRESIDENT, BRITT REIGO, to succeed. our customersiftheyare what willbedemandedof stand howitworksand employee mustunder- telecom world,every to succeedinthenew acting onthejob.Ifweare the wayofthinkingand petence andtochange to increase com- internal Ericsson workedsohard NEVER BEFOREHAS ii · in focus 24 T devoted topromotingunderstanding ofthenew further refinedduringtheyear. Greateffortwas was introducedinJanuary at anincreasinglyrapidpace.The organization that During DEVELOP THEINTERNALCULTURE, AWARENESS • emerging A newEricsson around the years ago.Justaboutwhatitwaslike months forateamofskilledengineerstoprepare. occupied severalmetersofshelfspaceandtook oped bythecustomer’s engineers.Atypicaltender based onverydetailedtechnicalspecificationsdevel- market andrequestedtendersfornewdeliveries in everycountry, thatatregularintervalswenttothe component manufacturing. ments inmobiletelephony, businesssystemsand the profitsthatfinancedEricsson’s boldnewinvest- business totally. This wastheunitthatgenerated that concernsthepeoplewithinCompany. aspects ofEricsson’s businessstrategyistheone in change.Thisiswhyoneofthemostimportant one thatencourageschangeandseeksopportunities pany, meaningthatthebusinessculturemustbe will berequiredofeveryoneworkingintheCom- the marketdemands.Butaboveall,anopenmind unquestionably beneededtoprovidetheflexibility tive managementandsmartworkingmethodswill competence andresources. that arebestatchangeandinreallocating with. Tomorrow’s winnerswillbethecompanies companies intheindustrywillneedtolearnlive changes. pany. Thetenyearsaheadwillbringevengreater passed haveentailedenormouschangesintheCom- dominates thebusiness.Thetenyearsthathave accounts forthelion’s shareofrevenuesandtotally the Company’s operations.Instead,mobiletelephony business forEricsson,butitisnolongerthemotorin tion infixedtelecomnetworksisstillanimportant AND COMPETENCE That waswhatthetelecomworldliketen Ericsson’s customerswerestate-owned Daring structuralinitiatives,distinctandproac- Restructuring isawordthatEricssonandother Today, tenyearslater, itishistory. Communica- Telecommunications. Itwasbuiltup worked inabusinessareacalledPublic employees, morethanhalfofwhom , axe , worktorestructureEricssoncontinued switch anddominatedEricsson’s was polishedand had years ago. ptt , s, one division ofrolesandresponsibilitiesintheCompany. to defininganddisseminatingknowledgeofthenew organization amongtheCompany’s employees and while , This relativelymodestdeclineisthenetresultof One yearlaterthisnumberhadfallento At year-end letters ofintentthatweresignedinlate high. for thefuture.MobilitywithinEricssonremains tions orstrengtheningofresourcesinstrategicareas areas willberequired.Ericsson isthereforecontin- strengthening ofresourcesinthis andothercentral the Company’s currentstrategicfocus,additional son’s competenceinthedatacomand persons beginworkingforanewemployer. ued focusoncoreoperations,meaningthat January ments. ThesaleoftheEnergy Systemsbusinessin through acontinuedrealignmentofworkassign- This trendwillcontinuein Several importantcompanyacquisitions during greatly contributedtostrengthening Erics- , persons leavingEricssonduringtheyear, joined theCompanythroughacquisi- , was afirststepinEricsson’s contin- Ericsson had , , asaresultof ip employees. field. With ,. , , and 25
HUMAN RESOURCES
The Bluetooth Headset contains a wireless earpiece and microphone for mobile phones. uing to pursue an acquisition strategy that seeks to fill vacancies in existing operations, but instead identify small and medium-size companies with actively seek the most talented people, offer key expertise that supplements the already high employment, and thus secure the skills the compa- level of skills within Ericsson. ny needs. An international working group is now Individual recruitment of highly skilled new working to develop guidelines for implementing employees is also a high priority for Ericsson. Dur- this policy. ing , a completely new policy was established To support the new recruitment model, Ericsson for new recruitment by which we will not recruit to is also working actively to become more visible and
NUMBER OF EMPLOYEES BY GEOGRAPHIC REGION 1999 1998 1994 Number of Number of Number of employees percent employees percent employees percent Europe, Middle East, Africa 70,900 68 74,900 72 59,300 78 USA and Canada 12,200 12 9,800 9 6,200 8 Latin America 8,200 8 7,800 8 4,500 6 Asia Pacific 12,000 12 11,200 11 6,100 8
Total 103,300 103,700 76,100
Of which Sweden 43,500 42 44,600 43 36,600 48 Of which EU 65,700 64 70,000 67 17,700 23
During 1999, the number of Ericsson employees declined slightly. The markets in which the number of employees increased the most are primarily markets, such as the U.S. and Brazil, in which companies were acquired during the year. In Sweden, the number of employees continued to decline as a consequence of operations being sold to other companies. and e-mail. the writingofSMSmessages Chatboard, keyboard tofacilitate ii · in focus 26 10,000 12,000 14,000 members oftheexecutivemanagementteam. mittee fortheprogramincludesthreeoffourteen the highestlevelinCompany. Thesteeringcom- degrees. Thetraineeprogramisactivelysupportedat high gradesfromuniversity, andmosthadtwo from ninedifferentcountrieswereselected.Allhad in thefirstprogram.Sixwomenandelevenmen world andinthecompositionoftraineegroup. with studyunitsarrangedindifferentpartsofthe ties worldwide.Theprogramisveryinternational are arrangedincooperationwithleadinguniversi- with anEricssoncustomer, whilethetheoryunits theoretical studies.Onejob-trainingperiodisspent six-month jobtrainingperiodsinterspersedwith Brazil, where it is32.TheaverageageinSweden39. average agesare foundingrowth countries, suchasChinaand More thanhalf ofallemployeesare 35oryounger. Thelowest The averageageofEricssonemployees isgraduallydeclining. EMPLOYEES BYAGEGROUP management beganplanningforwhatwouldbe During thespringof started during son isthenewglobaltraineeprogramthatwas excellent startforaninternationalcareeratErics- offered anopportunitytoworkinternationally. An recruitment, whileallowingnewemployeestobe tries givestheCompanyaverybroadbasefor Ericsson’s globalpresenceinmorethan employer. even moreknownasanexcellentandexciting will nowbecultivatedinordertomakeEricsson excellent relationswiththeacademicworld,which leges aroundtheworld.TheCompanyhaslonghad better representedatleadinguniversitiesandcol- 2,000 4,000 6,000 8,000 Several thousandpersonsappliedforthe This isatwo-yearprogramconsistingofthree 0
–19 wdn(oa:4,0)Restoftheworld(total:59,800) Sweden (total:43,500)
20–24
25–29
30–34 .
35–39 , Ericsson’s executive
40–44
45–49
50–54
55–59 coun- places
60–64 area basedonneedsinrespective Ericssonmarkets. persons willparticipateinthis training. logic inSiliconValley. During Inside the ness Academydevelopedanintensivecoursecalled and unitswithinEricsson. is nowbeingextendedtomanyothercompanies year. TheKnowledgeStep,astheprogramiscalled, communications for Systems businessunitprovidedtrainingindata started throughoutEricssonin tence Shift,anumberofsimilaractivitieswere various interactivecourses. knowledge. Thesegapscanthenbefilledthrough diagnostic gamethatrevealsthegapsintheir employees canstartbyplayinganentertaining provides thebaseforentireprogram.Here to explain.AnewwebsiteonEricsson’s intranet technology thattheCompetenceShiftisdesigned hensive wouldnotbepossiblewithoutthevery gies. accept theCompany’s businessandproduct strate- development willmakeiteasiertounderstandand The ideaisthatawarenessoftheforcesdriving the newmarketsituationthatEricssonisfacing. explaining newtechnology, newbusinesslogicand world functions.TheCompetenceShiftfocuseson an increasedunderstandingofhowthenewtelecom all oftheCompany’s Shift, astheprogramiscalled,intentionthat enhancement todate.ThroughtheCompetence the Company’s largest investmentinskills more than75percent ofallemployeeshaveanacademic degree. Europe, aswellinpartsofLatinAmerica.Inseveralcountries, education ishighestingrowth marketsinAsiaandEastern centage pointsoverthepasttwoyears.Theaveragelevelof ees haveanacademicdegree, whichisanincrease offiveper- throughout the1990s.Today, 49percent ofallEricssonemploy- The levelofeducationEricssonemployeeshasincreased EMPLOYEES BYLEVELOFEDUCATION There arealsovariouslocalinitiatives inthe For customeraccountmanagers,EricssonBusi- In additiontothecentrallyinitiatedCompe- An internaldevelopmentprogramthiscompre- 27 % 9 % education Higher secondary Mandatory school ip tornado, whichdescribesthebusiness , , employees duringthe or higher University degree Specialized school HUMAN RESOURCES employees willgain . The , atleast 21 % 43 % gsm • 27
CORPORATE CITIZENSHIP Good reputation in society increasingly important
around the world have realized the importance of being perceived as a respectable and responsi- ble citizen in society. They have under- MstoodM that a good reputation also has a commercial A1018, mobile phone for the low-price value. It is easy to appreciate that public authorities segment. Available in and organizations are more favorably disposed to five different colors. companies that contribute to improving society and make their resources available in emergency situa- Ericsson’s local company worked together with the tions. Not quite as self-evident – but no less impor- local mobile operator Turkcell to ensure that tant – is that today’s consumers increasingly expect mobile communication in the affected area contin- that the companies whose products they purchase ued to function. Ericsson employees in Turkey should be companies that distinguish themselves donated money, gave blood and provided other from others and through their actions win the cus- assistance during rescue efforts. tomer’s confidence. It is becoming increasingly nat- When floods struck Vietnam in November, ural for today’s consumers to prefer doing business Ericsson’s local office provided emergency assis- with “good” companies rather than with “bad” ones. tance in a number of ways. Ericsson volunteer workers, mobile phones and other resources were placed at the disposal of the authorities during the Ever since the Company was founded more than reconstruction work. years ago, Ericsson has taken pride in being In Canada, Ericsson quickly provided a mobile ethical in its actions and practicing fair business base station on wheels to assist rescue personnel and methods. This is a part of the business culture that the families of victims following a major air crash. Lars Magnus Ericsson established and something that has contributed to creating a positive image of THROUGH public service Ericsson as a company. Obviously, catastrophes make headlines, but there activities, Ericsson Through the years, this image has been strength- are many countries in the world that face major companies around the ened by activities that have been conducted in various challenges every day. These challenges range from world are strengthening parts of the world to demonstrate Ericsson’s social helping people to find food, work or housing to our positive image. This is responsibility in the countries in which it is active. teaching them to read and write. very important in a market With the support of local management, Ericsson In order to support and reward innovative efforts in where people increasingly employees in many countries have participated in this area, Ericsson founded the erica Award (Erics- let their hearts dictate different social projects. Such work not only strength- son Internet Community Award). This award, which business and purchasing ens Ericsson’s positive image, but also contributes to is also sponsored by other companies, is given to non- decisions. strengthening the team spirit within the Company. profit organizations that use Internet technology to These often spontaneous expressions of solidarity help others. In , a total of usd , was LARS A. STÅLBERG, are very valuable, but more is required. The realiza- awarded. The prize was shared by three winners: the SENIOR VICE PRESIDENT, tion that it is essential to coordinate and develop National Library for the Blind in Great Britain, Med- COMMUNICATIONS such activities, resulted in a comprehensive review ical Training Worldwide in Novato, California and being conducted in of Ericsson’s role in soci- Kids HealthLINK in San Francisco, California. ety. A special group was established within Erics- son’s marketing function that was charged with further developing Ericsson’s activities in this area. Ericsson will continue to provide humanitarian assistance in the form of communications systems. In this way, the Company will play a leading role in Experiences during confirm that humanitari- helping to reduce human suffering in conjunction an assistance in the form of communications sys- with catastrophes. The message to the world is clear: tems in conjunction with natural catastrophes and Ericsson is a company that takes responsibility, that similar situations is the area in which Ericsson can really makes a difference. It is a company which is provide the greatest benefit. During the preceding characterized by high ethical standards and which is year, significant efforts were made in several situa- a respectable and responsible employer that takes a tions around the world. long-term view of environmental issues and has been Following the major earthquake in Turkey, doing so for some time. It is a company that cares. • network architecture. telecom worldandits forward intothenew existing investments customers tomigratetheir sold systemsthathelpour net andwedeveloped areas ofthemobileInter- We tooktheleadinall by more than40percent. systems operationsgrew AND SERVICE PROVIDERS. AND SERVICE NETWORK OPERATORS BUSINESS SEGMENT EXECUTIVE VICEPRESIDENT, MATS DAHLIN, DURING 1999 ii · in focus 28 our mobile E dais- cdma portfolio withcdmaOne,previously knownas thus allowingtheCompanytoexpanditsproduct acquired Qualcomm’s infrastructureoperations, systems. Aspartoftheagreement,Ericsson further strengtheneditspositioninmobile with theAmericancompany, Qualcomm,Ericsson announcement inMarch tion ( drivers behindthedevelopmentofthird-genera- third-generation systems. second-generation systemsandisnowalsotruefor existing standards.Thishasappliedtofirst-and pany abletooffermobilesystemsaccordingall in mobilesystemsisthatEricssontheonlycom- One ofthereasonswhyEricssonisworldleader and newfixednetworksolutions mobilesystems Solid growthfor important standards. able tosupplysystemsforeach ofthethreemost decision on continue tofocusstronglyonthe increased by growth innetworktraffic. of Internettrafficcombinedtogenerateexponential in mobiletelephonyandcontinuedstronggrowth telecommunications networks.Very rapidgrowth . business segmentexperiencedaneventfulyearin prospects forachievingthisgoalarefavorable. market. Achievementsduring with ing thesegment’s positionasEricsson’s largest, tributed toextremelystronggrowth,strengthen- anyone hadexpected. increased duringtheyearatamuchfasterratethan The resultwasthatnetworkcapacityhadtobe users wereconnectedtotheInternetduring fic increasedevenmore.Morethan cent. With anoperatingmargin of ( business segmentisalsoEricsson’s mostprofitable. , Ericsson haslongbeenoneoftheprincipal When the In mobilenetworks,thenumberofsubscribers Ericsson’s NetworkOperators/ServiceProviders Net salesamountedto For thisbusinesssegment,thesetrendscon- A dramaticincreaseintrafficwasnotedall g broad portfolioofnetworksolutionsand that theCompanyshouldbeabletooffera supplier inthenewtelecomworlddemands ) in ) mobilecommunications.With the percent ofnetsales. , . g itu, , itbecameclearthatEricsson will be percent duringtheyear, whiletraf- ’ which wasanincreaseof at theendof sek , , of anagreement , ip show thatthe and datacom percent, the the leading announced its million new m. . per- Operating margin, percent behind Japanwhen means thattherestofworldwillbesomewhat to gainmomentumuntilsometimein them. However, licenseallocationisnot expected and Ericssonisdiscussingdeliverieswithmostof edge and testsystems.Test systemsfor were signedduringtheyearcoveringcommercial the world’s first taken intocommercialoperationnextyear, willbe terminals for Japan. Ericssonwillsupplyradiobasestationsand signed alarge numberof cial contractfora During theyear, Ericssonsignedthefirstcommer- Operating margin, SEKb. Net sales,SEKb. Orders booked,SEKb. the measured bytheoperator’s subscriberbase. the year, therebywinninghalf ofallbusinessas switching techniquesin cantly increasedatacapacityusingpacket- of the considerable interestduringtheyear. Thisisapart Number ofemployees AND SERVICE PROVIDERS1999 BUSINESS SEGMENTNETWORKOPERATORS technologies, whichincludeoperatingsystems, strengthen Ericsson’s offeringwithrespecttothese The businesssegmentisworkinghardtofurther net receivedconsiderableattentionduringtheyear. Technologies thatallowwirelessaccesstotheInter- In anticipationof operation. world. Manyoperatorshaveappliedfor its maincompetitorsinthisarea. operators, whichmeansthatEricssonisfaraheadof are expectedtobetakenintooperationby Cantel haveplacedordersforsuchsystems,which Ericsson isalsoleadingthewaywithrespectto Planning for g gsm are nowinoperationwithmorethan standard, system thatmakesitpossibletosignifi- ntt edge g g ’s network,whichwhenitis g g systems isunderwayalloverthe network. Additionalcontracts g system with systems, . BellSouthandRogers is takenintocommercial gsm 64,695 gprs 149.9 151.8 1999 19.6 13 networks. Ericsson gprs contracts during ntt 865–6 68,645 wcdma 2. 22 19 123.2 127.6 98(percent) 1998 15.3 has attracted 12 , DoCoMo in g . licenses, and Change which 29
BUSINESS SEGMENT NETWORK OPERATORS AND SERVICE PROVIDERS communications platforms and content. Ericsson is telecommunications to a new generation of net- active on a broad front in this area. works that will handle circuit-switched and Content is being developed in cooperation with ip/atm-based packet-switched traffic. During a large number of companies and operators. Erics- , bt in Great Britain, kpn in the Netherlands, son’s demonstration systems for g in various parts Telia in Denmark and Telefónica in Spain chose of the world are a valuable asset in illustrating the engine for modernizing their networks. An order opportunities provided by the new technology. from Diginet, which intends to use engine for an In order to further promote the development of extensive Latin American ip network with wireless applications for g and other technologies, Ericsson access, confirms that this is a solution that also fits took an ownership stake in companies such as newly established operators. oz.com and Saraïde during the year. Although engine’s success was the result of strategic these investments might seem to be somewhat marketing activities to reposition Ericsson as a peripheral to Ericsson’s core business, Ericsson supplier of networks for data and telecommunica- intends to take an active part in driving a market tions. This was made possible by restructuring the for the mobile Internet and to support new ip- Wireline Systems business unit to become a suppli- based solutions that generate more network traffic. er of total solutions and services. The positive results achieved by engine are not the only examples that confirm that Ericsson is one of With a market share of over percent, Ericsson the key players in the ip and datacom market. In the dominates the market for mobile systems. Ericsson area of ip-based voice telephony, called VoIP (Voice is also one of the leading suppliers of infrastructure over ip), Ericsson is now the world leader after having for fixed communications. The axe system, the signed several important contracts during . sales of which exceed those of any other switching Ericsson’s systematic investments in ip commu- system, is the foundation of Ericsson’s success in nication also resulted in the establishment of the each of these markets. During , more axe Datacom and ip Services business unit in Boston in lines were sold than ever before, bringing the total the U.S. installed base up to million fixed lines. This is the world’s largest installed base for fixed telecom- munications and a major source of future revenues. The concerted effort to further strengthen Ericsson’s Several of Ericsson’s operator customers are now expertise in ip technology made during the past few beginning the work of upgrading their networks to year was accelerated significantly during . Sever- the next-generation network architecture. This al important acquisitions and partnerships were architecture will handle data and multimedia com- announced during the year. Consequently, Ericsson munications in fixed and wireless networks. now has a complete product portfolio for tomorrow’s data and telecom networks. Today, Ericsson has a unique capacity to offer total solutions for all types During , Ericsson’s engine concept achieved of wireless and fixed networks. considerable success. This is a solution for the In order to strengthen Ericsson’s offering to the migration of circuit-switched networks for fixed segment’s customer groups, Ericsson Services was
RBS 2401, complete picobase station for installation indoors. ii · in focus 30 prise market,butinthelong-term nextlink being usedintrialsbytheAmericanoperator signed itsfirstcontractsandthesystemisnow attracted majorinterestinthemarket.Ericsson , reduced bymorethan nies currentlyincludedinthis businessunitwas the sharply reducedthenumberof employees.During Systems businessunit,whichduringthepastyear operations. ThisappliedprimarilytotheWireline was characterizedbycontinuedrestructuringof The businesssegment’s internalworkduring access, optimizedforhigh-speed data communication. country’s onlynation-widenetworkforwireless Mobitex network,whichforthetimebeingis Ericsson receivednewordersforequipmentthe of oneEricsson’s customersduringtheyear. U.S. morethandoubledthenumberofsubscribers demand forwirelessdatacommunicationinthe underwent somewhatofarenaissance.Increased Mobitex isonesuchproduct,whichduring continued toshowfavorablemargins during Several ofthebusinesssegment’s matureproducts partner isstrengthened. tion asatotalsupplier, systemsintegratorand With astrongportfolioofservices,Ericsson’s posi- established asanewbusinessunitduringtheyear. currently holdsa Ericsson’s successful new operatorssurface.Thesystemisbasedon wider application,asnewlicensesareissuedand possibly laterwith bandwidth atthedesiredrate,firstwith products easilyallowtheseoperatorstoincrease capacity intheexistingcoppernetwork.Ericsson interest amongoperatorsforinvestingingreater The stronggrowthinInternettrafficincreased services thatareanexcellentsourceofadd-onsales. copper networksofferingconventionalnarrowband Ericsson’s customershavealarge installedbaseof the yearwith number ofimportantcontractsweresignedduring services attwicethespeedofexistingnetworks.A switched technologyfor Spain andU.S.-based rity level.ContractsweresignedwithTelefónica in works whilemaintainingahightransmissionsecu- increases capacityinwirelinetransportationnet- lmds During During Ericsson alsooffers Ericsson’s persons atyear-end s, thenumberofemployeesin the compa- , Ericsson’s systemforwirelessbroadband , , . Ericssonismainlytargeting theenter- wdm at&t isdn the restructuringofWireline adsl technology substantially -percent marketshare. and others. mini-link aol cdpd made astrongcomeback. tdma . percent andtotaledsome during theyear. . , afirstpacket- BUSINESS SEGMENTNETWORKOPERATORS ANDSERVICEPROVIDERS that providesfor ip system, which lmds traffic, has isdn can enjoy . and ewr,wsdvlpdb uhagop • network, wasdevelopedbysuchagroup. controlling householdequipmentviathetelephone instance, E-box,Ericsson’s product forremotely that areconsideredtobeworthdeveloping.For vation cells,whicharegroupsformedaroundideas entrepreneurial character, often organized asinno- U.S. company, Com-NetCriticalCommunications. which wassoldinthebeginningof in finishedcommercialproducts. that arecompletelynewandhavenotyetresulted to phaseoutofitsproductportfolioandoperations unit includesoperationsthatEricssonispreparing The NewandSpecialBusinessOperationsbusiness similar components. MacroDens, powermoduleforsupplying current toPCcircuit cards and business segmentduring contributed positivelytoEricsson’s profitability. earnings thatexceededexpectationsand with satisfactorysalesandnewsolutions,generated adapted toordervolumesandnewtechnology. Systems willcontinue,andtheworkforcebe and Madridweretransferredtoexternalpartners. in Visby, Katrineholm,Östersund,Longuenesse working fornewemployerswhenproductionunits outsourcing. Forexample, staffing company. be offeredemploymentwithManpower, another Those whohavenotsucceededwithinoneyearwill the businesssegmenttofindnewcareerpaths. rum, whichishelpingabout arranged throughtheestablishmentofFramtidsfo- for affectedpersonnelintheStockholmareawas to thestaffingcompanyProffice.Asimilarsolution The businessunitalsoincludesunitsofapurely One exampleisthePrivateRadioSystemsUnit, The dominantshareofreductionswithinthe The implementedstructuralmeasures,together In Norrköping, employees weretransferred , , took placethrough employees began employees in to the 31
OTHER OPERATIONS Components Microwave Systems
(now Ericsson can look Microelectronics) reported net sales of back on a period of rapid growth, which is sek , m. (,) in . Operations expected to continue with the new business consist of the Energy Systems, Microelec- opportunities provided by the company’s EEEtronics and Electronic Distribution business units. Etwo main product areas: defense systems and Energy Systems had an extremely good year. One microwave communications. The company’s sales of the high points was a contract with Telefónica del amounted to sek , m. Peru that gave Energy Systems total responsibility for Continued rapid growth of traffic in fixed and supplying power to their some , customer instal- wireless networks serves to promote the company’s lations. Through a general agreement with Siemens, primary civil product, which is the mini-link Energy Systems became a strategic supplier to the microwave link. During , more than , German manufacturer of telecom systems. Ericsson such units were produced. Over the past several strengthened its position as a world leader in power years, Ericsson’s mini-link has dominated the modules, delivering its millionth module from the world market for microwave links. pkf family, a unique record in the industry. - A new application area was added with the intro- Microelectronics showed very strong growth dur- duction of mini-link bas ing the year. Thanks to an increased focus on appli- in the beginning of . cations for broadband and mobile telephony, large This is a system for broad- volumes of components could be delivered, particu- band access via a micro- larly in mobile telephony. wave link. The market Significant investments were made during the potential is expected to be year to increase manufacturing capacity for integrat- substantial. ed circuits in Kista. An important partnership Another important part agreement was signed with Chartered Semiconduc- of civil operations at Erics- Erieye, system for airborne tor for joint development and production of inte- son Microwave Systems is the development of base surveillance. Shown mounted on grated circuits for next-generation radio technology. stations for wcdma. Ericsson received its first the Brazilian Embraer EMB145. Demand for power transistors for radio base wcdma contract from ntt DoCoMo in Japan at stations continued to show strong growth, both the beginning of the year. from internal and external customers. Continued upgrading to digital lines, a trend that is driven by increasing Internet use, resulted in a Ericsson’s focus in defense systems is on sensors and doubling of deliveries of line circuits for network information technology. This is a direction that is terminals installed as customer premises equipment. favored by trends in a market that is generally Volume production of radio modules for the characterized by increasing demands for advanced Bluetooth standard was started during the year. technology systems. Sensors, such as control and Demand for these chips is strong among various communications systems, are an area of top priority application developers both within Ericsson and for many countries’ military forces. externally. Microelectronics is currently the leader During , Ericsson Microwave Systems in developing and supplying Bluetooth modules. received an additional foreign contract for the air- The Electronic Distribution business unit contin- borne surveillance radar, Erieye, from the Greek Air ued to grow geographically and in terms of sales. Force, which ordered four such systems. The Swedish New offices were opened in Germany and the U.K. Armed Forces, in which Erieye is already operational, In addition to successful projects for customers, such commissioned Ericsson to continue developing the as Electrolux and Lego, a new generation of Erics- next generation of airborne radar. The so-called aesa son’s Internet catalogue was developed, enabling technology, on which this radar is based, represents a customers to pay for purchases with a credit card. major advance in radar technology. The Arthur artillery localization radar system was delivered to the Swedish and Norwegian Effective February , , Microelectronics’ activi- defense forces during . Additional contracts for ties will be carried out at Ericsson Microelectronics these systems were signed with two other countries ab and its foreign operations. An agreement was during the year. The South African order of the jas reached in January covering the sale of the energy Gripen aircraft was another important event for system operations to Emerson Electric Co. in the U.S. Ericsson Microwave Systems and the associated Microelectronics now also includes power modules. • company, Ericsson saab Avionics. • hope toimprove margins. market positionandcan we willrecapture our our newproduct portfolio in thefourthquarter. With wasnoted but anupturn disappointment in1999, Middle EastandAfrica. Market Area Europe, previously headof 2000, isJanWäreby, ucts asofFebruary15, Segment ConsumerProd- NEW HEAD CONSUMER PRODUCTS BUSINESS SEGMENT VICE PRESIDENT, JOHAN SIBERG,EXECUTIVE PROFITS WERE ii · in focus 32 HPR-08, asmallFMradio that canbeconnected of Business to amobilephone a N A yearofinnovativeconcepts thus accountedfor compared withtheprecedingyear. Thesegment cation viathecable- and Ericsson’s PipeRider, amodemfor ly willofferconsumerscordlessphonesforthehome Home Communicationswasestablishedthatinitial- During is stillmainlyfocusedonthesalesofmobilephones. ment. sharply reducingprofitabilityforthebusinessseg- ments todominatesalesduringtheyear, thus phones, causedproductsinthelowerpriceseg- process ofincreasingvolumeproductionthenew ation oftechnicalplatforms.However, delayinthe which severalwerebasedonanentirelynewgener- sek sales. tively toprofitability. of the was notedinthefourthquarter, duringwhichsales business segmentofonly the year, resultedinanoperatingmargin for the renewal oftheproductportfolioincurredduring not asstrong.This,plusthehighcostsfortechnical larger shareofsales,thesalesincreasein . percent in million phonessoldcomparedwith Ericsson’s businesssegment ConsumerProducts Net salesforthebusinesssegmentamountedto In termsofvolume, The consumermarketisdifferent inmany Because thelow-pricesegmentaccountedfora , t , and othernewmodelscontributed posi- market asitdidduring so manynewproductsfortheconsumer new mobilephoneswereintroduced,of . m. in however, aspecialbusiness unitfor However, acleartrendreversal , tv percent ofEricsson’s totalnet network. an increaseof percent comparedwith was arecordyear, with Ericsson launched . ip percent sek Some communi- million in was large proportion ofEricsson’s salesduringtheyear. true volumeproduct,whichaccounted foravery phones werelaunchedduring with prepaidcallingtime,the users andwhooftenpurchase amobilephone that Ericssonhaschosentotarget. Foryounger lio isnowbeingadaptedtothecustomersegments that therearedifferenttypesofusers. in detail.Thesemarketstudiesandanalysesshow phone users’behaviorandpreferencesareanalyzed pany’s ConsumerLabinLund,Sweden,mobile studies ofthemarketandconsumers.AtCom- ment, Ericssonisconstantlyconductingcareful To provideafoundationforfutureproductdevelop- sorship eventsandintensive activities tostrengthentheCompany’s brand. Ericsson continuedtoinvestheavilyinvarious lar, thebrandplays anessentialrole.During respects fromEricsson’s othermarkets.In particu- Ericsson ranked by thedistinguishedresearchfirmInterbrand, brand awareness,conductedoverthepasttenyears results. Intheprominentinternationalstudyof costly, thesemeasuresarenowbeginningtoproduce leaders inmobilephones. Ericsson, MotorolaandNokia,thecurrentmarket China andSoutheastAsiatobegincompetingwith are makingitincreasinglyeasyformanufacurersin son atthispointintime.Advancestechnology systematic worktobuildtheEricssonbrand. ranking providedastrongincentiveforcontinuing For moreprofessionalusersin job categoriesin Based ontheseobservations,theproductportfo- Although globaladvertisingcampaigns,spon- A strongbrandisextremelyimportantforErics- th intheworld tv . a advertising are The formerisa . and t This , 33
BUSINESS SEGMENT CONSUMER PRODUCTS
BUSINESS SEGMENT CONSUMER PRODUCTS 1999 pany was started for telephone production. Expansion Change of production in Brazil continued. 1999 1998 (percent) In addition to expanding its own production capacity, the business segment continued to out- Orders booked, SEK b. 47.6 44.9 6 source production to external partners. Together Net sales, SEK b. 46.4 45.2 3 with Ericsson’s own production increases, this means Operating margin, SEK b. 0.3 3.2 that the Company is well prepared to meet the Operating margin, percent 1 7 increase in volume expected in . Number of employees 16,446 14,193 16 Several new accessories for Ericsson mobile phones which the phone is subjected to rough treatment, were launched during the year. The accessories the r pro was launched as the world’s first market is increasingly important, since it often water-, dust- and shockproof mobile phone. This offers greater margins than volume phone sales. phone is designed for gsm pro, which means that Several of the new accessories were entirely new it can also be used as a private radio terminal. innovations – and the result of creative thinking on The t and t world models are phones that the part of the Company’s product developers. target consumers who want high quality and are Chatboard is a small keyboard which is connect- prepared to pay for intelligent functions. Ericsson’s ed to the mobile phone to facilitate entry of sms mc was the first wap product on the market. It messages and which can even be used to send is a handheld computer, which via a built-in e-mail. An fm radio that also functions as a hands- infrared port for communication with a mobile free headset was another popular new product, as phone, allows wireless access to the Internet and was the mp player shown at Telecom in Geneva. e-mail. It also includes software for word process- During the autumn, the first Blue- ing, image transmission and other functions. tooth product, a cordless handsfree For the demanding Japanese market, Ericsson headset, was also shown. Bluetooth is produced a variation on the t for ntt DoCoMo. a technology for wireless transmission This phone, which was sold in limited test quanti- over short distances that was devel- ties, was very well received in the market. oped by Ericsson but released to the public domain. Development is being continued by Ericsson, Com, ibm, The telephone that was most in the spotlight dur- Intel, Lucent, Motorola, Nokia, and ing was the t. When it was first shown in Toshiba. Close to , companies January, it generated considerable attention due to have adopted the technology and are its extremely light weight, modern design and developing Bluetooth products. advanced functions. The market’s reception was Ericsson Components is one of the manufacturers HS210, cordless display phone for home communications. very positive, and expectations were high that the that is already producing Bluetooth chips for inte- Provides direct access to the t would sell extremely well. gration into these future products. Internet and e-mail using It was not until the autumn, however, that the Bluetooth technology and a small base station. tremendous demand for the t could be satisfied by greater volumes. This was due to component The partnership between Ericsson and Microsoft shortages that affected the entire industry, as well that was announced in December will have a as delays in trimming in production. The t is significant impact on the business segment’s con- based on a completely new technical platform, tinued product development. With this partner- which includes a new processor, a new radio sub- ship, that relates to the mobile Internet, Ericsson system and an innovative new battery technology gains access to Microsoft’s Mobile Explorer for its that Ericsson was first to bring to market. more advanced telephones. During the latter part of the year, the situation The agreement with Microsoft does not affect improved, and production of the t is gradually collaboration through the Symbian consortium, in being stepped up. The technical difficulties in the which Ericsson is working with Matsushita, transition to the new technical platform have been Motorola, Nokia and Psion to further refine the overcome, suggesting that forthcoming models epoc operating system for wireless terminals. based on the same platform will be significantly During , Ericsson introduced the epoc-based easier to industrialize. mc, as well as the r, which will begin to be sold in full scale during . The partnership for the networked home of the To meet sharply increasing volumes, Ericsson signifi- future, which was announced by Ericsson and Elec- cantly increased its production capacity during . trolux during the autumn, is based in large part on T10, dual-band phone with A new production plant in Malaysia was taken into forthcoming products from the business segment vibrating alert. Available in five operation, and in China a second joint-venture com- Consumer Products. • different colors. and theInternet. characterized bymobility in aworldthatwillbe communications solutions operations andtheir and developingtheir assistance withoperating companies whowant strategic partnerfor Ericsson isalong-term Police showsthat with theMetropolitan ENTERPRISE SOLUTIONS BUSINESS SEGMENT EXECUTIVE VICEPRESIDENT, HAIJO PIETERSMA, A MULTI-YEAR ii · in focus 34 contract B units increased trends. of greatstrategicimportanceinrespondingtothese Ericsson’s businesssegmentEnterprise Solutionsis Focus on which correspondedto and contentinnext-generationmobilenetworks. new applicationsthatwillgeneratemostofthetraffic and information,evenwhenoutoftheoffice. ees arealsobeinggivenaccesstonetworkservices offering personalizedservices.Increasingly, employ- channels forcommunicatingwithcustomersand Internet willallowthemtocreatecompletelynew customers areincreasinglymobile.Themobile such ase-commerceande-mail. behind newInternetandintranetapplications, business segmenthad tional operations,primarilybusinessswitches.The force wasreducedbymorethan areas suchasbusinessconsulting,whilethework- of companyacquisitionsandorganic growthinnew areas. Thenumberofemployeesincreasedasaresult to continuedheavyinvestmentinfuturegrowth ings, whichnonethelessremainatalowlevel,due ing theyearcontributedactivelytoimprovingearn- sales. Severaldifferentimprovementprogramsdur- ated in segment’s profitability, operationswereconsolid- tomorrow’s businesssystems,whileimprovingthe and mobileenterprisesolutions The businesssegment’s salesforcomparable These trendsaretheprimarydriversindeveloping Companies arebecomingmoreawarethattheir To strengthenEricsson’s positionasasupplier of broadband trafficandarethedrivingforce Business usersalreadyaccountformost tomorrow’s multimediacommunications. . percent in , percent ofEricsson’s total employees atyear-end. ip the developmentof to percent intradi- -telephony services sek , m., actions overtheInternet, combined withnewsystemssolutions.Banktrans- as apartnerindevelopingnewbusinessconcepts have strengthenedcustomerconfidenceinEricsson ments. Theseefforts,plusEricsson’s transport, travel,mediaandentertainmentseg- Ericsson isfocusingonthebankingandfinance, tions fortheInternet. consulting operationsthatprovidesbusinesssolu- switches andonincreasedgrowthforthebusiness development ofsaleschannels,thelaunching son’s work withtheoperationsandmaintenanceofErics- markets. Otheremployeesofthebusinesssegment and telecomconsultants , were alsorecruited. recently dissolved.Severalnewbusinessconsultants operations frompartsofEricssonData,whichwas through amerger ofinternalconsultingandservice Business Consultingbusinessunitwasformed the mobileInternet.During companies withbusinesssolutionsandservicesfor that Ericssonshouldbetheleaderinproviding expand businessconsultingactivities.Thegoalis focus onthefutureareeffortstoestablishand Another importantcomponentinthesegment’s on theHiperLANstandard. high-capacity networksfordatatransmissionbased business networks,anareawhereEricssonwilloffer were increasedindevelopingtomorrow’s wireless tions andmobileInternetsolutions.Investments In businesssolutionsforthemobileInternet, Development workwasrefocusedon In Approximately it , employees workasbusinessconsultants, activities. continued emphasiswillbeputonthe , of thebusinessunit’s formerly TouchWave Inc. EricssonWebCom Inc., companies. Developedby business switchforsmall WebSwitch 2000,IP-based wap wap solutions forwireless , theEricsson consultants in wap ip expertise, applica- it ip 35
BUSINESS SEGMENT ENTERPRISE SOLUTIONS
BUSINESS SEGMENT ENTERPRISE SOLUTIONS 1999
Change 1999 1998 (percent) Orders booked, SEK b. 18.0 14.6 23 Net sales, SEK b. 17.3 14.6 19 Operating margin, SEK b. 0.1 0.1 Operating margin, percent 0 0 Number of employees 9,615 9,966 –4
banking services and wireless e-commerce are examples of concepts developed during the year. As companies focus more on core operations, they are outsourcing operation, maintenance and development of their communication networks to external partners. Ericsson Business Consulting can offer customers an opportunity to migrate existing systems to new mobile solutions. A five-year contract, signed in , to maintain and supply Britain’s Metropolitan Police network marked a breakthrough in this area. The acquisition in May of the U.S. company, TouchWave Inc., gave Enterprise Solutions access to WebSwitch, which is an ip-based switch that can handle conventional analog and ip-based telephony for smaller companies. Products from this company, which was renamed Ericsson WebCom, will play an important role in the ip product portfolio, as well as for Erics- son’s continued expansion in the U.S. WebSwitch received several prestigious awards during the year at telecom shows in the U.S. WebCom has already sold more than , switches to customers in the U.S. An important aspect of Ericsson’s U.S. product strategy is expan- sion of indirect sales channels for the Company’s R320, WAP telephone with built-in IR modem and new ip-based products. calendar that can be synchronized with PC or PDA. Weighs less than 100 grams. The business segment is not only developing in new areas of operations. Sales of Ericsson’s business switches also increased in , with more lines Meanwhile, rationalization continues in tradi- sold than ever of md (for large) and Business- tional operations involving business switches. Two Phone (for small and mid-size companies). Growth of the segment’s research and development centers in Europe, especially in the U.K. and Italy, was were discontinued during the year, as were two particularly strong. product areas peripheral to core operations. Plants Ericsson sells call-center solutions that support in Austria and China were transferred to external customer service functions. Ericsson is the leader in partners through outsourcing. this segment, particularly in Europe. During , Restructuring will continue in with strong Ericsson launched a new generation of server-based focus on continued expansion of the distributor call centers. network and on reducing costs for direct sales. With its large installed base in business commu- Central to these efforts is an emphasis on profitabil- nications – , large companies have purchased ity and cost reductions and the need to increase md – Ericsson’s business potential for tomor- Ericsson’s presence in the market segment for small row’s ip-based solutions is substantial. and mid-size companies. • time ofprinting. been appointedatthe market area hadnot Middle EastandAfrica Europe,new Eastern The managerofthe pe marketarea. of thenewWestern Euro- Jan Wäreby asmanager Ragnar Bäcksucceeded EFFECTIVE AND AFRICA EUROPE, MIDDLEEAST EXECUTIVE VICEPRESIDENT, JAN WÄREBY, in theregion. trend formobiletelephony exceptionally strong by thecontinuing bolstered significantly average andwas exceeded themarket where growth Europe during1999, its overallpositionin ERICSSON ii · in focus 36 strengthened February 15, E faster thanthemarket. overall positioninthearea andgrew the year, Ericssonstrengthened its in increased capacity. networks, whichforced investment of subscriberswashighinexisting same timethegrowth inthenumber added duringtheyear, whileatthe area. Severallarge networkswere Ericsson’s businessinthemarket driving thepositivedevelopmentof (–12 percent). Finland (–16percent) andNorway declined inDenmark(–40percent), in Russia(–55percent). Salesalso wasnoted in 1999,whileadownturn Europe, thetrend wasalsopositive markets. Incentralandeastern became oneofEricsson’s tenlargest growth. Forthefirsttime,Turkey markets showingstrong sales U.K. (+15percent) were twoother 13.0 b. most inreal terms,from SEK7.0to Spain wasthemarketthatincreased was inBelgium(+147percent), but most rapidgrowth inrelative terms between individualmarkets.The year, butthere were large variations increased 18percent duringthe Ericsson’s salesinthismarketarea , mobile systemsandfixednetworks Strong yearthankstogrowthin below. sent ongoingsalestoexistingcustomersthatarenotregisteredasnewinthelist with Ericsson,itmustbeemphasizedthat important contractsannouncedduringtheyearconfirmsthesetrends.Asalways exceptionally stronggrowthinthenumberofInternetsubscribers.Areview As aresult ofdevelopmentduring The trend formobiletelephonyis Turkey (+117percent) andthe cation networkstosatisfyrequirementsforincreasedcapacityduesimilarly the world’s mobilephonesystemsandincreasedinvestmentsinfixedcommuni- terized bytwostrongmarkettrends:continuedexceptionallygrowthin ’ 1999: Important contractsannouncedin and datanetworkwithIPoverATM Islandssimi hf ICELAND valued atSEK4,900m. surveillance radar, foursystems, Greek AirForce GREECE systems, SEK1,650m. Siemens (owned sinceAprilbyMannesmann) o.tel.o GERMANY Province Telephone Companyof Vaasa FINLAND system forGSM Eesti MobiltelefonAS ESTONIA trex, newmobilesolutionforbusiness Telia Danmark work forvoiceanddata Telia Danmark DENMARK system valuedatSEK1,630m. Cesky Mobil CZECH REPUBLIC – Turnkey WDMsystem percent oftheCompany’s salesrepre- – OEMsupplierofpower – GSM1800system – Turnkey GSM/GPRS – Multiservicevoice – GSMMobileCen- – Multiservicenet- – Erieyeairborne – Positioning during was charac- the Astrolink system. broadband accessviasatellitefor Telespazio SpA ITALY than SEK660m. network expansionvaluedatmore Polska Telefonia Cyfrowa POLAND WAP services Telenor Mobil tickets viamobilephones loped togetherwithEricsson,movie wireless e-commerce solution deve- Telenor Mobil NORWAY switches KPN Telecom Jalda technology nic commerce basedonEricsson’s WISH ted dataandtelecom vices Network Ser- KPN International access valuedatSEK100m. WISH 1,000m. SEK expansion valuedatmore than Telfort NETHERLANDS network valuedatSEK1,150m. Medi Telecom MOROCCO – ENGINEsolutionforintegra- – Paymentsystemforelectro- – Infrastructure forInternet – GPRSsystemandGSM – AXETransgate – Developmentof – Introduction of – Turnkey GSM – Infrastructure for – GSM 37
ERICSSON AROUND THE WORLD
Countries inLänder which därEricsson Ericsson has harcompanies bolag eller or offices kontor CountriesLänder in which utan EricssonEricssonbolag is not ellerrepresented -kontor
Ericsson has had an international focus since the earliest days of its history. Today, the company is one of the most geographically diversified enterprises in the world. With operations in more than 140 countries, Ericsson is unique in its industry and is one of the companies that is best equipped to assist increasingly more global companies.
Ericsson has companies or offices in the following countries Europe, Middle Georgia Netherlands Ukraine Pakistan Latin America East and Africa Germany Nigeria United Arab Philippines Argentina Austria Ghana Norway Emirates Singapore Bolivia Albania Greece Oman United Kingdom Republic of Brazil Algeria Hungary Poland Uzbekistan Korea Chile Bahrain Iran Portugal Yemen Sri Lanka Colombia Belarus Ireland Romania Yugoslavia Taiwan Costa Rica Belgium Iceland Russian Zimbabwe Thailand Ecuador Bosnia- Israel Federation Vietnam El Salvador Herzogovina Italy Saudi Arabia Asia and Guatemala Botswana Jordan Serbia Oceania North America Honduras Bulgaria Kazakhstan Slovakia Australia Canada Jamaica Croatia Kyrgyzstan Slovenia Bangladesh United States Mexico Cyprus Latvia South Africa China Netherlands Czech Republic Lebanon Spain Hong Kong Antilles Denmark Libya Switzerland & Macao Nicaragua Egypt Lithuania Sweden India Panama Estonia Luxembourg Syria Indonesia Paraguay Ethiopia Macedonia Tajikistan Japan Peru Finland Malta Tanzania Malaysia Puerto Rico France Moldavia Tunisia New Guinea Uruguay Gabon Morocco Turkey New Zealand Venezuela NORTH AMERICA EXECUTIVE VICEPRESIDENT, BO DIMERT, wireless access. Internet ving themarkettowards these twotrends are dri- ped dramatically. Together, connectionsdrop- Internet same time,thepriceof of nearly50percent. Atthe rocketed, withanincrease phone subscriberssky- number ofmobiletele- cations. During1999,the mobile datacommuni- expected developmentfor Millennium inviewofthe talking abouttheMobile IN THEU.S., ii · iin fokus focus 38 people are to afull36percent in1999.Another whole, thesalesincrease amounted percent. Forthemarketarea asa Sales inCanadaincreased by2 Ericsson’s largest singlemarket. thereby re-establishing theU.S.as sed 39percent tonearlySEK24b., son’s totalsalesintheU.S.increa- tems were extremely strong. Erics- and order bookingformobilesys- during theyear. Asaresult, sales increased bynearly50percent number ofmobilephonesubscribers mobile telephonyintheU.S.The charges resulted instrong growth for duction ofnewandsimplercalling was verypositivein1999.Theintro- des CanadaandtheUnitedStates, American marketarea, whichinclu- The trend forEricssonintheNorth cation viaGSM platform forreal-time datacommuni- Telia Mobile SWEDEN cations integrated dataandvoicecommuni- Telefónica solution, valuedatSEK83m. new network-basedcall-center Telefónica phony valuedatSEK90m. SA Interoute Telecommunicaciones SPAIN SEK 210m. work, includingterminals,valuedat MTN SOUTH AFRICA valued atSEK1,200m. Mobitel SLOVENIA SEK 830m. order forfixednetworksvaluedat Rom Telecom ROMANIA Interoute PORTUGAL network forIPservices Netia HoldingsSA – NationwidesystemforIPtele- – World’s firstGSMPro net- – GSMnetworkexpansions – NetworkforIPtelephony – ENGINEsolutionfor – Cenaxis,Ericsson’s – Introduction ofanew – Breakthrough AXE – Nationwide 1999: Important contractsannouncedin in themediaindustry. companiesand Internet dation amongnetworkoperators, the yearwascontinuedconsoli- notable trend inthismarketduring networks valuedatSEK530m. tions forIPtelephonyanddata BridgePoint Enterprises valued atSEK2,800m. third-generation mobilenetwork Rogers Cantel Voice overIPvaluedatSEK118M Cescom CANADA ture forGPRS Vodafone AirtouchPlc 3G mobilenetworks and testingofradiobroadcasting via Virgin Radio media services the NetwithIP-basedwireless multi- One2One valued atSEK990m. contract foralltelecomservices year managementanddevelopment Metropolitan PoliceService 3G andWCDMA Vodafone valued atSEK2,560m. of majorinfrastructure expansion One2One rators WCDMA systemfortestingbyope- UNITED KINGDOM Access networkbasedonADSL Etisalet Telecommunications UNITED ARABEMIRATES at SEK255m. Ukrtelecom m. 250 SEK TDMA expansionvaluedat Digital CellularCommunications UKRAINE work valuedatSEK8,510m. Turkcell TURKEY – ExpansionofGSMnet- – Five-yearcontractfor – Test systemforGSMon – GPRScontractaspart – Jointdevelopmentof – SDHnetworkvalued – Jointdevelopment – Developmentof – Infrastruc- – Solu- – Five- – – E 1,500m. SEK multiservice networkvaluedat AXE/AXD301 hybridswitchesfor BT valued atSEK2,310m. for TDMA(IS-136)infrastructure Tritel Communications of GPRS InstallationandfirstU.S.fieldtrials – Omnipoint Communications for expansionofcdmaOnenetwork Sprint PCS LINK BAS) point microwave systems(MINI- NEXTLINK in ChicagoandSpringfield,Illinois service platformforTDMAnetworks SBC Wireless Networker andWDMinfrastructure America Online(AOL) valued atSEK6,300m. Infrastructure for14U.S.markets – BellSouth CellularCorporation UNITED STATES – ENGINEsolutionfeaturing – Fieldtrialsofpoint-to- – Seven-yearcontract – Jambalaopen – ERION – Contract 39
ERICSSON AROUND THE WORLD
Market Area Western Europe Market Area North America Market Area Eastern Europe, Middle East and Africa Market Area Latin America Market Area Asia Pacific
In conjunction with the release of its year-end financial report on 1999 operations, Ericsson announced that it is reorganizing the Europe, Africa and Middle East market area, dividing it into two areas: Western Europe market area, which comprises the EU countries plus Norway and Switzerland, and the Eastern Europe, Middle East and Africa market area.
ERICSSON’S MARKET share for mobile tele- phony in Latin America CHILE Thanks to very strong growth of sales Important contracts announced in exceeds 40 percent, but in Mexico (+74 percent) and continu- 1999: CTC Startel (Telefónica) – TDMA the Company also has a ed solid development in Brazil – network expansion. leading position in fixed despite the strong devaluation at the ARGENTINA Entel PCS – GSM expansion telecommunications. beginning of the year – the market Telecom and Telefónica – TDMA During the more than 100 area as a whole showed favorable networks valued at SEK 3,300 m. MEXICO years that Ericsson has growth during 1999 (+19 percent). Telcel – Prepaid services for Telcel’s been active in this market, The development in Central America BRAZIL entire TDMA network a strong customer base was also positive during the year. TIM (Telecom Italia Mobile) – has been established in Brazil is Ericsson’s single largest Expansion of TDMA networks. VENEZUELA virtually every country. market in the area and Ericsson’s TESS (Telia) – Expansion of TDMA Movinet – Expansion of TDMA fourth largest market globally, with networks. network for 3G valued at BENGT FORSSBERG, sales in 1999 of slightly more than Vesper S.A. (previously Mirror SEK 1,700 m. EXECUTIVE VICE PRESIDENT, SEK 14 b. (+20 percent). S.A.) – cdmaOne network for wire- LATIN AMERICA Mobile systems and phones less access to the fixed network. SEVERAL COUNTRIES account for the majority of growth in Diginet Americas – Broadband the area. Nonetheless, investments network for wireless access covering continue to be made in expansions several Latin American countries of the fixed telephone network, valued at SEK 2,500 m. particularly in Brazil and Mexico. 40
ERICSSON AROUND THE WORLD
After the deep economic crisis in Important contracts announced in SmarTone Mobile Communica- 1998, conditions stabilized in several 1999: tions Ltd, Hong Kong – WCDMA countries during 1999. This resulted test system and GPRS infrastructure in modest, but nonetheless positive AUSTRALIA Guandong Mobile Communica- ii · in focus growth (+5 percent) of Ericsson’s Enermet – GSM modules for rea- tions Co. Ltd. – GSM expansion sales in the market area as a whole. ding energy consumption at consu- valued at SEK 650 m. There were significant differences mer sites, SEK 160 m. China Unicom – GSM expansion in between countries, however. Queensland Ambulance – Mobitex six provinces valued at more than China, which was Ericsson’s system, SEK 45 m. SEK 1,000 m. largest market in 1998, declined Shandong MCC – Expansion of sharply. As a result of the restructu- PHILIPPINES GSM network valued at SEK 840 m. ring currently in progress among Globe Telecom – GSM system Sichuan Mobile Communications Chinese operators and changes in valued at SEK 355 m. Co. – GSM expansion valued at THE YEAR was market regulation, market activity SEK 835 m. characterized by very tapered off significantly. For Erics- JAPAN SmarTone Mobile Communica- strong growth in Japan son, the result was a 16-percent Japanese Digital Phone Corp. – tions Ltd., Hong Kong – WAP sys- and India, while sales in decline in sales in both infrastructure Expansion of PDC system valued at tem China declined. and mobile phones. SEK 1,470 m. The decline in China was In Japan, on the other hand, Erics- Japanese Digital TuKa Group – SRI LANKA due to a weakening of the son’s sales increased by 78 percent, Three-year general agreement for Mobitel – Digitization of AMPS market, which Ericsson while sales in India increased by 82 continued expansion and upgrading network valued at SEK 160 m. considers to be percent. Increases were also noted valued at SEK 1,700 m. temporary, and by in Australia (+24 percent) and New TAIWAN restructuring among Zealand (+22 percent), while sales CHINA Chungwa Telecom of Taiwan Chinese operators. An declines in Malaysia (–34 percent), Inner Mongolia Post and Telecom – Upgrading of AMPS network, upturn was noted during Singapore (–29 percent) and in the Administration – GSM system SEK 390 m. the fourth quarter. Philippines (–17 percent) reflect valued at SEK 345 m. Far EasTone Communications continuing economic uncertainty in Liaoning Post and Telecommuni- – GPRS system KJELL SÖRME, these countries. cations Administration – Expan- EXECUTIVE VICE PRESIDENT, sion of GSM network valued at SEK THAILAND ASIA PACIFIC 1,260 m. Advanced Info Service Public (TOOK OVER THE POSITION China Telecom (Hong Kong) Ltd. Company Ltd. – Expansion of GSM DURING THE YEAR) – GSM expansion in Guandong network valued at SEK 450 m. • valued at SEK 2,416 m.
NET SALES PER MARKET AREAS (SEK m.)
Percent 1999 1998 change Europe, Middle East and Africa *) 115,065 97,456 18.1 North America 25,175 18,560 35.6 Latin America 30,263 25,537 18.5 Asia Pacific 44,900 42,885 4.7
215,403 184,438 16.8
*) of which Sweden 7,551 8,509 –11.3 *) of which EU 80,345 71,094 13.0
1998 figures restated according to the Market Area organization that was introduced on January 1, 1999. 41
TREASURY MANAGEMENT AND FINANCIAL RISKS
characterized by continued success for the U.S. 1999 economy. During the year, FINANCIAL EXPOSURE Asia recovered strongly after the crisis – With exports from Sweden amounting to approxi- and Europe showed gradual signs of recovery. In mately sek b. (sek b. in ) and sales in Latin America the Brazilian economy strengthened Sweden of sek b. (sek b. in ), Ericsson is some after the substantial devaluation in the begin- relatively heavily dependent on the development of ning of the year. exchange rates between the Swedish currency and Ericsson’s liquidity increased during the year foreign currencies, as well as on economic condi- with sek . b. and net, after deduction of short- tions in Sweden. As opposed to the transaction term interest-bearing liabilities, with sek . b. exposure, and to some extent translation exposure, This in spite of a number of strategic investments, Ericsson does not have a policy to hedge the finan- including the acquisitions of Torrent Networking cial exposure. Technologies Inc. (U.S.), Qualcomm Infrastructure Division (U.S.), TouchWave Inc. (U.S.), Telebit a/s TRANSACTION EXPOSURE (Denmark) and minority shares in Juniper (U.S.), To limit currency risks as much as possible in con- Saraïde (U.S.) and oz.com (Iceland). These invest- junction with import and export activities, pur- ments of approximately sek . b. were financed chases and sales in foreign currencies are hedged by primarily through a number of bond issues currency forward contracts in cases that involve amounting to sek . b. The bond issues in May, firm commitments with customers and suppliers. of sek b., were the largest ever by a Nordic In addition, estimated purchases and sales are corporation. In addition, a number of liquidity hedged for periods of up to months, based on strengthening activities were implemented, such as assessments of stability in volumes, pricing and the establishment of a pan-European securitization other factors within Ericsson’s business segments. program, which was utilized to sek m., and Outstanding bids are also hedged, normally with factoring. During the year, all short- and long-term currency options. Hedge periods agree with the borrowing programs and long-term credit facilities timing of the anticipated future cash flows. The have been increased and updated. foreign exchange exposure is concentrated mainly in the large production companies, notably the Swedish units, since the foreign subsidiaries are invoiced in their local currencies. Table shows the Ericsson has a policy for managing financial risks distribution of commercial net cash flows of major established by the Board of Directors. Respons- currencies for Ericsson’s companies in Sweden. ibility for identifying and hedging financial risks arising in the Group’s operations rests with the TABLE 1 – NET CASH FLOWS OF CURRENCIES TO individual Ericsson companies. Risks are normally AND FROM SWEDEN (PERCENT)
hedged through Ericsson’s internal bank, Ericsson Specification of currencies with net flows Treasury Services, which in turn manages the Group exceeding SEK 0.5 billion exposure externally. The major part of the risks Currency 1999 1998 assumed by the internal bank in this way are hedged in the financial market, but the bank also has the AUD 6 4 right to take positions in the financial market with- CHF 4 3 EUR 42 35 in the framework of the policy established by the HKD 2 8 Board of Directors. The risk mandate which GBP 4 5 amounts to sek m., is based on a percent JPY 7 4 change in each open foreign exchange position and a USD 37 34 change of one percentage point in interest rates. Other –2 7 Ericsson Treasury Services operates via treasury 100 100 centers in Stockholm, Dublin, Singapore and Dal- The table is based on statistical data pertaining to flows to and las. from Ericsson’s companies in Sweden. Ericsson hedges financial risks by balancing assets and liabilities with respect to currencies and interest-rate periods and by using derivative instru- ments. ii · in focus 42 year’s rateswasapproximately foreign currencyexchangeratescomparedtolast ly. Thenetincomeeffectfor approximately have aneffectontheconsolidatednetincomeof Equityincompaniestranslatedaccording tothe • 34.2 Monetarynetincompaniestranslated according –0.2 • –0.6 0.7 a frameworkestablishedbyCompanymanagement: –0.2 1.2 Exposures inforeignsubsidiariesarehedgedwithin 6.6 TRANSLATION EXPOSURE 32.6 0.2 exposure inEricssoncompanies. 1.5 iaries aremonitoredtosecureminimumtransaction 0.2 in localcurrencies.Currencybalancessubsid- most loansbyforeignsubsidiariesaredenominated Exposure arisingfromborrowingislimited,since Buy(–) Other currencies USD NOK JPY HKD GRD GBP EUR DKK CHF AUD Currency AND FUTURECASHFLOWS,SEKBILLIONS TO ACCOUNTSRECEIVABLE, ACCOUNTSPAYABLE AS OFDECEMBER31,1999,PERTAINING TABLE 2–NETCURRENCYFORWARDS BALANCES krona against Swedish companies,alastingchangeofthe the developmentofSwedishkrona. important currencies,Ericssonismainlyexposedto eur/usd that Ericssonhaslimitedexposuretoanisolated between thetworespectivecurrencies.Thismeans nies ismainlyin The netcurrencyexposurefortheSwedishcompa- was hedgedatyear-end subsidiaries. Onepercentofsuchmonetarynet current methodarehedgedveryselectivelyupto cent. to thetemporalmethodarehedged Based onthenetcurrencyflowstoandfrom percent ofthetotalmonetarynetinsuch change. With theexceptionofafewless usd sek usd and Euroof . and Euro,withbalance b. and . sek sek of changesin percent would . . b. respective- b . per- Sell (+) 76.2 USD companies withfinancialoperations).SEKbillions. of December31,1999(includingassociatedcompaniesand Monetary netsinforeign companies,byfunctionalcurrency, as OF TOTAL FOREIGNMONETARY NET AS OFDECEMBER31,1999,INPERCENT CHART 1–MONETARY NETS Total interest-bearing liabilities Long-term financialliabilities,floatingrate Long-term financialliabilities,fixedrate Pension liabilities Short-term financialliabilities Interest-bearing liabilities Total interest-bearing assets Long-term financialassets,floatingrate Short-term financialassets Interest-bearing assets INTEREST RATES, SEKBILLIONS TABLE 3–DISTRIBUTIONOFFIXED ANDFLOATING assets andliabilities. anced interest-rateperiodsforinterest-bearing The focusduringtheyearwasshort-termandbal- Ericsson’s interest-raterisksare managedcentrally. - the devaluationinBrazil. ing theyearare The translationdifferencesreportedinequitydur- MYR JPY Other currencies GBP sek – . b., mainlyasaresultof HKD AUD 1999 44.8 23.7 12.0 42.3 10.8 31.5 0.7 8.4 BRL EUR 1998 27.5 10.5 29.6 11.4 18.2 6.6 2.3 8.1 CNY 43
TREASURY MANAGEMENT AND FINANCIAL RISKS
Ericsson’s policy is to invest excess liquidity mainly The ability and willingness among telecom vendors in government papers, as well as in commercial to offer financing support has become an increas- paper and corporate bonds with ratings of a/p or ingly important factor for customers’ when select- higher. Ericsson Treasury Services has credit limits ing a supplier. Customer finance is a very powerful for each issuer and counterparty. The exposure in means of competing. The granting of credits and derivative instruments is valued at market daily the implied credit risk has continued to increase, and is expressed as a liability to, or receivable from, but without major losses during the year. each counterparty. Netting contracts – so-called In total, the credit risk exposure amounts to isda agreements – are in force for most of the sek . b., of which sek . b. is on the balance counterparties, which substantially reduces coun- sheet while the remaining part relates to contin- terparty risk. Counterpatry limits are reviewed gent liabilities. continuously. No credit losses were incurred during Credit risks are continuously sold to financial the year. institutions, when market conditions are appropri- ate. TABLE 4 – ERICSSON TREASURY SERVICE’S INVESTMENTS, DECEMBER 31, 1999, SEK BILLIONS Treasury bills 7.0 Treasury bonds 2.1 Ericsson’s long-term objective is to have a payment Mortage bonds 0.1 readiness amounting to between and percent of Commercial papers 2.1 sales in order to cope with rapid changes in liquidi- Corporate bonds 0.8 ty requirements. Payment readiness is defined as Cash, bank deposits 5.7 net liquidity – liquid funds less short-term borrow- Total 17.8 ing, plus long-term unutilized credit commitments.
TABLE 5 – NET RISK IN INTEREST-RATE TABLE 6 – PAYMENT READINESS, SEK BILLIONS DERIVATIVES, SEK MILLIONS 1999 1998 Type of instrument Cash, bank deposits and Forward-rate agreements (FRA) 83.1 short-term investments 29.0 18.2 Interest-rate swap contracts 212.8 Confirmed long-term credit lines 8.5 1.6 Interest-rate futures 3.3 Short-term borrowing –10.5 –5.4 Total net risk in interest-rate derivatives 152.3 Short-term portion of long-term debt –1.5 –1.1 Net risk in interest-rate derivatives expressed as the effect of a Payment readiness 25.5 13.3 change of one percentage point in interest rates as of December 31, 1999, SEK millions. Percent of sales 11.8 7.2
To ensure long-term payment readiness, Ericsson’s policy is that the greater part of its borrowing should be long-term or its needs should be covered through long-term credit commitments. Long- term borrowing should have an evenly distributed maturity structure, and very long maturities should be avoided in order to obtain flexibility.
TABLE 7 – RATING
Rating agency Long-term Short-term
Moody’s A1 P-1 Standard & Poor’s A+ A-1
Ericsson’s current rating a/a+ is well in line with its peer group. iii · financial information 44 TAXES (SEKm.) INCOME BEFORE BOOKED (SEKm.) SALES ANDORDERS COSTS (SEKm.) TOTAL TECHNICAL 100,000 140,000 180,000 220,000 10,000 14,000 18,000 10,000 15,000 20,000 25,000 30,000 35,000 20,000 60,000 2,000 6,000 5,000 0 0 0
9519 971998 1997 1996 1995 951996 1995 951996 1995 Research anddevelopment Other technicalcosts 971998 1997 971998 1997 Orders booked Net Sales 1999 1999 1999 stock pricesof the stockmarket,andreflectedinsharplyrising coming years.Thiswascertainlyrecognizedby which willgeneratevastamountsoftrafficin Web, butalsoforalotofbusinessapplications, tion, notonlyforchattingandsurfingonthe aware ofthepotentialInternetcommunica- bered astheyearwhenourindustrybecamefully increased talk-time.Theyearwillalsoberemem- by bothincreasednumberofsubscribersand demand intheareaofmobiletelephony, driven The year InDecember, ajoint-venturecompany, tobe • Inthesecondquarter, Ericssonacquiredtwo • InMarch,EricssonandQualcommstrucka • Among themostimportantwere: venture agreementswereconcludedin Financial Officer. appointed ExecutiveVice Presidentand Chief Network OperatorsandServiceProviders,was previously Controllerforthebusinesssegment product launches.InDecember, StenFornell, operating expenses,cashflowandmobilephone and tofocusonnear-term issuesregarding mance, tomaintainthespeedinrestructuring, taken bytheBoardtosafeguardcompanyperfor- tion asChiefExecutiveOfficer. Thisactionwas Lars Ramqvist,alsotemporarilyassumedaposi- as President.TheChairmanoftheBoard,Dr. Kurt HellströmreplacedSven-ChristerNilsson solutions andmarketareasforsales.Mid-year, segments fortheprovisioningofproductsand tion, withamatrixofcustomer-oriented business related companiesinparticular. Explorer inmoresophisticated mobilephones. and enablesEricssontouseMicrosoft Mobile Microsoft accesstoEricsson’s mobile Internet.Theagreementgives Microsoft todevelopandmarketsolutionsfor managed byEricsson,wasestablishedwith net access. complement Ericsson’s offeringregardingInter- Inc. andTouchWave Inc.Theirproductswill access routers,Torrent NetworkTechnologies U.S.-based companiesspecializedinInternet systems ofallstandards. sole supplier, abletodelivermobile phone comm’s infrastructure divisionandisnow, as litigation issues.EricssonalsoacquiredQual- property rightsandtherebyeliminatedpatent Ericsson andQualcommagreedonintellectual generation ( tions regarding deal thatleadtotheunlockingofclosedposi- A numberofsignificantacquisitionsandjoint Ericsson startedtheyearwithaneworganiza- was characterizedbyfastgrowthin it g -companies, andInternet- ) cdma wcdma patents forthethird- standardization. wap technology, . sek for Ericssonincreasedfrom quarter inapromisingway. Total orderbacklog Orders inChinahavepickedupthefourth This positionsEricssonverywellforthefuture. for anairbornesurveillancesystemtoGreece. works tomultiservicecapabilities,andanorder engine orders. We alsoreceivedstrategicordersforour capturing ofmorethan Another keyachievementduring systems –faraheadofanyourcompetitors. Significant ordersincluded strong volumesintheU.S.,SpainandTurkey. growth waswellabove flatordersinourwirelinebusinessdueto • introductionproblemsforournewgeneration • aslowbuild-outofcapacityinChina,our • our long-termannualgrowthexpectationsofover last yearto Orders booked ORDERS, SALESANDINCOME long-term goalsin results betterthanexpectedearlierintheyear. orders, sales,incomeandcashflowmadethe A verystrongfourthquarterwithrecordlevelsof Growthinsaleswas • performance duringthefirsthalfofyear. We reachedapositivecashflowbeforeacquisi- • We reachedacapitalturnoverof • • Operatingmargin at • BOARD OFDIRECTORS’REPORT FOR1999 In ourwirelessmarkets,excludingChina, price pressuredrivenbyvendorovercapacity. subsequent pricepressureonoldermodels. of mobilephoneswithlowervolumesand turing withincustomerorganizations. largest wirelessmarketduetointernalrestruc- We didnot,however, succeedtomeetallour units vs.atarget of+ tions, target of roce below thetarget ofatleast ed percent. Thisismainlyrelatedtothreefactors: b. – sek at solution formigratingfixedlinenet- sek .. percent. in totalincreasedby + percent wasslightlybelowtarget- . . b. , b., whichisslightlybelow . mainly duetoweak percent forcomparable percent, withvery percent ofall percent. sek percent ofsalesis orders fortrial percent. b. to . percent from was the turns vs.a gprs g turing and customer ( costs forprocessdevelopmentinourtime-to- provisions forcustomerfinancing,andproject motion effortsinmobilephones,increasedrisk general growth,butinparticularalsofrompro- The maincausewashighersellingexpensesfrom an . sek including costsrelatedtocustomerordersof increased expenselevelcomparedtolastyear. sek a lowergrossmargin percentage,resultinginan volume, however, morethanoffsetstheimpactof were stableinmobilesystems.Theincreasedsales pressure inourwirelinebusiness.Grossmargins share ofoldermodelsthanplanned,plusprice able productmixinmobilephones,withalarger Net salesto were up for mobilephones.SalesinEnterpriseSolutions Wireline Systemsandamodest mobile systemsisoffsetbyslightlylowersalesin percent to sales toconsolidatedcompanies,increasedby tralia andIndia.ExportsfromSweden,including partly offsetbystrongincreasesinJapan,Aus- percent, duetoa Turkey. Asia/Pacificsalesincreasedbyonly with stronggrowthinBrazil,Mexico,Spainand East/Africa by cent andLatinAmericaEurope/Middle American marketareasalesincreasedby largest marketwith applications. TheU.S.againbecameEricsson’s consulting andservicesactivities,suchas ing portionofthesalesisgeneratedfrom or ing marketadaptations,were percent ofsales.Total technicalexpenses,includ- BOARD OFDIRECTORS’REPORT FOR1999 Operating expenses Net sales Research anddevelopment( The grossmargin sek . . ( b., whereanincreaseofover ) percentofsales.Thefocusour ( . b. increaseingrossmargin. b. ( ttc sek percent overlastyear, andanincreas- y increased by ) b.,were . . k ) flowandsupplychain.Restruc- expenses alsocontributedtothe percent) increaseoverlastyear. percent, drivenbytheunfavor- and declined from ( percent declineinChina, developed unfavorably, with sek percent ofsales.TheNorth ) b. percent respectively, . . percent to sek r&d ( . . percent increase . . ) b.or ) expenses, percent in sek percent of ( . wap r&d per- ) b. ( - ) may bereceivedfrom miums, apotentialcreditamountof Ericsson’s holdingsinJuniper. of sharesinIntracom,andaminorportion from of rency exchangeratechangeshadafavorableeffect expenses increasedfasterthansales( ( cdma adapting ourswitchingproductstotheacquired efforts isonmobileInternetand the devaluationinBrazil. e – sek financial statementsofforeignsubsidiaries in SwedenandU.S.A.areeffectsoftranslation ing togenerallyacceptedaccountingprinciples Reported directlyinstockholders’equityaccord- below ourlong-termtarget of ratio isapproximately for temporaryexcesscashatyear-end, theequity to increasedfinancialexpenses. the firsthalfofyear. Higherborrowingsled as aresultofnegativecashflow, inparticular not affectedincomein percent to . Net Incomeof very favorable, non-taxable capitalgains,thetaxratebecame to acoupleofsuccessfullysettledtaxcasesplus below lastyear’s recordlevelof September of sidiary during January–AugustinourBraziliansub- b., duetothelarge minorityholdingslastyear . ). Comparedto sek Due topreviousoverpaymentofpensionpre- Other operatingrevenues Financial net Minority interest The resulting Income beforetaxes, Earnings persharearedown ( ) percentofsales,mainlybecauseoperating . , . products fromQualcomm. edb + . ). Theequityratiodroppedfrom b., ofwhich . mainly duetocapitalgainsfromsales , whichwereacquiredbyEricssonin (+ . . sek percent duringtheyear. Adjusted . was reducedto Operating Margin , ) b.onincome. in incomewas . ( . sek spp sek . the effectsofforeigncur- ( . ) percent,resultingina increased by percent, whichstillis . in year – . ) b. b., is sek sek b. asaresultof percent to percent. sek g declined to , aswellon sek – . sek . sek – , thishas percent vs. . b. Due . (– . . . . (– b. sek b. . . b. ) b. ) (SEK m.) EXTERNAL FINANCING, CASH FLOWBEFORE FINANCIAL NET(SEKm.) –700 –600 –500 –400 –300 –200 –100 –10,000 100 200 300 400 500 10,000 –8,000 –6,000 –4,000 –2,000 2,000 4,000 6,000 8,000 0 9519 1997 1996 1995 0 1995 961997 1996 1998 1998 1999 1999
iii · financial information 45 iii · financial information 46 EMPLOYEES NUMBER OF (SEK m.) TANGIBLE ASSETS, INVESTMENTS IN EQUITY RATIO, % 100,000 20,000 40,000 60,000 80,000 1,000 3,000 5,000 7,000 9,000 16 24 32 40 0 8
0 0
9519 971998 1997 1996 1995 951996 1995 9519 971998 1997 1996 1995 971998 1997 Worldwide Sweden 1999 1999 1999 te prtos1. 00104(9.6) 0.4 (0.7) 0.1 0.4 (7.0) 0.5 0.1 0.3 (12.4) 13.1 10 (percent) 19.6 10 19 income 3 16.8 -15.0 22 17.3 (percent) 46.4 (SEKb.) 149.9 Investments intangiblefixedassets INVESTMENTS, FINANCINGANDCASHFLOW Ericsson Less: inter-segment sales Unallocated costs Other Operations Enterprise Solutions Consumer Products Network Operators Segment Torrent NetworkingTechnologies Inc.,now • Qualcomm’s infrastructuredivision • amounted to den. Strategicacquisitionsduringtheyear sek acquisitions. Adjustedfor target offavorablecashflowbeforestrategic quarter of sek subscribed. by aNordiccorporationandsubstantiallyover- Euro andU.S.dollarswerethelargest evermade um Term Note( successfully launchedunderourEuropeanMedi- Telebit • TouchWave Inc.,nowrenamedEricssonWeb- • for mobileInternetcapabilities. operators havechosentoenhancetheirnetworks utes ofusagepersubscriber. Inaddition,many bers ofsubscriberscoupledwithincreasedmin- kets, excludingChina,withincreasesinthenum- ny experiencedverystronggrowthinmostmar- long-term goals.Themarketformobiletelepho- and ServiceProvidersperformedinlinewithour ties includingadvancesfromcustomers. tomer receivablesandincreasedoperatingliabili- improved inventory, activemanagementofcus- ment inoperatingcashflowismainlyaresultof tions, cashflowwas MinorityinvestmentsinSaraïde, • renamed Ericsson Cash flowbeforefinancingactivitieswas Benchmark bondissuesof Juniper Com Inc. Among thesegments,onlyNetworkOperators . – . ( . (– sek a/s . ) b.,ofwhich sek and ) b.duetoaverystrongfourth . emtn . b. We managedtoreachour sek ip b. intotal,including: ) program.Theissuesin Infrastructure Inc. + sek sek . sek b. Theimprove- . – . ( . . b. ofacquisi- oz.com ) b.inSwe- b. were were and e ae rwhOeaigmargin Operating Growth Net sales negative effectof ket foryear telephony standards,whichopensupanewmar- now theonlysupplierabletoofferallmobile won morethan operators havechosenEricsson.In Ericsson systems,andallofthetoptenlargest of allsubscribersintheworldareconnectedto Several strategicordersforthe implemented andastableturnaroundachieved. restructuring activitieshavebeensuccessfully of formance during units. TheWireline Systemsunit improvedper- that oftheclosestcompetitor’s. Today, into multi-servicenetwork concept formigratingcircuit-switchednetworks a marketshareabove undisputed marketleaderinmobilesystemswith Systems declinedslightly. Ericssonisnowthe more than Sales ofmobilesystemsproductsincreasedby sales by production nowundercontrolandamuchmore . margin roseto volumes reachedtargeted levels,andoperating cent. Duringthefourthquarter, however, the prices resultinginincreasedsalesofonly portfolio, olderphonesweresoldtounfavorable delayed volumeproductionofthenewproduct increase involumesto dropped duringtheyear, inspiteofa ties werereceivedduring such as BOARD OFDIRECTORS’REPORT FOR1999 . The Operatingmargin improved,inspiteofa With theQualcommacquisition, Ericssonis The NetworkOperatorsegmentincreased For ConsumerProductsthemarketshare 1. 71. . (10.4) 8.2 17.6 17 215.4 percent forthefullyear. With ramp-up of percent ofsales,demonstratingthatthe bt , percent andwithimprovedmargins. knp . percent, whilesalesinWireline . and Telefonica. sek percent ofsales,comparedto percent oftheordersfor with anoperatingincome – . percent, morethantwice million units.Dueto b. fromacquired ip and engine from customers, -2.4 atm , capabili- Operating product Ericsson percent percent per- gprs . projects andgoodwillamortization. ture, increasedmillenniumexpenses,common year duetochangesinthecorporatestaffstruc- certain acquisitions.Thecostsincreasedfromlast rate staffexpensesandgoodwillamortizationon equipment toGreeceinthefourthquarter. order of Forces. DefenseSystemshoweverpostedalarge due tofewerordersfromtheSwedishArmed sales andoperatingincomecomparedtolastyear ed inthisgroupisDefenseSystems,withlower – ment. DedicatedNetworksreportsalossof viously reportedintheEnterpriseSolutionsseg- Networks unit,whichwillbecloseddown,pre- and servicesformobileInternet. consulting activitiesarefocusingonsolutions tions solutionsforprivatenetworks.Business opment expensesfor even comparedtolastyear, withcontinueddevel- significantly during The numberofemployeesintotaldidnotchange positioned towinbackmarketsharein competitive productportfolio,Ericssoniswell volumes ofthe by market demandcontinuestolookstrong. lished atthebeginningof the programsfor percent. have adilutiveeffectonearningspershareof issued byEricsson,whichiffullyutilized,will “employee options”thatarehedgedbywarrants 2000 planconsistsofoptions(so-called , addition tothetwoearlierplansfor ( implement astockoptionplanforyear activities. affected byoutsourcingandotherrestructuring sumer Products.Around were recruitedintonewjobs,mainlyinCon- were addedthroughacquisitionsandabout , BOARD OFDIRECTORS’REPORT FOR1999 . Unallocated costsmainlyincludecorecorpo- Other OperationsincludestheDedicated Enterprise Solutions’externalsalesincreased The allottmentandsubscriptionpricesunder During theyear, adecisionwasmadeto b. duetounsuccessfulprojects.Alsoinclud- percent to which werebasedonmarketsolutions.The ) atyear-end. Almost sek . pbx md sek b. forairbornesurveillance ip . and and wirelesscommunica- , ( and was . . . Incomewasatbreak ) b.withstrong , employees were will beestab- , employees , and , sek in as . it considerably. able environmentalimpactforagivenfunction consumption, whichoftenreducestheunfavor- to miniaturizeproductsandreducetheirenergy exploiting the energy consumptioninuse.Ericssonisfully largest impactontheenvironmenttobetheir Life-cycle analysesofourproductsshowthe flux andsolderingpastepowderlacquer. waste productsandnoise.Chemicalsusedinclude operations consistsofemissionstoairandwater, components. Theenvironmentalimpactofthese components andmanufacturingofcables regular operations. point onitwillbeconsideredapartofEricsson’s program isnowwellundercontrol,fromthis . within ayear. Expectednetsavingsare manning-company, shouldtheynotfindnewjobs market, andwithaguaranteedemploymentin skills, tomakethemmoreattractiveonthelabor participate inatrainingprogramforenhanced employees wereaffected.Someofthe savings of In total decisions madewilltakeplaceinearlyyear early After initialdelays,theprogramannouncedin plaints havebeenreceivedduringtheyear. ardous activities.Nomaterialrequestsorcom- while tions duetonoiseoremissionsintoairwater, For Ericsson has PERMISSIONS ORREPORTING SWEDISH REGULATIONS REQUIRING in Ericsson hasproductionoperationsin are expectedforyear are sition. Thetotalaccumulatedcostsoftheproject major incidentwasexperiencedduringthetran- conditions. Allthreeobjectivesweremetandno tect shareholdervalueandtosecureworking gram weretoretainsatisfiedcustomers,pro- The objectivesforEricsson’s millenniumpro- expenses. Additionalcostsofaround mainly aspartofsellingandadministration b. in sek countries, fortheassemblyofelectronic of these,permissionisrequiredforopera- units areobligedtoreportcertainhaz- sek . sek is nowimplementedasplanned.Some b., ofwhich . and it production facilitiesinSweden. . b. werespentin industry’s inherentpossibilities sek b. Asindicatedabove, . . sek b. from . b. during , . sek with cost sek Since the facilities , . , . b. (SEK) EARNINGS PERSHARE 0 1 2 3 4 5 6 7 9519 971998 1997 1996 1995 1999
iii · financial information 47 iii · financial information 48 Board meetingsdeliveringspecialpresentations. al Meetingtoeight.Companystaffparticipatein number ofdirectorselectedbytheAnnualGener- Board andwasnotreplaced,whichreducedthe ceo appointed bytheemployeeorganizations. InJuly, and threememberswithdeputies,whoare who areelectedbytheAnnualGeneralMeeting, tors consistsofninemembers,withoutdeputies, Telefonaktiebolaget LMEricsson’s BoardofDirec- mental Reportfor mental activities,pleaseseeourseparateEnviron- this liabilityismadeintheaccounts. with theDutchauthoritiesandaprovisionfor liability issueisnowregulatedinanagreement known concerningafacilityinHolland.The outside Sweden,onlyonematerialdamageis will becarriedoutduringyear million. Remedialactionsfor environmental damagesislessthan liabilities hasbeenexamined. The situationregardingso-calledenvironmental ENVIRONMENTAL LIABILITIES have notyetreceivedtheircertificates. been certifiedandanother den, units atthelatestendofyear is scheduledforimplementationinallproduction The ISO-CERTIFICATES and reportsthemtotheBoard forapproval. lishes thetermsofemployment forthepresident rization bytheBoard.Thepresidium alsoestab- and acquisitionsdivestments basedonautho- such asprojectsinvolvingcustomer financing between Boardmeetingsactonurgent matters, men andthePresident,whichduringperiod consisting oftheChairman,twoVice Chair- cash management. customer financingprojects,andrulesgoverning plants, majorsalesofoperationsandlarge structure, majorinvestmentsinbusinessesand include Ericsson’s strategyandorganizational ident. Accordingly, mattershandledbytheBoard division ofworkbetweentheBoardandPres- ment theBoardhasadoptedwithrespectto information andotherwisefollowsthearrange- which isdesignedtomeettheBoard’s needfor their observationsfromtheauditstoBoard. meetings. Thecompanyauditorshavereported During fiscalyear For furtherinformationonEricsson’s environ- For theSwedishunits,totalliabilityfor The Boardhasalsoestablishedapresidium, The workoftheBoardfollowsasetplan, iso Sven-Christer Nilssonresignedfromthe of Ericsson’s environmental managementsystem . , production unitshavealready are recommendedbut the Boardheldnine sek . . sek For units million In Swe- Torrent NetworkingTechnologies Inc., • theMobilenetworkplanningandfieldmea- • theInfrastructuredivisionofQualcommInc. • Holdingsinanewassociatedcompany: across • EricssonincreaseditsholdingsintheNigerian • Telebit • TouchWave Inc.,renamedEricssonWebCom • theBraziliancompanyMatec • were made: Cosir S.p.A.Ericssonretainsaminorityholding. in theItaliannetworkconstructioncompany Minorityholdingsin:Juniper, Saraïde, • In early consulting unit. part ofthebusinesssegmentEnterprise solutions’ Sverige sulting changed theirnamestoEricsson BusinessCon- vices. reporting, payrollandtravelmanagementser- Swedish subsidiariesregardingaccounting, Sweden, EricssonSharedServices A sharedservicecompanywasestablishedin ters andoverallplanning. Board todevoteadditionaltimestrategicmat- subject torapiddevelopmentandenablethe Board evenmoreeffectiveinabusinessthatis purpose ofthischangeistomakethework Committees todecideonspecificmatters.The may alsoprovidefurtherauthorizationtoits decide oncertainkindsofmatters.TheBoard Committee andtheRemunerationto sidium. TheBoardhasauthorizedtheFinance the AuditCommitteehavesubstitutedpre- Committee, theRemunerationCommitteeand composed ofBoardmembers,namelytheFinance responsibilities foryear dures hasresultedinanewplanforallocationof BOARD OFDIRECTORS’REPORT FOR1999 renamed Ericsson NetQual Inc. was acquiredandincorporatedasEricsson surement divisionof Wireless CommunicationsInc. was acquiredandincorporatedasEricsson holding ed subsidiary percent andthecompanyisnowaconsolidat- company LMEricsson(Nigeria)Ltdto Inc. subsidiary, sinceownershiphasincreasedfrom During theyear, thefollowingacquisitions oz.com LM EricssonData The Board’s annualreviewofitsworkproce- percent to ab ab , a/s , respectively. Thesecompaniesarea and EricssonBusinessConsulting ab , iD2Technologies Ericsson solditsmajorityholdings . percent. ip ab . Infrastructure Inc. lcc and Semantica International Inc. Three committees ab s.a. ab , supporting is nowa ab s.a in region andinvolvingmorethan to outsource merged intoEricsson son Redes com Espana early inyear the StockholmareawillbeoutsourcedtoSkanska . activities. Thesedivestitureswilloccurinyear and focuscapitalutilizationonitscorebusiness will divestthemajorityofitsrealestateholdings den, hasbeentransferredto A softwaredevelopmentunitinÖstersund,Swe- tron andinKatrineholm,Sweden,toFlextronics. nesse, France,andÖstersund,Sweden,toSolec- turing andsoftwaredesignoperationsinLongue- stations. announced shortly. Eastern Europe/MiddleEast/Africa willbe ern Europe.AlsoeffectiveFebruary tive Vice President,headofMarketAreaWest- ber oftheCorporateExecutiveTeam andExecu- ian subsidiary, willtakeupapositionasmem- ations, reportingtothePresident. assume apositionascoordinatorofSwedishoper- sumer Productssegment. Siberg asExecutiveVice President fortheCon- Europe/Middle East/Africa,willsucceedJohan Executive Vice PresidentMarketarea Effective February15,JanWäreby, previously MANAGEMENT CHANGES chairman oftheSwedishnetworkoperatorTelia. as aboardmemberuponhisappointment On January BOARD OFDIRECTORS quarter. nents toEmersonElectricCoduringthesecond and theEnergy SystemspartofEricssonCompo- Net CriticalCommunicationsinthefirstquarter Private RadioSystemsbusinessinUSAtoCom- Agreements havebeenenteredintotodivestthe DIVESTITURES - BOARD OFDIRECTORS’REPORT FOR1999 In France, Ericsson hasbranchandrepresentativeoffices Ericsson signedaletterofintentwithCompaq In Spain,thethreesubsidiariesEricssonInfo- During theyearitwasdecidedthatEricsson Other outsourcingactivitiesincludemanufac- Appointment ofamanagerfor MarketArea Ragnar Bäck,currentlyPresidentinourItal- Johan Siberg, ExecutiveVice President, will . andpartsof ( Real estatemanagementandservicesin ) countries. s.a s.a . it , s.a . merged intoEricssonEspana ., EricssonRadio support, startingintheNordic . EricssonandRadio met , Lars-EricPeterssonresigned s.a. Commutation have au -system , s.a 15, 2000 . andErics- ab work . s.a . . increasedlong-termcustomerfinancing of • first quarterof before taxesintherangeofthreetimesthat increasedlong-termloanstosubsidiaries of • to cash andshort-terminvestments amounted to EricssoncompaniesinSweden.Atyear-end, pany soldamajorpartofitsrealestateholdings increased borrowings.Duringtheyear, thecom- growth ofmorethan increasedbankandshort-termcashinvest- • tive cashflow. earnings. We intendtoachievethiswithaposi- more than and anoperatingmargin ofatleast positive cashflowbeforestrategicacquisitions, means growingbyatleast we intendtogrowfasterthanthemarket,which long-term financialtargets remainunchanged: ny andinthegrowthofmobileInternet.Our fits fromourleadingpositioninmobiletelepho- strong marketgrowthwhereEricssongainsbene- . tions to/fromuntaxedreservesandtaxeswas sek . For thefullyear increasedinvestmentsinsubsidiariesof • position were: com The commissionagreementwithEricssonTele- Ericsson’s customerfinancingcreditportfolio. company EricssonCredit and, sinceJanuary1,thenewlyestablished son Telecom tions conductedoncommissionbasisbyErics- The parentcompany’s resultsincludetheopera- the firstquarterofyear development inChinaandformobilephones.For weak, affectedbyrestructuringcostsandslow return oncapitalemployedof sek sek sek (USA). able tostockissuesinEricssonHoldingIIInc. These investmentswerefinancedthrough ments of The firstquarterof During Net Salesfortheparentcompanywere sek Major changesinthecompany’s financial ( . . ab ) b. . . . . has beencancelledasperJanuary ( . b., ofwhich , b. b. b. sek ab percent andasubstantialgrowthin ) b.andIncomebeforeappropria- . , EricssonTreasury Services , . we expectsalestoincreaseby b. we believeincontinued sek percent andincome ab, was exceptionally . , weexpectasales percent, andwitha which manages b. wereattribut- – percent with percent. , sek ab
iii · financial information 49 iii · financial information 50 taken bylegislativebodiesinSweden. General Meetinginlightofthefinaldecisions shares andwillpresentaproposaltotheAnnual change inlegislationtoenablerepurchaseof The BoardofDirectorswelcometheproposed sek increase oftheparvalueAandBsharesfrom al GeneralMeetingabonusissue,bywayofan The BoardofDirectorswillproposetotheAnnu- May . Trading withsharesofthenewparvalue is expectedtocommenceinthebeginningof . . to sek . ee uhradGrnEgtö JanHedlund GöranEngström Peter Sutherland öa idh vre atnLfClasReuterskiöld SverkerMartin-Löf Göran Lindahl o eeisLr aqitMarcusWallenberg Lars Ramqvist Tom Hedelius ieCara Chairmanand Vice Chairman followed byasplit Telefonaktiebolaget LMEricsson(publ) Stockholm January Org. no. sek : Kurt Hellström . Per Lindh President - specified above. February Assuming allsuchdebenturesareconvertedby ary Total amountavailable within thebusiness the remaindertoberetained registered ontheRecorddate paid toshareholdersduly sek an unchangeddividendof lows: poses thattheseearningsbedistributedasfol- sek the AnnualGeneralMeetingare Available fordistributionbytheshareholdersat BOARD OFDIRECTORS’REPORT FOR1999 , , Debentures , , . ,,,. , , per sharetobe the dividendwillamounttosum are alsoentitledtodividendfor ⁄ The BoardofDirectorspro- Vice Chairman converted uptoFebru- sek sek sek ,,, ,,, ,,, . noeBfr ae 16,386 17,590 pershare,Earnings SEK NET INCOME 89,522 Taxes Income Before Taxes Minority interest inincomebefore taxes Financial expenses Financial income Operating Margin Share ofassociatedcompanies inearnings Administrative expenses Selling expenses Research anddevelopmentothertechnicalexpenses Gross Margin Cost ofsales Years endedDecember31,SEKm. noeAtrFnnilIes16,892 Income AfterFinancialItems Other operatingrevenues Net sales CONSOLIDATED INCOMESTATEMENT Income taxesfortheyear Minority interest intaxes NOTE 3 NOTE 3 NOTE 2 NOTE 1 NOTE 5 NOTE 4 –125,881 215,403 –10,078 –31,205 –33,123 12,130 –2,971 –4,358 2,273 2,224 1999 –506 6.17 102 250 1521–97,868 –105,251 8,3 167,740 184,438 2,0 –20,464 –24,242 –24,108 –28,027 30111,941 13,041 82017,218 18,210 18,757 19,273 69,872 79,187 90618,805 19,036 245–2,365 –2,465 892–7,755 –8,922 549-5,755 -5,409 ,2 2,413 2,228 981997 1998 86–1,587 –826 .66.08 6.66 4 478 240 4 480 148 9 866 995
iii · financial information 51 iii · financial information 52 TOTAL ASSETS Short-term cashinvestments Receivables Inventories Current Assets Financial assets Tangible assets Intangible assets Fixed Assets ASSETS December 31,SEKm. Cash andbank Other receivables Short-term customerfinancing Other long-termreceivables Long-term customerfinancing Other investments Equity inassociatedcompanies Accounts receivable -trade Assets PledgedasCollateral NOTE 13 NOTE 11 NOTE 10 NOTE 8 NOTE 7,23,25 NOTE 6 NOTE 20 CONSOLIDATED BALANCESHEET 202,628 151,269 31,227 63,584 25,701 51,359 24,719 10,548 13,415 15,593 1,749 4,972 6,657 1,751 2,712 2,068 1999 167,456 125,532 22,589 53,900 26,973 41,924 22,516 11,877 3,837 6,354 6,356 2,902 5,937 1,438 2,777 1,203 1998 Other current liabilities Other long-termliabilities Income taxliabilities Accounts payable–trade Liabilities tofinancialinstitutions Current liabilitiestofinancialinstitutions Advances from customers Convertible debentures 1) TOTAL STOCKHOLDERS’EQUITY, PROVISIONSANDLIABILITIES 2,182 Current maturitiesoflong-termdebt Current Liabilities Notes andbondloans Long-Term Liabilities Provisions Minority Interest inEquityofConsolidatedSubsidaries Stockholders’ Equity STOCKHOLDERS’ EQUITY, PROVISIONSANDLIABILITIES December 31,SEKm. CONSOLIDATED BALANCESHEET Of whichinterest-bearing provisions andliabilities Non-restricted equity Restricted equity Contingent Liabilities Reserves notavailablefordistribution Capital stock Net income Retained earnings NOTE 20 NOTE 17,20 NOTE 16 NOTE 14 NOTE 21 NOTE 19 NOTE 18 1) 202,628 21,618 24,954 22,552 69,176 10,127 83,764 41,302 10,519 17,486 31,665 32,618 37,511 12,130 19,535 45,020 2,397 1,448 6,437 5,453 1,491 4,893 1999 567 167,456 18,246 13,068 22,284 63,112 66,941 31,725 30,181 28,053 32,931 13,041 17,140 27,474 1,957 1,898 8,398 6,241 1,188 8,063 5,427 4,470 4,878 2,051 1998 459
iii · financial information 53 iii · financial information 54 Inventories Changes inOperatingNetAssets Taxes Capital gains(-)/lossesonsaleoffixedassets Repayments oflong-termdebt e hnei ah10,775 18,233 13,550 CASH, ENDOFPERIOD Cash, BeginningofPeriod –2,439 –15,364 Net ChangeinCash Effect ofexchangeratechangesoncash Cash FlowFrom FinancingActivities Dividends paid Proceeds from issuanceofotherlong-termdebt Issue ofconvertibledebentures 12,925 Changes incurrent liabilitiestofinancialinstitutions,net FINANCING Cash FlowBefore FinancingActivities Cash FlowFrom InvestingActivities Other Acquisitions/sales ofotherinvestments,net Sales oftangibleassets Investments intangibleassets INVESTMENTS Cash FlowFrom OperatingActivities Provisions andotheroperatingliabilities Customer financing,short-termandlong-term Depreciation andamortization ofassociatedcompanies Undistributed earnings Minority interest innetincome Adjustments toReconcileNetIncomeCash Net income OPERATIONS Years endedDecember31,SEKm. Net changeincapitalcontributedbyminority Accounts receivable -tradeandotheroperatingassets CONSOLIDATED STATEMENT OFCASHFLOWS NOTE 22 NOTE 22 NOTE 22 –19,562 15,163 13,463 12,130 29,008 –1,399 –1,515 –4,010 –2,270 –9,085 –4,768 3,854 7,382 1999 –947 –336 714 625 722 404 134 58 18 1,9 10,067 –10,894 –7,156 –17,219 1,9 –15,828 –10,695 30111,941 13,041 91719,060 29,127 82329,127 18,233 231619 –2,301 132–2,672 –1,332 –3,396 –2,056 9857,746 –9,825 380–2,805 –3,800 –7,237 –8,965 885–69 –8,865 577–347 –5,727 ,8 5,756 6,081 ,6 2,571 3,366 14,986 9,054 ,9 14,902 7,394 981997 1998 20152 –230 27256 –277 722,065 –792 –90 –359 3 642 632 1,109 586 5 96 955 5 –513 –56 94,875 19 521 35 NET INCOME Income taxesfortheyear 4,431 Financial expenses Other operatingrevenues Research anddevelopmentothertechnicalexpenses Gross Margin Cost ofsales Years endedDecember31,SEKm. noeAtrFnnilIes3,217 –4,496 Contributions from subsidiaries,net Appropriations to(-)/transfersfrom untaxedreserves Income AfterFinancialItems Financial income Operating Margin Selling expenses Net sales noeBfr ae 6,189 Income Before Taxes Administrative expenses PARENT COMPANY INCOMESTATEMENT Changes inotheruntaxedreserves Changes indepreciation inexcessofplan NOTE 15 NOTE 15 NOTE 3 NOTE 3 NOTE 2 NOTE 1 NOTE 4 –10,944 15,375 –2,320 –2,691 –2,202 –5,386 –4,116 –2,580 9,915 3,155 5,566 5,292 1999 –623 371 1,5 –12,205 –11,657 68616,217 16,836 192–1,827 –1,942 278–3,152 –2,738 634–6,635 –6,324 230–1,568 –2,370 189–1,329 –1,889 ,7 4,012 5,179 ,5 6,223 6,052 2,368 2,666 ,7 1,244 1,372 ,3 4,758 5,732 ,4 4,074 4,749 ,5 5,151 6,151 981997 1998 49–393 –419 14–504 –174 0 337 204 0–167 30
iii · financial information 55 iii · financial information 56 Tangible assets TOTAL ASSETS Receivables Inventories Current Assets Financial assets Intangible assets Fixed Assets ASSETS December 31,SEKm. Short-term cashinvestments Cash andbank Other receivables Long-term customerfinancing Receivables from subsidiaries Short-term customerfinancing Other long-termreceivables Receivables from subsidiaries Accounts receivable –trade Investments Associated companies Other investments Assets PledgedAsCollateral Subsidiaries PARENT COMPANY BALANCESHEET NOTE 13 NOTE 12 NOTE 11 NOTE 10 NOTE 8 NOTE 8 NOTE 12 NOTE 8 NOTE 8,9 NOTE 8,9 NOTE 7,25 NOTE 6 NOTE 20 104,856 22,336 52,714 17,925 24,364 52,142 12,062 9,184 2,402 2,129 6,320 1,039 1,845 5,028 1999 178 952 828 53 56 18,617 35,721 12,329 19,262 76,534 40,813 1,607 2,625 7,618 2,544 5,732 4,665 1998 127 280 974 402 30 46 78 Convertible debentures Other long-termliabilities Liabilities tofinancialinstitutions Notes andbondloans Long-Term Liabilities TOTAL STOCKHOLDERS’EQUITY, PROVISIONSANDLIABILITIES Other current liabilities Income taxliability Liabilities tosubsidiaries Accounts payable–trade Advances from customers Current liabilitiestofinancialinstitutions Current maturitiesoflong-termdebt Current Liabilities Liabilities tosubsidiaries Provisions Untaxed Reserves Stockholders’ Equity STOCKHOLDERS’ EQUITY, PROVISIONSANDLIABILITIES December 31,SEKm. PARENT COMPANY BALANCESHEET Non-restricted equity Restricted equity Statutory reserve Revaluation reserve Share premium reserve Capital stock Contingent Liabilities Net income Retained earnings NOTE 12,17 NOTE 17,20 NOTE 17 NOTE 17 NOTE 16 NOTE 15 NOTE 14 NOTE 21 NOTE 19 NOTE 12 NOTE 18 NOTE 20 NOTE 17 104,856 17,486 32,835 11,611 34,286 25,601 26,816 16,300 16,535 10,734 3,454 5,453 5,513 5,406 9,681 1,941 4,893 5,867 5,566 1999 370 229 821 252 929 587 20 53 30,904 24,986 17,448 13,827 14,564 16,340 76,534 4,470 6,968 2,821 6,195 3,731 3,086 9,680 1,687 4,878 5,282 5,732 8,832 1,203 1998 320 104 365 558 26 95 21
iii · financial information 57 iii · financial information 58 Accounts receivable –tradeandotheroperatingassets Customer financing,short-termandlong-term Inventories Changes inOperatingNetAssets Unsettled dividends Unsettled contributionsfrom (-)/tosubsidiaries Appropriations to/transfersfrom (-)untaxedreserves Dividends paid Repayments oflong-termdebt Proceeds from issuanceofotherlong-termdebt Capital gains(-)/lossesonsaleoffixedassets Depreciation andamortization Adjustments toReconcileNetIncomeCash ah n fPro 17,090 6,693 10,397 21,329 Cash, EndofPeriod Cash, BeginningofPeriod Net ChangeinCash –14,636 Cash FlowFrom FinancingActivities –9,845 Other Issue ofconvertibledebentures Changes incurrent liabilitiestosubsidiaries Changes incurrent liabilitiestofinancialinstitutions,net FINANCING –4,791 Cash FlowBefore FinancingActivities Cash FlowFrom InvestingActivities Other Lending, net Acquisitions/sales ofotherinvestments,net Sales oftangibleassets Investments intangibleassets INVESTMENTS Cash FlowFrom OperatingActivities Provisions andotheroperatingliabilities Net income OPERATIONS Years endedDecember31,SEKm. PARENT COMPANY STATEMENT OFCASHFLOWS 13,323 11,120 –6,188 –3,904 –5,200 –3,904 –1,705 –4,397 –5,185 2,320 1,810 1,752 5,566 1999 –155 –556 –368 655 322 456 890 41 - 1,7 11,324 –11,072 –3,799 –10,833 03721,469 10,397 10,145 21,469 220–3,269 –4,000 –2,290 –4,700 340–2,404 –3,410 41113,199 –4,181 53117,026 –5,311 –5,702 –5,761 476–3,370 –97 –4,706 –5,978 ,3 –5,079 5,133 ,2 94 1,022 ,4 1,866 2,645 ,3 4,758 5,732 ,7 –1,903 5,072 981997 1998 14–86 –164 48–1,804 –428 26207 –206 –622 –396 275,158 –237 6 –311 164 4 665 442 6 –38 269 4 401 247 3 167 –30 6,000 - –111 - where votingstockinterestisatleast before taxes. more fairviewoftheimportantmeasureIncome holdings inthegroupduringlastyears,givesa method, consideringthesignificantminorityinterest taxes andshareintaxes.Thereasonisthatthis rr Accounting StandardsCouncil’s recommendation interests are,indeviationfromtheSwedishFinancial earned onlyaftertheiracquisition. equity insubsidiariesandassociatedcompanies whereby consolidatedstockholders’equityincludes prepared inaccordancewiththepurchasemethod, ence. Intercompanytransactionshavebeeneliminated. voting majorityorbyagreementhasadecisiveinflu- has anownershipanddirectlyorindirectlya Subsidiaries areallcompaniesinwhichtheCompany accounts oftheParentCompanyandallsubsidiaries. The consolidatedfinancialstatementsincludethe PRINCIPLESOFCONSOLIDATION (A) differences, seeNote those intheUnitedStates.Foradescriptionofmajor accounting principlesdifferincertainrespectsfrom Standards Council’s ( thereby applyingtheSwedishFinancialAccounting accounting principlesgenerallyacceptedinSweden, (“the Company”)arepreparedinaccordancewith Telefonaktiebolaget LMEricssonanditssubsidiaries The consolidatedfinancialstatementsof December In millionsofSwedishkronor(exceptpershareamounts)at Notes totheFinancialStatements reported as“Equityproportion reserve”. Minor included inconsolidatedrestricted equityare profits andunamortizedgoodwill (see(B)below). equity afteradjustmentsforunrealizedintercompany Investments inassociatedcompaniesareshownat eliminated infulltheconsolidatedaccounts. associated companiespurchasedfromsubsidiariesare “Taxes”. Unrealized internalprofitsininventory in theOperatingMargin. Taxes areincludedinitem “Share inearningsofassociatedcompanies”,included before taxinthesecompaniesisreporteditem to theequitymethod.Ericsson’s shareofincome not morethan50percent,areaccountedforaccording NOTES Material investmentsinassociatedcompanies, In theconsolidatedIncomeStatement,minority The consolidatedfinancialstatementshavebeen Undistributed earningsofassociated companies , dividedintotwoitems;shareinincomebefore each year, unlessotherwisestated. rr . ) recommendations.These percent but C TRANSLATION OFFOREIGNCURRENCY (C) ‘‘Administrative expenses”. other technicalexpenses”,“Sellingexpenses”or are reportedunder“Researchanddevelopment the natureofacquisition,goodwillamortizations amortization periodsofupto of eachitem’s estimatedeconomiclife,resultingin amortized/reversed accordingtoindividualassessment acquisitions ofconsolidatedcompaniesis Goodwill, positiveandnegative,resultingfrom GOODWILL (B) exchange duringtheyear. Theresultingtranslation and incomestatementitemsatthe averageratesof sheet itemsaretranslatedatyear-end exchangerates, the functionalcurrencytoSwedish kronor, balance solidated incomestatement.Inthesecondstep,from ing fromthisremeasurementareincludedinthecon- into thefunctionalcurrency. Gainsandlossesresult- in twosteps.Inthefirststep,remeasurementismade be anothercurrencythanlocalcurrency, aretranslated economies, whosefunctionalcurrencyisconsideredto example incountrieswithhighlyinflationary companies, ifany, aretranslatedto financial statementsplusgoodwillrelatedtosuch sidered theirfunctional(business)currency. Their primarily generateandexpendcash,isthuscon- local currencyistheinwhichcompanies For mostsubsidiariesandassociatedcompanies,the ment (seeNote panies areincludedintheconsolidatedincomestate- from translationoffinancialstatementsthesecom- translated usingthemonetarymethod.Adjustments krona, arelabeled“integratedcompanies”and functional currencyisconsideredtobetheSwedish tions withtheSwedishoperationsthattheir activities orothercompanies,havingsuchcloserela- are includedintheconsolidatedincome. ciples issold,accumulatedtranslationadjustments company accountedforinaccordancewiththeseprin- are reporteddirectlytostockholders’equity. Whena current method,wherebyanytranslationadjustments and carriedatthelowerofcostorfairmarketvalue. investments areaccountedforasOtherinvestments, investments inassociatedcompaniesandallother Financial statementsofcompaniesoperatingfor Financial statementsofcompanieswithfinance FINANCIAL STATEMENTS ). Accounting principles years. Dependingon sek using the
iii · financial information 59 iii · financial information 60 also hedgedforperiodsof anticipated futurecashflowsinforeigncurrenciesare ments withsuppliersandcustomers.Inaddition, currency contractsinallcasesinvolvingfirmcommit- sales inforeigncurrenciesarehedgedusingforward financial interest-andcurrencyrisks. are signed. ciples sopermit,forexamplewhen net intheBalanceSheetonlywhenaccountingprin- realized gainsandlossesonderivatives,arereported cial income/expense. cy options. Some bidsarealsohedged,normally throughcurren- periods shallagreewithexpectedfuturecashflow. Treasury Services reserved. GainsandlossesfromderivativesinEricsson valued atmarketvalue,andnetunrealizedgainsare derivatives inEricssonTreasury Services market value. lowest ofacquisitioncostplusaccruedinterestand than EricssonTreasury Services Short-term cashinvestmentsheldbycompaniesother VALUATION OFSHORT-TERM CASHINVEST- (E) Stockholder’s equity, netoftaxeffects. of foreignsubsidiariesarereporteddirectlyto financial expenses. losses relatedtofinancialliabilitiesareincludedin assets areincludedinfinancialincome,andgains losses onforeignexchangeattributabletofinancial and lossesareincludedinCostofsales.Gains into operationalandfinancial.Netgains exchange rates. in foreigncurrencieshavebeentranslatedatyear-end In thefinancialstatements,receivablesandliabilities TRANSLATION OFFOREIGNCURRENCY (D) Council’s recommendation from theSwedishFinancialAccountingStandards equity. Theremeasurementinsteponeisadeviation adjustments arereporteddirectlyagainststockholders’ concerned opereateindefactodollar-based economies. view ofthesefinancialstatements,sincecompanies accordance with opinion, theremeasurementmethod,whichisin tion adjustmentofsuchfinancialstatements.Inour ITEMS ININDIVIDUALCOMPANIES In ordertolimitcurrencyrisks,purchasesand Derivative instrumentsareusedmainlytohedge Financial assetsandliabilities,includingun- Short-term cashinvestmentsandinterestrelated Translation effectsrelatedtopermanentfinancing Gains andlossesonforeignexchangearedivided MENTS ANDDERIVATIVES ..ga fas u.s. gaap ab are reportednetasOtherfinan- rr – months. Thehedge ab , whichrequiresinfla- , givesamorefair are valuedatthe isda -agreements ab are flows correspondto income assoontheyareidentified. between actualandhedgedflowsarerecognizedin an exposure,thehedgeisclosed.Herebydeviations derivatives arevaluedatmarket. hedged instrument.Otherforeignexchangerelated positions arevaluedinthesamemanneras ments orloanswhichareappliedtohedgeinterest Interest-related derivativeslinkedtospecificinvest- ner reflectingtheaccountingforhedgedposition. hedging certainpositionshavebeenvaluedinaman- related tofuturecashflowswas unrealized lossaftermarketevaluationofcontracts estimated usefullivesof,ingeneral, tion, generallyusingthestraight-line method,with tions. lated depreciation,adjustedwithnetvalueofrevalua- Tangible fixed assetsarestatedatcostlessaccumu- TANGIBLE FIXEDASSETS (F) overall loss.Thelossismainlydueto ty costeffectduringtheyearisvaried,withanet speculation elementbynothedging.Thisopportuni- an opportunitygainorlosswhichwouldimplya been madeisthereforesomewhatartificial–itshows moderated. nominal currencyratechangesaretoalarge extent dors ortakeotheractions,whichmeansthateffectsof to adjustorrenegotiatepriceswithcustomersven- cash flowsarechosentogiveussufficientleadtime sales margins. Forwardcontractperiodsforestimated served theirpurposeofsafeguardingourcalculated rency speculationandminimizerisk.Thehedgeshave entirely accordingtoEricsson’s policytoavoidcur- accounting principlesarenotvaluedatmarket. reasonably assuredcashflowsandthereforbySwedish tracts areenteredintoashedgesofcommittedand been includedinincomefor than whenhedgingwasmade.Thiseffecthasnot a resultmainlyofhigherdollarspotratesatyear- end rate. son whyahigherrateismorefavorablethanlower our excessforeigncurrencytobanks,whichistherea- ward contractsarenetsaleswherewesell receive moreforeigncurrencythanwepay, ourfor- hedged rateswerehigherthanspotrates.Sincewe gains relatedmainlytoaweakerEuro,wherethe rates lowerthanspotrates,whichispartlyoffsetby driven bythestrongerdollarresultinginhedged Forward exchangeoptionsandinvestments Currency forwardcontractsrelatedtofuturecash When atransactionhedgedinadvanceceasestobe Annual depreciationisreportedasplandeprecia- To calculateagainorlossasifhedgeshadnot The useofcurrencyforwardcontractsashedgesis – months offuturesales.Net , sek since thesecon- – . usd years on b., whichis contracts, NOTES been giventorisksofobsolescence. other long-termliabilities. of tangibleassetsandasothercurrentliabilities contracts arecapitalizedandreportedasacquisitions material leasecontracts.Accordingly, certainleasing than carryforwards withaprobabilitytobeusedgreater deferred taxreceivablesattributabletounutilizedloss assets andliabilitiestheirtaxvalue,also temporary differencesbetweenthebookvalueof The Companyreportsdeferredtaxesattributableto DEFERREDTAX INUNTAXED RESERVES (K) Standards Council’s recommendationNo. Company appliestheSwedishFinancialAccounting mally expensedoverthetermoflease.The Property leaseswiththecompanyaslesseearenor- LEASING (J) included inCostofsales. incurred. Costsbasedonordersfromcustomersare Research anddevelopmentcostsareexpensedas RESEARCHANDDEVELOPMENTCOSTS (I) affiliated companies. certain costsareeliminatedintransactionsbetween other customers,takingintoaccount,however, that the samepricingisappliedasintransactionswith revenues, provisionismadeforestimatedlosses. such contractsareestimatedtoexceedremaining recognized successively. Ifcostsrequiredtocomplete counts andallowances. added tax,andarenetofgoodsreturned,tradedis- and representamountsrealized,excludingvalue- software andservicesaccordingtocontractualterms Sales revenueisrecordedupondeliveryofproducts, REVENUERECOGNITION (H) on afirst-in,first-out( Inventories arevaluedatthelowestofcostormarket INVENTORIES (G) expenses. of Salesandintherespectivefunctionaloperating on rentalequipment.DepreciationisincludedinCost buildings, reported intheconsolidatedfinancial statements. years onmachineryandequipment,upto NOTES For salesbetweenconsolidatedcompanies,asarule Revenue fromlong-termcustomercontractsis Appropriations andUntaxedreserves arenot percent. years onlandimprovements, fifo ) basis.Considerationhas for to years taken intoaccount. changes indeferredtaxassetsandliabilitieshavebeen from operations. ment activitiesanddonotaffectreportedcashflow acquired/sold, arereportedascashflowfrominvest- the averageexchangerateduringperiod. respectively. tions, investingactivitiesandfinancing cash positionduringtheyearattributabletoopera- The StatementofCashFlowsshowschangesinthe Swedish FinancialAccountingStandardsCouncil. basis betweenEricssonTelecom ary companyin January Company, signedin accordance withrecommendation Statement ofCashFlowsispreparedprincipallyin STATEMENT OFCASHFLOWS (L) Ericsson Credit basis fortheParentCompanyasinpreviousyears. ab Ericsson Treasury Services OPERATIONS ONCOMMISSIONBASIS (M) deferred taxexpensefortheperiod. in theconsolidatedincomestatementasapartof liability attributabletochangesintaxratesisshown sheet asDeferredtax.Anadjustmentofdeferredtax country andisreportedintheconsolidatedbalance each yearbyapplyingthecurrenttaxratein equity. and inthebalancesheetasrestrictedstockholders’ income statementaspartofnetfortheyear, Deferred taxes.Theafter-tax effectisstatedinthe shown intheconsolidatedincomestatementas ble ineachcountry. Thedeferredtaxsocalculatedis been reversed,applyingthecurrenttaxrateapplica- Such itemsreportedbyconsolidatedcompanieshave In preparationoftheStatementCashFlows, Subsidiaries purchasedand/orsold,netofcash Foreign subsidiaries’transactionsaretranslatedat The agreementaboutoperationsoncommission The accumulateddeferredtaxliabilityisadjusted have conductedtheiroperationsoncommission REPORTED INPARENT COMPANY ACCOUNTS , . ab has beenaddedasacommission- . , hasbeencancelledasper ab and EricssonTelecom ab rr and theParent from the
iii · financial information 61 iii · financial information 62 and tangibleassets Gains onsalesofintangible and otheroperatingrevenues Commissions, licensefees Europe*, MiddleEast,Africa Europe*, MiddleEast,Africa Net losses(–)onsales and otheroperatingrevenues Commissions, licensefees Losses onsalesofinvestments and operations Gains onsalesofinvestments and tangibleassets Losses onsalesofintangible Asia Pacific Latin America North America Asia Pacific Latin America North America of tangibleassets PARENT COMPANY and operations CONSOLIDATED 2 ment NetworkOperatorsandServiceProviders. Parent Companysalesaremainlyrelatedtobusinessseg- Total CONSOLIDATED Business Segments OfwhichEU OfwhichSweden ** * Total** PARENT COMPANY OfwhichEU OfwhichSweden ** * Total** CONSOLIDATED Market Areas 1 Network OperatorsandServiceProviders Less: intersegmentsales Other operations Enterprise Solutions Consumer Products Other operatingrevenues Net salesbymarketarea and businesssegment 115,065 215,403 10,907 44,900 30,263 25,175 15,375 80,345 3,210 1,733 2,159 2,036 8,047 2,346 7,551 3,155 2,224 1999 1999 1999 1999 –244 –397 307 825 273 –55 215,403 167,740 184,438 149,943 –15,079 13511,171 11,315 83,490 97,456 28544,010 21,267 42,885 18,973 25,537 18,560 68616,217 16,836 64,244 71,094 16,750 17,345 46,444 ,3 2,398 2,735 64 1,208 2,579 2,185 2,957 2,362 ,0 6,064 3,789 7,903 2,062 9,320 8,509 ,6 2,368 2,666 981997 1998 1999 1997 1998 1997 1998 981997 1998 33–159 –303 74–65 –764 6 1,017 765 0 282 202 9 866 995 6 –30 –69 99 89 184,438 123,219 –13,749 15,170 14,561 45,237 1998 Other interest incomeand in subsidiaries Result from participations Financial Income as fixedassets receivables accountedfor Result from securitiesand Financial Income in associatedcompanies Result from participations iaca e –698 PARENT COMPANY Financial Net Total financialexpenses similar profit/loss items Interest expensesand Financial Expenses Total financialincome similar profit/loss items CONSOLIDATED 3 are includedintheinterestexpensesshownabove. 7,713 Swedish companies’interestexpensesonpensionliabilities Ofthetotalamount,SEK–4m.in1999,–1501998,–105 ** Dividendsfrom EricssonCablesHoldingABamountingtoSEK 1,420m.in * Financial Net Total financialexpenses Other financialexpenses in subsidiaries Losses onsalesofparticipations Financial Expenses Total financialincome and similarprofit/loss items Other interest income as fixedassets and receivables accountedfor Result from othersecurities and similarprofit/loss items Interest expenses in associatedcompanies Losses onsalesofparticipations 1997 isattributabletohedgeofnetinvestmentsinforeign subsidiaries. the company. 1998 hasbeenreported net ofaSEK1,420m.write-downtheinvestmentin Dividends* Dividends Net gainsonsales Other** Net gainsonsales Subsidiaries Subsidiaries Other Financial incomeandexpenses 1,426 7,750 2,971 2,971 2,273 2,202 9,915 1,365 1,197 1999 1999 122 847 109 553 123 887 9 2 - - ,2 4,326 4,026 ,6 2,365 2,365 2,465 2,465 2,413 2,228 ,3 1,922 1,336 ,4 1,827 1,942 6,223 6,052 ,0 859 1,104 981997 1998 1997 1998 ,1 4,396 4,110 9 491 892 6 7 468 5 1,183 658 9 650 892 2 888 824 2748 –237 16 11 NOTES 654 21 2741- -2 Income taxpaid oa 6 6 ,1 10,548 9,519 765 –31 44 127 –3,181 264 –1,617 2 –83 –405 100 –20 122 –850 –2,527 –959 –1,159 8 –684 –23 10 –424 –65 13,729 3 –30 –112 11,136 5,373 9 1,170 4,372 110 52 Total –1,144 –390 –136 8,881 Closing balance 745 –258 –117 Translation 7,078 difference fortheyear 1,423 Sales/disposals –10 and soldcompanies 505 –15 Balances regarding acquired 256 –4 Depreciation fortheyear Opening balance Accumulated Depreciation 1,298 –117 Closing balance Translation difference fortheyear Sales/disposals and soldcompanies Balances regarding acquired Acquisitions Opening balance Acquisitions Cost 33 170 CONSOLIDATED 26 14 88 6 sek Amount The ParentCompany’s deferredtaxesfortheperiodamountto 2005 orlater 2004 137 2003 2002 2001 2000 Year ofexpiration percent. AtDecember hood thattheywillbeusedisdeemedtogreaterthan attributable tounutilizedlosscarryforwards,ifthelikeli- assets andliabilitiestheirtaxvalues. able totemporarydifferencesbetweenthebookvaluesof reserves. TheCompanyalsoreportsdeferredtaxesattribut- Company reportsdeferredtaxesattributabletountaxed As explainedunderAccountingPrinciples(K),the Tax onprofit fortheyear Income taxdeferred CONSOLIDATED 4 lized losscarryforwards. the followingtable.TheParentCompanyhadnounuti- which theselosscarryforwardscanbeutilizedareshownin lized losscarryforwardsof NOTES In addition,theCompanyreportsdeferredtaxassets m., sek – m. , theCompanyhadtotalunuti- Income taxesfortheyear sek and rdmrspurchased trademarks n iia research and and similar –4,756 –4,358 sek iess Patentsand Licenses, 1999 m. Thefinalyearsin 398 ihsdvlpetGowl Total Goodwill development rights m. 524–6,551 –5,214 549–5,755 –5,409 981997 1998 15796 –195 . 468 Interest expensesonconvertible Net income Earnings pershareEarnings dividend element(millions) and stockissueincluding outstanding afterfullconversion Average numberofshares Net incomeafterfullconversion debentures, netofincometaxes CONSOLIDATED 5 oa 56 –401 Total Closing balance PARENT COMPANY ae/ipsl - –379 –22 457 Sales/disposals - - Depreciation fortheyear Opening balance Accumulated Depreciation 457 Closing balance Sales/disposals Acquisitions Opening balance Acquisitions Cost 1,996.9 12,130 12,315 Earnings pershare 1999 6.17 185 Intangible assets ,9. 1,974.4 1,996.9 30111,941 13,041 33611,996 13,306 trademarks and 981997 1998 .66.08 6.66 6 55 265 similar rights licenses, Patents,
iii · financial information 63 iii · financial information 64 elsiiain 4 9 4 165- –3,425 9,121 –1,675 –60 2,149 47,475 642 –1,901 1,210 4,034 309 691 –1,435 22,386 2,401 24 342 –29 14,438 537 143 9,441 195 –53 Reclassifications Sales/disposals Balances regarding acquired andsoldcompanies Acquisitions Opening balance Acquisitions Cost oa 0 73418828 6 118 –147 - 157 - 354 - - –4 842 –1,393 47 ------–296 –1,939 309 0 - 369 2,215 - - –952 - 331 - 6 118 224 –222 –2,561 –147 4,407 –378 –205 –1,078 65 –175 157 - 130 1,306 142 291 –398 –63 –45 306 –542 446 ment withatotalbookvalueof 24,719 425 0 During theyearParentCompany hassoldtootherSwedishEricssongroupcompanies,land,buildings andotherequip- 2 –82 1,576 –4 –463 - 1,628 –46 Total –100 - 463 - 366 Closing balance 523 –22 92 1 Sales/disposals 9,013 Depreciation fortheyearonrevaluations 3 –1,744 - Opening balance - - Accumulated Revaluations,Net –53 2,017 1 6,131 - Closing balance Sales/disposals - 2,944 - –28,399 2 - Depreciation fortheyear - 7,947 Opening balance - 415 - - Accumulated Depreciation - Closing balance - 303 - - - Reclassifications - –6,515 –25,422 Sales/disposals 337 –15,990 –83 Acquisitions 1,827 179 Opening balance - - Acquisitions Cost 52,812 - 203 –9,980 461 - PARENT COMPANY –335 –22 - 1,114 1,628 –668 –14,799 –3,730 –2,429 116 –2 –53 3 25,000 Total –20 172 –8,440 –2,442 Closing balance Translation difference fortheyear 96 16,111 Sales/disposals –2,183 –304 Depreciation fortheyearonrevaluations 7 –343 Revaluations fortheyear Opening balance 10,073 Accumulated Revaluations,Net –179 Closing balance - Translation difference fortheyear Reclassifications –165 Sales/disposals Balances regarding acquired andsoldcompanies Depreciation fortheyear Opening balance Accumulated Depreciation Closing balance Translation difference fortheyear CONSOLIDATED 7 sek , m. adadOhradvance Other Land and adadOhradvance Other Land and ulig ahnr qimn amnsTotal payments equipment Machinery buildings ulig ahnr qimn amnsTotal payments equipment Machinery buildings Construction Construction in process in process Tangible assets and and NOTES elsiiain 3- - –3 - 1 3 –51 - - 46 6 - - 974 94 19,262 1,789 Reclassifications Write-downs 3,426 Revaluations fortheyear Shareholders’ contribution Acquisitions andstockissues Opening balance Investments ae 6 2 - –26 53 –65 1,039 24,364 Closing balance Sales –79 2,712 32 PARENT COMPANY –131 –109 250 in 2,777 –28 Goodwill, net,constitutes Closing balance Sales Acquisitions Dividends Translation difference fortheyear Taxes Share inearnings Opening balance EQUITY INASSOCIATED COMPANIES 8 the equitymethodwere ments. NOTES Dividends receivedfromcompaniesaccountedforunder . sek sek iire aisments panies sidiaries m. in u-cm invest- com- Sub- m. ( ) oftheinvest- itdOther ciated and Asso- sek m. pnn aac 5- - - –5 2,129 –50 –921 –826 127 8,072 –230 2,052 Write-downs fortheyear 285 Acquired allowances Opening balance Accumulated Write-Downs 8,017 Closing balance Sales/repayments Acquisitions/credits granted Opening balance Acquisitions Cost oa ,5 ,5 4,972 6,657 1,751 –128 –47 –2,856 –12 5 2,656 –24 –62 39 –1,645 –20 –3,847 –39 - Total –12 Closing balance Translation difference fortheyear Sales/repayments Write-downs fortheyear Opening balance CONSOLIDATED oa ,2 2,129 - 6,320 –1,752 Total Closing balance PARENT COMPANY Ofwhichdeferred taxassetsSEK964m.(SEK7891998). 2 Write-Downs are includedinSellingexpensesduetothecloserelation to 1 lsn aac 1-- - - - 21 21 5,100 9,513 –754 1,742 Accumulated Write-Downs 84 2,926 –6,307 Closing balance –270 7,582 2,844 Opening balance –88 Accumulated Revaluations 1,456 8,326 –31 587 Closing balance Translation difference fortheyear Sales/repayments Acquisitions/credits granted Opening balance Acquisitions Cost operations. 1 net ia-receiv- finan- invest- ogtr Other Long-term et igables cing ments te utmrterm customer Other utmrlong-term customer iacn receivables financing Financial assets ogOther Long emlong- term 2
iii · financial information 65 iii · financial information 66 ITlrcPyLd utai 0 099 20 10 572 100 5 n/a Australia 100 100 25 Argentina Mexico China BeijingEricssonMobileCommunicationCo.Ltd. Teleric PtyLtd. I II Teleindustria EricssonS.A. CíaEricssonS.A.C.I. I I I BL rcsnFnn 50885 wdn90 Sweden - 556008-8550 194 - 4 105 757 156 18,421 950 74 341 100 88 100 72 195 485 3,924 39 216 100 Switzerland 100 ABLMEricssonFinans 662 Norway 81 UnitedStates 80 144 III Italy 90 Associated Companies 100 Russia 60 UnitedKingdom 100 100 100 48 100 5 Germany 6 100 Ireland France 800 Finland Denmark 5 14 2 Austria 1,122 100 969 145 105 100 - 100 Hungary 100 455 47 67 EricssonHoldingIIInc. 108 Sweden 100 Sweden 41 - 102 100 II 100 EricssonHoldingLtd. 100 EricssonAG 97 1 II 100 EricssonCorporatioAO Sweden 20 85 I 556326-0552 EricssonA/S - 556030-9899 100 Sweden I 636 EricssonS.p.A. 516 Sweden I 60 Sweden EricssonTreasury Ireland 17 Ltd. 100 II EricssonCommunicationsSystemsHungaryLtd. value 100 556381-7666 100 151 50 Sweden III EricssonGmbH 361 556329-5673 100 335 I EricssonFranceS.A. value 556044-9489 10 I Sweden OyLMEricssonAb Sweden 30 556018-0191 Sweden II Sweden LMEricssonA/S 360 100 100 I 556329-5657 EricssonAustriaAG Sweden ship I 100 I 556381-7609 556212-7398 100 EricssonCredit AB 556250-2046 556250-9454 100 Sweden Sweden EricssonTreasury ServicesAB Domicile III LMEricssonHoldingAB 556251-3258 III Sweden EricssonCablesHoldingAB Sweden II ABAulis Sweden II SRACommunicationAB 556251-3266 556056-6258 II EricssonSoftware Technology AB Reg.No. II EricssonBusinessConsultingAB 556137-8646 I 556028-1627 EricssonSverigeAB 556090-3212 I EricssonRadioAccessAB I EricssonMobileCommunicationsAB I EHPTSwedenAB I EricssonTelecom AB I EricssonRadioSystemsAB I EricssonMicrowave SystemsAB I EricssonBusinessNetworksAB I EricssonUtvecklingsAB I I Subsidiaries Company Type SHARES DIRECTLY OWNEDBYTHEPARENT COMPANY Swedish AnnualAccountsActandfiledwiththe listing ofshareholdings,preparedinaccordancewiththe directly andindirectlybytheParentCompany. Acomplete The followinglistingshowscertainshareholdingsowned 9 rcsnNkl el rai 916330 196 49 Croatia EricssonNikolaTesla I I rcsnPoetFnneA 50853 wdn91 Sweden 556058-5936 EricssonProject FinanceAB III rcsnTia t.Tia 01019 2 160 2 80 1 49 4 105 100 76 - Taiwan Thailand 525 2 China 11 100 100 70 51 India Singapore Malaysia China Ericsson(Thailand)Ltd. EricssonTaiwan Ltd. I EricssonTelecommunications Pte.Ltd. I EricssonTelecommunications Sdn.Bhd. I EricssonCommunicationPrivate Ltd. I NanjingEricssonCommunication Co.Ltd. I EricssonLtd. I I te te onre 645 - - Othercountries Other Other te ntdSae,LtnAeia--134 - - UnitedStates,LatinAmerica Other te uoe(xldn wdn 103 - - Europe (excludingSweden) Other Other Control, Telefonaktiebolaget LMEricsson,CorporateFinancial request to: Patent andRegistrationOffice,maybeobtainedupon se - wdn--710 - - Sweden Stockholm, Sweden. Percen- we-PrCarrying Par owner- tage of oa 1,039 - Total 24,364 - Total 158 - - 5) 4) 3) 2) 1) Investments 2 510 425 941 29 4 15 536 10,591 - NOTES Inventories, net 21 Less advancesfrom customers 90 100 100 UnitedKingdom 98 100 100 100 100 10 Japan Australia 100 100 100 Mexico 100 exchange inItaly. 100 Brazil USA The subsidiary, EricssonS.p.A.,islistedontheMilanstock USA USA Turkey 100 Malaysia USA 72 100 UnitedKingdom Spain 100 Canada Financecompanies III 100 Holdingcompanies II USA 100 Manufacturing,distributinganddevelopmentcompanies I SymbianLtd. KEY TOTYPEOFCOMPANY 100 100 EricssonAustraliaPty. Ltd. I Italy TheNetherlands ofownership EricssonMobileCommunicationsSdnBhdMalaysia Associated Companies UnitedKingdom NipponEricssonK.K. TheNetherlands I EricssonTelecom S.A.deC.V. TheNetherlands I EricssonTelecomunicações S.A. I EricssonTelekomunikasyon A.S. I EricssonIPInfrastructure Inc. Domicile Sweden I EricssonWireless CommunicationInc. Sweden I EricssonWebCom Inc. I EricssonNetQualInc. I EricssonInc. I AdvancedComputerCommunicationsInc. I EricssonCommunicationsInc. 556000-0365 I EricssonMobileCommunications(U.K.)Ltd. Reg.No. 556577-4469 I EricssonLtd. I EricssonEspañaS.A. I EricssonTelecommunicatie B.V. I EricssonHoldingNetherlandB.V. I B.V. EricssonHoldingInternational I EricssonTelecomunicazioni S.p.A. II LMEricssonLtd. II METS.A. I EricssonS.A. I EricssonComponentsAB I EricssonCablesAB I I I Subsidiaries Company Type SHARES OWNEDBYSUBSIDIARIES 9 Contract workinprocess for resale Finished products andgoods Manufacturing workinprocess and consumables Raw material,components NOTES 25,701 13,398 13,324 –4,816 1,972 1,823 osldtdCompany Consolidated 1999 26,973 11,643 10,696 –2,648 4,356 2,926 1998 Inventories 1999 952 774 105 104 –31 - Parent 1,607 1,152 1998 388 –43 80 30 5 4 3 2 1 Ericsson’s shareofthemarketvalueasperDecember Voting poweris49%. Voting poweris40%. of Ericsson(Thailand)Ltd. Through subsidiaryholdings,totalholdingsamount to 100% voting powerisinexcessof50%. Beijing EricssonMobileCommunicationsCo.Ltd.,butthe Through subsidiaryholdings,totalholdingsamount to49%of of EricssonHoldingIIInc. Through subsidiaryholdings,totalholdingsamountto 100% , was sek , , m. rne100 100 France France rln 100 Ireland S 100 USA Investment, continued Percentage ,
iii · financial information 67 iii · financial information 68 Commercial receivables Current Receivables Financial receivables Long-Term Receivables* Other 13 Includingnon-interest bearingreceivables andliabilities,net,amountingto * Financial liabilities Commercial liabilities Current Liabilities Financial liabilities Long-Term Liabilities* Financial receivables PARENT COMPANY 12 , Allowance fordoubtfulaccountsamountingto associated companies 11 Deferred taxassets for potentiallossesofapoliticalnature. risk evaluations.Theallowancedoesnotincludeprovisions includes amountsforestimatedlossesbasedoncommercial Company whichhasreducedtheamountsshownabove, associated companies Receivables in Notes andaccountsreceivable Prepaid expenses Receivables from Advance paymentstosuppliers Accrued revenues n iblte a loaiea ie.. and liabilitiesmayalsoariseattimes. SEK 11,772m.(8,191).Interest-free transactionsinvolvingcurrent receivables m. ( , ) and sek Accounts receivable–trade Receivables andpayables m. ( 18,255 63,584 31,227 63,380 3,413 2,358 3,231 3,083 osldtdCompany Consolidated osldtdCompany Consolidated 1999 1999 204 887 Other receivables ) intheParent 11,868 53,900 22,589 53,775 3,275 3,057 1,990 1,695 – subsidiaries 1998 1998 125 704 17,925 23,305 22,336 19,347 25,601 2,989 2,296 3,454 1999 sek 6,407 2,402 9,184 1,828 2,292 1999 1999 110 283 651 15 - 12,329 15,968 18,617 16,219 17,448 Parent Parent 2,398 1,480 2,821 4,248 2,544 7,618 2,907 2,535 1998 1998 1998 190 272 9 1 - hrs(a au E .0 6,5,6 410 164,054,660 A shares (parvalueSEK2.50) (par value reserve shallbereducedcorrespondingly. reserve. Whenassetsaresoldordiscardedtherevaluation stock issue/stocksplitorbeappropriatedtoarevaluation book value.Revaluationamountsmusteitherbeusedfor have areliableandlastingvaluesignificantlygreaterthan ble andfinancialassetsmayberevalued,providedthey restricted reserves,notavailablefordistribution,arereported. tain othercountriesinwhichtheCompanyisoperating, In accordancewithstatutoryrequirementsinSwedenandcer- Reserves notavailablefordistribution thousandth ofonevotepershare. per sharewhileClassBsharesareentitledtoone Company. ClassAshares,however, areentitledtoonevote participation inthenetassetsandearningsof es: ClassAshares(parvalue 4,483 The capitalstockoftheCompanyisdividedintotwoclass- 1,793,083,861 B shares (parvalueSEK2.50) following: Capital stockatDecember Capital stock 14 Taxes –2,115 288 –2,403 Closing balance Changes incumulativetranslationadjustment Opening, balance Cumulative translationadjustments in investments inforeignsubsidiares, in Brazil), culation ofgoodwillinlocalcurrency(excluding goodwill) inBrazil, change incumulativetranslativeadjustments(including Financial income Cost ofsales following itemsintheconsolidatedincomestatement: cial statementsofintegratedcompaniesareincludedinthe dated companies. According totheSwedishAnnualAccountsAct,tangi- Changes incumulativetranslationadjustmentsinclude Currency gains/lossesresultingfromtranslationoffinan- ) and sek sek sek . m. ( ). Bothclasseshavethesamerightsof m., netgain/loss(–)fromhedgingof sek sek – , sek , m. in Stockholders’ equity m. changeregardingrecal- ,5,3,2 4,893 1,957,138,521 . usadn parvalue outstanding , consistedofthe sek Number of ) andClassBshares shares Aggregate ) fromsold/liqui- m. ( 1999 –11 51 65 –3 sek NOTES – 1998 m. 46 14 34 –2 nagbeast 1-11 - 11 Intangible assets In ExcessOfPlan Accumulated Depreciation oa nae eevs3062305,406 2,320 1,747 5,283 127 123 529 2,691 112 3,086 –127 –371 3,409 5,566 –371 2,289 1,218 5,566 2,592 Total UntaxedReserves 254 494 Total 5,566 otheruntaxedreserves Income deferralreserve 1,120 483 - Reserve fordoubtfulreceivables Tax equalizationreserve Other UntaxedReserves - 32,835 in excessofplan 16,300 Total accumulated depreciation 16,200 Tangible assets - 100 16,535 - PARENT COMPANY 1999 9,681 20 12,130 - 15 12,130 1,941 - - 4,893 69,176 31,665 - 1 37,511 December 31,1999 Net income1999 31,329 - 1,289 - 4,893 PARENT COMPANY subject totaxationwhentransferredSwedenandthat,in should benotedthatearningsinforeigncompaniesmay tors. Inevaluatingtheconsolidatedfinancialposition,it the proposalsofrespectivecompanies’boardsdirec- reserves notavailablefordistribution,inaccordancewith Of retainedearnings, December 31,1999 Net income1999 CONSOLIDATED Changes instockholders’equity 14 tc iiedsae 1 –3,905 - –3,905 –15 –3,905 - - - - 284 - - - 75 - - 75 1 - - –15 - 30,904 1 - - 14,564 - 14,464 –75 - 100 284 - - - 16,340 - - - 9,680 –75 –15 95 - - - - 1,687 269 4,878 - Dividends paid 15 stock dividendshares Proceeds from unclaimed Reversal ofrevaluation reserve Capital discount Conversion ofdebentures January 1,1999 dutet 243–,0 –2,403 - 1 –3,905 –7 –3,905 –36 –2,403 - - - –2,403 - - - 284 1 - –6,741 –7 –36 - 6,741 - 1 –36 –7 63,112 - 6,727 284 30,181 - - - 32,931 14 269 - 26,778 - - - - - 1,275 4,878 15 adjustments Changes incumulativetranslation restricted andrestricted reserves Transfer betweennon- Revaluation offixedassets Dividends paid stock dividendshares Proceeds from unclaimed Capital discount Conversion ofdebentures January 1,1999 1996 andprioryears’share premium isincludedinStatutory reserve. NOTES continued sek m. willbeappropriatedto a.1wtdaas– Dec.31 withdrawals(–) Jan. 1 aia rmu inSauoyrsrce inrtie restricted retained tion restricted Statutory tion premium Capital tc reserve stock Allocations/ hr eau-TtlDsoi te Non- Other Disposi- Total Revalua- Share 1 aia rprinrsrce etitdrestricted Restricted restricted proportion Capital eev eev qiyrsreerig equityTotal earnings reserve equity reserve reserve tc eev eevseut qiyTotal equity equity reserves reserve stock restricted stockholders’equity. adjustments havebeendistributedamongunrestrictedand ed attheyear-end exchangerate.Cumulativetranslation by currencyrestrictions. some instances,suchtransfersofearningsmaybelimited qiyOhrNon- Other Equity Consolidated unrestrictedretainedearningsaretranslat- Company in Changes inotheruntaxedreservestheParent drawal oftaxequalizationreserve, sek allocation toreservefordoubtfulreceivables, reserve sek m. ( ) andallocationtoincomedeferral m. ( consisted ofthefollowing:with- ). Untaxed reserves sek m. ( );
iii · financial information 69 iii · financial information 70 ing righttodividendfor additional debenturesmaybeconverted toBsharescarry- shares. DuringtheperiodJanuary would beafurtherincreaseof ,, debentures intheamountof new stockissue,of sion priceafterstocksplit,bonusissueandadjustmentsfor te 138 4,669 for Ericssonshareholders,wasintheamountof outstanding. One,issuedin The ParentCompanyhastwoconvertibledebentureloans Other liabilities tofinancialinstitutions Notes andbondloans more afterthebalancesheetdate: Consolidated long-termliabilitiesmaturingfiveyearsor Other 17 ing, restructuringandchangesintechiquemarkets. , other Swedishcompanies’obligationsintheamountof The pensionliabilitiesincludetheParentCompany’s and Other provisions 16 m. andcarriesinterestof ation intheamountof The ParentCompany’s pensionliabilitiesincludeanoblig- a Swedishlawonsafeguardingofpensioncommitments. Pension RegistrationInstitute( convertible uptoandincludingMay (maturing 2000) Convertible debentures (maturing 2001–2003) Notes andbondloans commitments Pensions andsimilar (maturing 2003) Deferred taxes with itsagreement Liabilities tosubsidiaries Liabilities tofinancialinstitutions ments, risksregardingoff-balancesheetcustomerfinanc- Upon conversionofalloutstanding debentures,there Other provisionsincludeamountsforwarrantycommit- m. ( B shares. , ) inaccordancewithanagreementthe sek sek . pri . , . sek per Bshare.During . percent. Thedebenturesare ,, 24,954 22,552 12,934 17,486 osldtdCompany Consolidated osldtdCompany Consolidated pri Long-term liabilities 8,398 5,453 1,220 1,448 , withpreferentialrights 1999 1999 m. ( 567 ), whicharecoveredby to February - - m. wereconvertedto , 13,068 22,284 11,840 , 4,470 8,056 5,516 2,388 1,898 1998 1998 459 725 in thenumberof ) inaccordance - Provisions 17,486 26,816 , ataconver- 5,513 2,476 3,037 5,453 3,454 1999 1999 sek 370 , 53 - - , Parent Parent 13,827 4,470 3,731 2,900 5,516 2,821 4,807 1998 1998 sek , 831 679 320 21 - , sek sold toEricssonemployees,anddebenturesamounting convertible debenturesamountingto income asinterestexpenseunderthedurationofloan. Parent Companyonly. Thiscapitaldiscountischarged to credited totheStatutoryreserveasadditioncapitalin Company’s alternativeinterestrate, Aulis. Thedebenturesheldby , , carrying rightstodividendsfor January of outstanding debentures,therewouldbeafurtherincrease were convertedto stibor The capitaldiscountisre-calculatedannually, basedon income asinterestexpenseunderthedurationofloan. recommendation with theSwedishFinancialAccountingStandardsCouncil’s the ParentCompany(Sharepremiumreserve)inaccordance capital intheconsolidatedfinancialstatementsaswell has beencreditedtotheStatutoryreserveasanaddition a marketinterestrateof bonus issue,of ing May ible toBsharesfromNovember Other 19 m. unused long-termlinesofcreditamountingto Company Company amountedto Unused portionsofshort-termlinescreditforthe drafts, bankloansandothershort-termfinancialloans. Liabilities tofinancialinstitutionsconsistofbankover- 18 1 Accrued expenses companies Liabilities toassociated of thesubscriptionperiodonJuly vertible debentureinterestrate, sek an interestdefinedas ket pricetonewemployees.Thedebentures,whichcarry amounting to Prepaid revenues Stockholm InterBankOffered Rate ,, A convertibledebentureloanintheamountof During In the In the , m. wasissuedduring B shares. intest ratechanges. m. –calculatedasthedifferencebetweencon- through January were soldtothewhollyownedsubsidiary sek Current liabilitiestofinancialinsti- , tutions andunusedlinesofcredit in thenumberofshares.Duringperiod sek consolidated accounts,theequitycomponent consolidated accounts,acapitaldiscount sek debentures intheamountof rr , ataconversionprice,afterthe m. Inaddition,theParentCompanyhad , stibor . Thecapitaldiscountischarged to m. hasbeencalculated,considering sek per share. . B shares.Uponconvertionofall , , , Other currentliabilities , percent. Thecapitaldiscount 1 ab less 41,302 12,280 27,233 osldtdCompany Consolidated . , . Ofthetotalamount, 1999 m. andfortheParent 823 966 Aulis areofferedatmar- , , . . percent, atexpiration additional debentures, sek were convertedto 31,725 20,716 percent, areconvert- 9,472 1998 , uptoandinclud- percent –hasbeen and the 598 939 , sek 5,867 3,409 1,691 1999 sek NOTES 738 m. were 29 sek , ab Parent m. 5,282 3,132 1,600 1998 546 4 m. ( received was tain conditions,itmaypledgecollateralforcertainsub- pledged assetsinfavorofsubsidiaries.However, undercer- Guarantees ae 1,074 –4,768 –592 62 203 4,297 750 62 –5,312 Acquistions/sales, net Sales Other acquisitions Cash inacquired subsidiaries Purchase price foracquired subsidiaries Other netassets Intangible assets Goodwill Cash Acquisitions/sales ofotherinvestments In Non-cash itemsin“financingactivities” sek Interest paidin 22 subsidiaries. , Of theguaranteesassumedbyParentCompany, Other contingentliabilities - 21 21 - - sidiaries’ pensionobligations. - 1,824 At December - 208 Other Bank deposits Chattel mortgages 36 Parent Company 1998 - Other 1999 customers institutions Real estatemortgages Consolidated 20 akdpst ,2 - - 1,824 - Bank deposits Chattel mortgages pension liabilitiesof activities” notreportedseparatelyiscurrentyearincreasein sek for accountsreceivable for customerfinancing NOTES Non-cash transactionunder“Cashflowfromoperating , m. in , conversionsofdebenturesweremadefor m. in sek m. ( sek , , m., and , , ). ). sek sek was , theParentCompanyhadno ofnnilfo oa Total Total from to financial Assets pledgedascollateral iblte Advances Liabilities m. ( sek Statement ofcashflows sek , , ,4 - 1,845 36 2,032 10,127 1,104 7,497 1,526 m. ( 1999 , osldtdCompany Consolidated Contingent liabilities m. in ). Incometaxespaidwere m.). sek m. ( 4,034 8,063 4,029 1998 , m. in - are relatedto 11,611 ) andinterest 1,000 6,756 3,855 1,845 2,068 1,824 1,824 1999 208 21 36 sek - - sek Parent and 2,155 6,968 4,813 1,203 1998 160 373 402 208 369 249 212 34 - distributed asfollows: 031 991 1,311 1,629 17 1,995 39 95 107 873 2004 16 2003 2002 2001 2000 294 es weredistributedasfollows: At December Net value Other equipment 1999 Other equipment Machinery Land andbuildings Acquisitions Cost Financial Leases consists of: Assets underFinancialleases,recordedastangibleassets, Leasing obligations 23 e netet1 81 - 17 –1 - Net investment Less: interest 2005 andlater Operating leasesamountedto 2,902 vary inlengthfrom phone exchanges,tocustomers.Theseleasingcontracts 120 Some consolidatedcompaniesleaseequipment,mainlytele- Leasing income Expenses fortheyearleasingofassetswere 2005 andlater 03-7 12 32 26 - 1 2 15 4 2004 - 2003 2002 2001 2000 Machinery Land andbuildings Accumulated Depreciation amounted to sek ciation amountedto m. ( which variablecost , Future paymentsreceivableforleasedequipmentare The acquisitionvalueofassetsleasedtoothersunder Net investmentinSales-typeleasesandFinancial sek m. and (December : m. atDecember , sek sek sek m. in , m.). , m., respectively). sek sek m. atDecember to , futurepaymentobligationsforleas- iaca essleases Financial leases : ae-yead Operating Sales-type and sek and , years. m. m. andnetinvestmentsto sek sek (December m.). Accumulateddepre- , iaca Operating Financial 881 18 m. atDecember essleases leases , m. in 9 9,701 394 (December sek , 215 291 238 141 532 71 26 26 Leasing ), of , : sek 1998 321 191 196 146 387 41 25 25 25 ,
iii · financial information 71 iii · financial information 72 24 capitalized softwareforinternaluseofthreetofiveyears. period forcapitalizedsoftwaretobesoldofthreeyearsand for itsintendeduse.Thecompanyhasadoptedanamortization tion ceasesandamortizationbeginswhentheproductisready reached acertaindegreeoftechnologicalfeasibility. Capitaliza- development costsarecapitalizedaftertheproductinvolvedhas ed orObtainedforInternaluse”.Accordingtothesestatements - effects ofthecapitaldiscountarereversed. lating incomeandequityinaccordancewith loans arereportedasliabilitiesatnominalvalue.Whencalcu- been reclassifiedtonon-commercial. ued atmarket.Accordingto ing practice,bothkindsareconsidered hedgesandarenotval- regarding salesandpurchases.According toSwedishaccount- as hedgesoffirmcommitmentswell asbudgetedcashflows Ericsson hascurrencyforwardexchange contractsandoptions Hedge accounting (D) Other details.) Inaccordancewith count, iscrediteddirectlytoequity. (Pleaserefertonote rate. Thedifferencefromthenominalamount,capitaldis- payments arevaluedatpresentvalue,basedonmarketinterest ⁄ In accordancewithSwedishaccountingprinciples,the (C) CapitalDiscountonConvertibleDebentures 1999 period oftime. some finishedprojectshavebeenamortizedonlyforashort couple ofprojectsarenotreadyfortheirintendeduseand The amortizationislowcomparedtothecapitalizationsincea Amortization Captalization use for internal Development costsforsoftware 1999 to Write-downs ofpreviouslycapitalizedsoftwarecostsamounting Write-downs Amortization Captalization to besold Development costsforsoftware Otherwise Marketed”andeffective ting fortheCostofComputerSoftwaretobeSold,Leasedor development costsarecharged againstincomewhenincurred. In accordancewithSwedishaccountingprinciples,software (B) CapitalizationofSoftware DevelopmentCosts to suchitemshavebeenreversedincome. not permittedunder Revaluation ofassetsintheprimaryfinancialstatementsis allowed inaccordancewithSwedishaccountingpractice. excess ofcost.Undercertainconditions,thisprocedureis Certain tangibleassetshavebeenrevaluedatamountsin (A) RevaluationofAssets the UnitedStates( significantly fromgenerallyacceptedaccountingprinciplesin Elements oftheCompany’s accountingprincipleswhichdiffer not relatedtofirm commitmentsarevaluedatmarket. sek The Companypractices , “AccountingforthecostsofComputerSoftwareDevelop- convertible debentureloananditsnominalinterest m. hasbeenmadein Reconciliation toaccountingprinci- ples generallyacceptedintheU.S. ..gaap u.s. ..gaap u.s. u.s. gaapfas ..gaap u.s. ..gaap u.s. ) aredescribedbelow: . Depreciationcharges relating since oneprojecthas , convertibledebenture , ithasadopted –4,460 , contractsandoptions 1,463 7,898 1,311 2,449 –152 –989 No. ..gaap u.s. 384–3,934 –3,824 ,7 5,232 7,170 ,4 1,298 3,346 981997 1998 1997 1998 “Accoun------sop , the for ment wasvaluedat research anddevelopment.Thein-processdevelop- In In-process researchanddevelopment amortized overtheeconomiclifeofeachasset. be appliedasareductionofnoncurrentassetsacquiredand In accordancewith financial statements,AccountingPrinciples(B)andNote to incomeoveronaverage shown negativegoodwillasadeferredcreditwhichisreleased When applyingSwedishaccountingpractice,theCompanyhas Business combinationadjustments income. Deferred taxiscalculatedonall (G) Deferred IncomeTaxes Such costsaretobecapitalizedinaccordancewith financing ofexpendituresforconstructiontangibleassets. has expensedinterestcostsincurredinconnectionwiththe In accordancewithSwedishaccountingpractice,theCompany (F) CapitalizationofInterest Expenses ingly, theCompanymaynotchangethese. assumptions areestablishedbythisinstitutionand,accord- Sweden participate.Thelevelofbenefitsandactuarial for Swedishindustry( plans areadministeredbyaninstitutionjointlyestablished as certainemployeesinforeignsubsidiaries.TheSwedish principle coverallemployeesofitsSwedishoperationsaswell The Companyparticipatesinseveralpensionplans,which (E) Pensions with income fortheperiodwhencalculating incomeinaccordance income fortheperiodinaccordancewith income portionofthesalesproceedswererecognizedin canceled therentalcontractonproperty. Consequently, the and ifleasingcostsdidnotexceednormalmarketrates. had tobemadeifthesalepricedidnotexceedmarketvalue Swedish accountingpracticeatthetime,nodeferralofprofit ceeds arethereforetreatedasaliability. Inaccordancewith financing arrangementandthegainsaredeferredpro- subsidiaries undercontractsexpiringin In Sale-leaseback ofproperty accrue forwithholdingtaxesonpossiblerepatriationofprofits. method. Under nies whichareconsolidatedapplyingtheequityaccounting made forwithholdingtaxesonundistributedprofitsofcompa- In accordancewithSwedishaccountingpractice,noaccrualis Tax onundistributedearningsinassociatedcompanies was charged toexpenseunder reached technologicalfeasibilityandhasnoalternativeuseit had thefollowing approximate effectsonconsolidated net tization amountingto amounting to and depreciatedastheassetsconcerned.Capitalization is distributedovertheestimatedremainingserviceperiod. pension liabilitiesalreadybookedattheintroductionin reflect futurecompensationlevels.Thedifferencerelativeto assumptions, andthatthecalculationofobligationshould this recommendationprincipallyrelatetotheactuarial according to Employer’s AccountingforPensions,whencalculatingincome , Application of Effective Under During u.s. gaap. , groupcompaniessoldapropertywhichwasleasedto the Companyacquiredtechnologyincludingin-process ..gaap u.s. ..gaap u.s. sek ..gaap u.s. , Ericssonwaiveditsoptiontorepurchaseand , theCompanyhasadopted ..gaap u.s. ..gaap u.s. sek , thesaleduring m. ( pri sek . TheeffectsfortheCompanyofusing ) inwhichmostcompanies , thecompanyholdingsharesshould – m. Sincethistechnologyhasnot ) hasincreasedincomeandamor- u.s. gaap. , negativegoodwillshouldfirst as describedabovewouldhave m. ( years (seealsoNotestothe ..gaap u.s. ) wascharged against u.s. is considereda adjustments to . fas gaap No. NOTES ..gaap u.s. . , ). , per share inaccordance Approximate income debentures Capital discountonconvertible development costs Capitalization ofsoftware Depreciation onrevaluation ofassets Items increasing reported netincome in accordance withU.S.GAAP Approximate comprehensive income Total othercomprehensive income Deferred incometaxes for sold/liquidatedcompanies Cumulative translationadjustments Cumulative translationadjustments Other comprehensive income in accordance withU.S.GAAP Aproximate netincome COMPREHENSIVE INCOME in equity, exceptthoseresultingfromtransactionswithowners. Comprehensive incomeincludesnetandotherchanges dance with The companyhaspresentedcomprehensiveincomeinaccor- (I) Comprehensive income included inothercomprehensiveincome. Equity Securities”.Unrealizedgainsandlossesshallbe No. values shallbemeasuredatfairvalueinaccordancewith securities availableforsalethathavereadilydeterminablefair are valuedatlowerofcostandmarket.Under In accordancewithSwedishaccountingprinciplesinvestments securities (H) Unrealized gainsandlossesonavailable-for-sales with U.S.GAAP, fullydiluted fully diluted Reported incomepershare, in accordance withU.S.GAAP Approximate netincome consolidated incomestatements Deferred incometaxes Other ADJUSTMENT OFNETINCOME effect ofminorityinterests. reported netincome,considerationhasbeengiventothe arriving attheindividualitemsincreasingordecreasing income andstockholders’equity. Itshouldbenotedthat,in Minimum pensionliability available-for-sale securities Unrealized gainsandlosseson Hedging forinvestments net afterdepreciation Capitalization ofinterest expenses, Net incomeasreported inthe Net increase innetincome Pensions Items decreasing reported income for internal use for internal to besold NOTES “Accounting forCertainInvestmentsinDebtand fas No , “Reporting ComprehensiveIncome”. 18,928 15,239 15,239 12,130 –2,403 –2,442 1,311 2,449 3,689 1,251 8,527 3,109 1,737 4,846 1999 7.68 6.17 116 942 416 –47 28 53 70 1 u.s. gaap 62813,660 16,288 12,848 15,539 12,848 15,539 11,941 13,041 ,4 1,298 3,346 ,9 907 2,498 1,126 3,308 981997 1998 11–207 –191 17–86 –107 2172 –211 .76.53 7.87 6.08 6.66 2 13 120 4 812 749 904 732 137 954 1 219 810 322 33 024 30 4–30 94 710 67 ------fas development costs Capitalization ofsoftware Increases after cumulativedepreciation Capitalization ofinterest, net Pensions available-for-sale securities Unrealized gainsandlosseson ACCORDING TOU.S.GAAP ADJUSTMENT OFCERTAIN BALANCESHEETITEMS according toU.S.GAAP Deferred incometaxes Other ADJUSTMENT OFEQUITY as perU.S.GAAP Cash andcashequivalents maturity of4–12months Adjustment foritemswith 1999 cash andbank,asreported Short-term cashinvestments, Consolidated, SEKm. the statementofcashflows. The Companyinprinciplefollows nies. Provisions includethetaxeffectinassociatedcompa- ofundistributedearnings Other current liabilities 1999 Intangible assets SEK m. convertible debentures Capital discounton Revaluation ofassets Reductions Approximate equity Reported stockholders’equity stockholders’ equity, net Adjustment of Convertible debentures Provisions Minority interest inequity Other receivables Other investments Tangible assets adjustments ofreportedcash: months. Applyingthisdefinitionwouldmeanfollowing be consideredcashandequivalents,ratherthanwithin short-term investmentswithduedateswithin to besold for internal use for internal According to fas No. , however, onlycash,bankand Dec 31 41,302 10,548 22,552 31,227 24,719 sprrpre Asper As perreported 19,277 29,008 –9,731 5,453 2,182 1,751 aac he U.S.GAAP balance sheet fas Dec 31 31,725 22,284 22,589 22,516 2251,2 10,664 14,123 12,255 19,060 29,127 18,233 13,193 85,616 24,109 69,176 16,440 598–504–8,396 –15,004 –5,978 No. 6,241 2,051 1,438 6,354 8,527 1,311 6,731 7,669 1998 9819 1996 1997 1998 1999 202 422 454 566 372 Dec 31 when preparing 40,902 30,489 33,133 10,278 24,544 24,828 0747,398 10,744 03857,364 70,318 1448,106 11,414 31252,624 63,112 6,019 2,177 months shall 1999 ,9 2,138 3,092 ,0 4,740 7,206 ,0 3,366 4,208 981997 1998 48–305 –488 7 339 273 674 885 8 803 682 425 434 -- -- Dec 31 32,143 25,646 23,745 22,256 17,098 6,923 2,021 1,438 1998
iii · financial information 73 iii · financial information 74 Social securityexpenses Wages andsalaries Land andlandimprovements Of whichpensioncosts Wages andsalariessocial securityexpenses Of whichEU Of whichSweden Asia Pacific PARENT COMPANY Of whichEU Of whichSweden Asia Pacific CONSOLIDATED Average numberofemployees 27 chase ofhousingandprivatecars. Consolidated companieswerecustomersfor , Sales oftheParentCompanywere 26 Buildings 25 of Savings Fund. employees forthepurchaseofsharesinLMEricsson’s Share Latin America USA andCanada East, Africa Europe, Middle Latin America USA andCanada East, Africa Europe, Middle such companies. Company’s totalpurchasesofgoodsandserviceswerefrom of theParentCompany’s sales,while sek The ParentCompanyhasguaranteeduptoanamount Loans totaling m.), ofwhichexportsaccountedfor m. forloansobtainedbyemployeesthepur- Average numberofemployeesand 7381,6 66,236 18,868 43,193 47,368 12,939 104,966 30,254 30,664 74,302 1762,9 71,912 20,196 51,716 ,7 ,6 3,939 1,269 3,939 1,269 2,670 2,670 12,255 4,429 7,826 ,3 ,4 4,583 1,346 3,237 ,3 ,4 4,577 1,345 3,232 8,625 2,054 12,174 3,985 6,571 8,189 e oe oa e oe Total Women Men Total Women Men Total Women Men Total Women Men remuneration in sek Special informationregarding 516 ------ m. havebeenmadetoatotalof 1999 1999 11,305 37,068 Tax assessmentvalues 2,151 2,656 1999 1999 osldtdCompany Consolidated osldtdCompany Consolidated 385 the ParentCompany sek 10,952 32,226 2,605 2,557 8201,4 66,706 18,446 41,554 48,260 12,647 101,485 28,907 29,117 72,368 2351,6 72,026 19,661 52,365 1998 1998 , ,1 ,9 5,910 1,892 5,910 1,892 4,018 4,018 11,389 4,086 7,303 ,7 ,5 6,529 1,958 4,571 ,7 ,5 6,529 1,958 4,571 8,116 1,837 9,954 3,533 6,279 6,421 ( 383 ) percentofthe ------ ( m. ( 1,131 1,997 1999 1999 ( (Sweden) and 522 162 1998 1998 ) percent. 41 sek ) percent Parent Parent 1,331 2,254 1,538 1998 1998 244 722 tive effectonearningspershareof Ericsson warrants,which,iffullyutilizedwillhaveadilu- Latin America USA andCanada Europe, MiddleEast,Africa Wages andsalariespergeographicalarea agreement. The affected Exercisable 1998 Type Plan tary remunerationtokeyemployees: Swedish kronorataverageexchangeratesfortheyear. Remuneration inforeigncurrencyhasbeentranslatedto (of whichbonusandsimilar) Corporate ExecutiveVice Presidents Board ofDirectors, President and Of whichEU Of whichSweden Asia Pacific The grants forthe of other thantheirentitlementsasemployees.However, afee Ericsson employeesreceivednoremunerationorbenefits fees approvedbytheGeneralMeeting. the BoardofDirectorswithintotalamount sek The ChairmanoftheBoardDirectorsreceivedafee of thecorporateexecutiveteam Benefits paidtomembers for the The optionsforthe 1999 2000 ,, for theformerPresidentin . constituting bonusearned amounts to Executive Officerinsuchhiscapacityisentitledfor sentatives ontheBoard. been made.Inaddition,the fits, and company Presidentamountto sek President in has alsobeenmadeforabonusof sek Option planshavebeenimplementedasacomplemen- Members anddeputymembersoftheBoardwhoare The valueofthebenefits,towhichpresentChief The salaryandvalueofbenefitspaidtothepresent The salaryandvalueofbenefitspaid totheformer ,, ,, ,, In addition,theCompanyhascarried pensioncosts . ilo 99500 1999 7-year calloptions 0.7 million -ercl pin n3lt 3/03% 2,000 tivelyaftergrant 3–5yearsrespec- In3lots(30/40/30%) (number ofoptions issued byEricsson 7-year calloptions issued bythird party yEiso tivelyaftergrant 8,000 1–3yearsrespec- In3lots,1/3peryear toyear7 by Ericsson call optionsissued 12.2 million7-year not yetdecided) sek . Moreover, heisalso entitledtoagreedseverance year planisplannedtobehedgedbyaswap sek per meetingwaspaidtotheemployeerepre- plan willtakeplaceafterMarch ,, ,, constitute salary, carbenefitandotherbene- during theyear. Thisfeewasdeterminedby ,,, amount to -plan weremadeonJanuary plan ishedgedbyissuanceof constitute bonusearnedduring plan weregrantedin ceo for whichamountprovisionhas 25,998 24,415 14,308 37,068 sek to year7 1,816 6,360 2,894 1999 osldtdCompany Consolidated sek 8,905,795. when hewasPresident. amounting to has received ,,, sek . 23,627 22,380 13,301 32,226 percent. 1,642 4,806 2,151 , 1998 of which sek , NOTES 1,996 1,855 1,855 1,997 . 1999 sek earned , . Employees Provision (6) 60 1 , - - , Grants and Parent . 2,254 2,153 2,153 2,254 1998 (12) 50 - - - 75
NOTES pay up to July , , in an aggregate amount of sek principles apply to other members of the corporate execu- ,,. tive team: The following rules regarding severance pay and pen- The benefits due under the so-called itp plan apply, sion apply to persons, including the President, who are supplemented by the portion of salary and bonus exceeding member of the corporate executive team. itp, from age . In addition, the employee has the right to Severance payments are not made if an employee resigns retire with a pension at age , at the earliest. Following voluntarily. The same applies if employment is terminated which the pension is based on the current pensionable salary as a result of flagrant disregard of responsibilities. Notice at retirement and amounts to between and percent of given by the employee, when such significant structural this salary. Subject to certain conditions, this pension is also changes or other events occur that, in a determining man- paid if the employee is entitled to severance pay at age . ner, affect the content of work or the condition for respec- Costs of pensions for the former and present Presidents tive positions, is equated with notice of termination served and eight present and two former executive vice presidents by the company. Upon termination of employment, sever- amounted to sek , m. during the year. ance pay amounting to two years’ salary is normally paid. In certain cases, if the employee is years of age or older, to percent of the employees final salary, depending on age, is paid annually to age . Such payments are made currently during the pertinent period and cease at age . 28 Fees to auditors The basic security in the pension arrangements for mem- bers of the corporate executive team consists of affiliation iii · information financial with the so-called itp plan or corresponding arrangements. Price- The employee’s pension is premium-based. For the por- waterhouse- tion of a salary in excess of basis amounts, the company Coopers KPMG Others Total pays to a capital insurance an amount that is related both to Fees to auditors 31,895 3,835 7,145 42,875 the age of the executive and to the executive’s salary plus a Fees for standard bonus. Most of the member of the corporate execu- other services 101,183 17,679 - - tive team are already covered by this system. 133,078 21,514 - - As described in earlier Annual Reports, the following
Audit report
To the general meeting of the shareholders of Telefonaktiebolaget LM accounts. As a basis for our opinion concerning discharge Ericsson (publ) Corporate identity number - from liability, we examined significant decisions, actions taken and circumstances of the company in order to be able We have audited the annual accounts, the consolidated to determine the liability, if any, to the company of any accounts, the accounting records and the administration of board member or the managing director. We also examined the board of directors and the managing director of Telefon- whether any board member or the managing director has, in aktiebolaget LM Ericsson (publ) for the year. These accounts any other way, acted in contravention of the Companies Act, and the administration of the company are the responsibility the Annual Accounts Act or the Articles of Association. We of the board of directors and the managing director. Our believe that our audit provides a reasonable basis for our responsibility is to express an opinion on the annual opinion set out below. accounts, the consolidated accounts and the administration The annual accounts and the consolidated accounts have based on our audit. been prepared in accordance with the Annual Accounts Act We conducted our audit in accordance with generally and, thereby, give a true and fair view of the company’s and accepted auditing standards in Sweden. Those standards the group’s financial position and results of operations in require that we plan and perform the audit to obtain reason- accordance with generally accepted accounting principles in able assurance that the annual accounts and the consolidated Sweden. accounts are free of material misstatement. An audit We recommend to the general meeting of shareholders includes examining, on a test basis, evidence supporting the that the income statements and balance sheets of the parent amounts and disclosures in the accounts. An audit also company and the group be adopted, that the profit of the includes assessing the accounting principles used and their parent company be dealt with in accordance with the pro- application by the board of directors and the managing posal in the administration report and that the members of director, as well as evaluating the overall presentation of the board of directors and the managing director be dis- information in the annual accounts and the consolidated charged from liability for the financial year.
Stockholm, January ,
Carl-Eric Bohlin Olof Herolf Thomas Thiel Authorized Public Accountant Authorized Public Accountant Authorized Public Accountant PricewaterhouseCoopers PricewaterhouseCoopers 76
TEN-YEAR SUMMARY
MSEK 1999 1998 1997 1996 1995 Results For The Year Net sales 215,403 184,438 167,740 124,266 98,780 Operating margin 1) 17,590 19,273 18,757 10,758 8,164 Financial net –698 –237 48 412 58 Income before taxes 1) 16,386 18,210 17,218 10,152 7,615
Year-End Position Total assets 1) 202,628 167,456 147,440 112,152 90,832 Working capital 66,037 52,978 53,095 36,180 29,394 Capital employed 116,387 92,637 80,165 61,411 51,566 Tangible assets 24,719 22,516 19,225 17,754 15,521 Stockholders’ equity 1) 69,176 63,112 52,624 40,456 34,263 – after full conversion 1) 75,159 69,353 59,490 42,269 36,353 Interest-bearing provisions and liabilities 45,020 27,474 23,146 17,545 15,554
Other Information iii · information financial Earnings per share, SEK 1) 3) 4) 5) 6.17 6.66 6.08 3.64 2.92 – in accordance with U.S. GAAP, fully diluted 2) 3) 5) 7.68 7.87 6.53 4.08 3.56 Adjusted stockholders’ equity per share after full conversion, SEK 1) 3) 5) 38 35 30 22 20 Cash dividends per share, SEK 3) 5) 2.00 * 2.00 1.75 1.25 0.88 Shares outstanding – average (in thousands) 3) 5) 1,954,291 1,950,225 1,938,742 1,919,084 1,769,384 Additions to tangible assets 9,085 8,965 7,237 7,188 6,457 Depreciation 6,532 5,545 5,422 4,216 3,614 Research and development – expenses 28,330 25,189 20,906 17,467 15,093 – as percent of net sales 13.2 13.7 12.5 14.1 15.3
Ratios Return on equity, percent 1) 18.3 22.5 25.7 19.0 18.9 Return on capital employed, percent 1) 19.0 24.9 29.9 22.4 20.7 Equity ratio, percent 1) 35.2 38.9 38.7 39.1 39.6 Debt-equity ratio 1) 0.6 0.4 0.4 0.4 0.4 Current ratio 1.6 1.6 1.7 1.5 1.6
Statistical Data, Year-End Backlog of orders 83,976 78,990 77,499 63,401 48,401 Number of employees – Worldwide 103,290 103,667 100,774 93,949 84,513 – Sweden 44,040 44,979 45,360 43,896 42,022
* For 1999, proposed by the Board of Directors. Working capital
1) 1991–1992 adjusted for change in accounting principles. Current assets less current non-interest-bearing pro- visions and liabilities. 2) From 1991 adjustment is made for 1993 adoption of FAS106, Employers’ Accounting for Postretirement Benefits Capital employed Other Than Pensions and FAS109, Accounting for Income Capital employed is defined as total assets less non- Taxes. interest-bearing provisions and liabilities.
3) 1990–1994 adjusted for stock issue and 4-for-1 stock split. Earnings per share 4) 1990–1995 adjusted for stock dividend element of the stock Earnings per share is based on average number of issue in 1995. shares per year after full conversion of convertible debentures and after stock dividend element of 5) 1990–1994 adjusted for stock dividend element of the stock stock issue, i. e. dilution due to favorable stock issue issue in 1995. pricing. Net income according to the Income 6) 1990–1997 adjusted for stock issue 1:1. Statement is adjusted by reversal of interest expense for convertible debentures net of tax. 77
TEN-YEAR SUMMARY
1994 1993 1992 1991 1990 MSEK Results For The Year 82,554 62,954 47,020 45,793 45,702 Net sales 6,553 3,530 1,754 2,282 5,694 Operating margin 1) –386 8 –204 –189 –163 Financial net 5,610 3,108 1,241 1,595 4,855 Income before taxes 1)
Year-End Position 72,999 67,490 56,637 50,080 47,167 Total assets 1) 20,899 20,869 20,063 17,497 16,965 Working capital 41,611 40,168 35,842 31,539 27,906 Capital employed 13,678 12,363 11,093 10,477 9,058 Tangible assets 23,302 21,305 17,720 17,050 16,753 Stockholders’ equity 1) 25,519 23,512 18,349 17,690 17,398 – after full conversion 1) 16,522 16,868 16,321 12,913 9,366 Interest-bearing provisions and liabilities
Other Information iii · information financial 2.15 1.54 0.28 0.52 1.71 Earnings per share, SEK 1) 3) 4) 5) – in accordance with 2.65 1.86 0.76 0.91 1.98 U.S. GAAP, fully diluted 2) 3) 5) Adjusted stockholders’ equity 15 13 11 10 10 per share after full conversion SEK 1) 3) 5) 0.69 0.57 0.44 0.44 0.44 Cash dividends per share 3) 5) Shares outstanding 1,737,530 1,716,272 1,648,528 1,646,992 1,642,976 – average (in thousands) 3) 5) 5,137 3,805 3,847 3,583 3,448 Additions to tangible assets 3,004 2,651 2,193 1,863 1,572 Depreciation Research and development 13,407 10,924 7,377 7,054 4,901 – expenses 16.2 17.4 15.7 15.4 10.7 – as percent of net sales
Ratios 17.7 14.5 2.8 5.3 20.4 Return on equity, percent 1) 18.2 12.9 9.6 12.0 25.9 Return on capital employed, percent 1) 34.4 34.5 34.5 38.1 39.3 Equity ratio, percent 1) 0.7 0.7 0.8 0.7 0.5 Debt-equity ratio 1) 1.5 1.6 1.6 1.7 1.7 Current ratio
Statistical Data, Year-End 45,671 45,296 38,050 28,777 30,415 Backlog of orders Number of employees 76,144 69,597 66,232 71,247 70,238 – Worldwide 36,984 31,796 29,979 31,244 30,817 – Sweden
For earnings per share accordance with u.s. gaap, Equity ratio see Note to the financial Statements. Defined as the total of stockholder’s equity and minority interest in equity of consolidated subsidia- Return on equity ries, expressed as a percentage of total assets. Defined as net income expressed as a percentage of average adjusted stockholders’ equity (based on the Debt-equity ratio amounts at January and December ). Year Defined as total interest-bearing provisions and lia- adjusted for increases resulting from a reduction in bilities divided by the total of stockholders’ equity the tax rates used when calculating the equity por- and minority interest in equity of consolidated sub- tion of timing differences. sidiaries.
Return on capital employed Current ratio Defined as the total of operating margin plus finan- Current assets divided by the sum of current provi- cial income as a percentage of average capital sions and liabilities. employed (based on the amounts at January and December ). 78 BOARD OF DIRECTORS AND PRESIDENT 1999
LARS RAMQVIST KURT HELLSTRÖM SVERKER MARTIN-LÖF MONICA BERGSTRÖM (1938*). (1943*). (1943*). (1961*). Chairman and (as of President (from July 7). President and CEO of Employee representative. July 7) CEO. Doctor of Shares held in Ericsson: SCA. Member of the Member since 1998. Philosophy. Honorary B 5,000. Boards of the Federation Convertible debentures: Doctor of Technology. Convertible debentures: of Swedish Industries and 1997/2003: 75,520***. Honorary Doctor of 1997/2003: 145,347***. the Swedish Forest Philosophy. Chairman of Call options: 5,187. Industries Ass. CHRISTER BINNING the Boards of Skandia Member since 1991. (1946*). and Volvo. Member of the GÖRAN ENGSTRÖM Shares held in Ericsson: Employee representative. Boards of AstraZeneca (1948*). B 2,000. Member since 1994. and SCA. Member of the Employee representative. Convertible debentures: Royal Swedish Academy Member since 1994. LARS-ERIC PETERSSON 1993/2000: 750** of Sciences, the Royal Shares held in Ericsson: (1950*). 1997/2003: 145,347***. Swedish Academy of B 1,320. President and CEO of Engineering Sciences and Convertible debentures: Skandia. Chairman of the CHRISTER ÅKERLIND the European Round Table 1993/2000: 6,250**. Boards of the National (1950*). of Industrialists. 1997/2003: 99,120***. Agency for Higher Educa- Employee representative. Member since 1990. tion, the Swedish Insur- Member since 1994. Shares held in Ericsson: JAN HEDLUND ance Federation and the Shares held in Ericsson: B 7,548. (1946*). Swedish Coalition of Ser- B 88. Convertible debentures: Employee representative. vice Industries. Member of Convertible debentures: 1997/2003: 145,347***. Member since 1994. the Boards of Pohjola, the 1997/2003: 145,347***. Convertible debentures: Swedish Employers’ Con- TOM HEDELIUS 1997/2003: 75,520***. federation and the Federa- (1939*). tion of Swedish Industries. Deputy Chairman. GÖRAN LINDAHL Member since 1996. CARL-ERIC BOHLIN Honorary Doctor of (1945*). Shares held in Ericsson: Authorized Public Economics. Honorary Doctor of B 1,000. Accountant, Chairman of the Boards of Technology. (Lars-Eric Petersson PricewaterhouseCoopers. Handelsbanken, Bergman President and CEO of resigned from the Board of & Beving, Svenska Le ABB Ltd. Member of the Directors in Januari 2000. OLOF HEROLF Carbone and the Founda- Board of DuPont. Member Authorized Public tion of Anders Sandrew. of the Salomon Smith CLAS REUTERSKIÖLD Accountant, Deputy Chairman of Barney International (1939*). PricewaterhouseCoopers. Industrivärden. Member of Advisory Board. President and CEO of the Boards of Volvo and Member since 1999. Industrivärden. Member of THOMAS THIEL SCA. Member of SAS the Boards of Handels- Authorized Public Assembly of Representa- PER LINDH banken, SCA, Sandvik and Accountant. tives. (1957*). Skanska. Member since 1991. Employee representative. Member since 1994. Shares held in Ericsson: Member since 1994. Shares held in Ericsson: B 18,154. B 10,000. BO HJALMARSSON Authorized Public MARCUS WALLENBERG PETER SUTHERLAND Accountant, (1956*). (1946*). PricewaterhouseCoopers. Deputy Chairman. Honorary Doctor. Chair- President of Investor. man of the Board of JEANETTE SKOGLUND Deputy Chairman of Saab. Goldman Sachs Inter- Authorized Public Member of the Boards of national, Co-Chairman of Accountant, Astra, AstraZeneca, BP Amoco. Member of the PricewaterhouseCoopers. Investor, Scania, SEB, Boards of Investor, ABB Stora Enso, Volvo and the Ltd and the Foundation of STEFAN HOLMSTRÖM Foundation of Knut and the World Economic Authorized Public Alice Wallenberg. Forum. Accountant. Member since 1996. Member since 1996. Shares held in Ericsson: * Year of birth ** Conversion rate: SEK 36:10 B 88,000. *** Conversion rate: SEK 236 79 BOARD OF DIRECTORS AND PRESIDENT 1999
Clas Reuterskiöld Lars-Eric Petersson
Monica Bergström Göran Lindahl
Peter Sutherland Jan Hedlund Christer Åkerlind Göran Engström Christer Binning
Sverker Martin-Löf
Per Lindh
Lars Tom Hedelius Ramqvist Kurt Hellström Marcus Wallenberg 80 CORPORATE EXECUTIVE TEAM
MATS DAHLIN (1954)* BO DIMERT Executive Vice President, (1943)* Business Segment Net- Executive Vice President, STEN FORNELL work Operators and Ser- Market Area North Ameri- (1948)* vice Providers. ca. Executive Vice President B. Sc. Joined Ericsson in M.B.A. VP Sales for IBM and Chief Financial Officer. 1980. Senior positions in in Sweden and President, B. Sc. (Econ.) Joined the U.S. and Canada. Digital Equipment Ericsson in 1982. Business Regional manager for Corporation, Nordic, Area Controller, Ericsson mobile operations in Asia before joining Ericsson in Information Systems. Vice Pacific. Marketing manager 1995, as VP, in charge of President Finance Control- for the American markets Business Enterprise Net- ling, Business Area Mobile and PCS operations. EVP, works. President, Ericsson Systems. VP and Con- Ericsson Radio Systems Inc. in the U.S., 1998. troller, Business Segment and manager for GSM Shares held in Ericsson: Network Operators. Business Unit, 1997. B 4,400. Shares held in Ericsson: Shares held in Ericsson: Convertible debentures: B 44,000. B 2,000. 1997/2003: 145,347.*** Call options: 1,618. Call options: 2,593. Call options: 2,910.
KURT HELLSTRÖM (1943)* As of July 7, President of Ericsson. M. Sc., and master degree from the Stockholm HAIJO PIETERSMA JOHAN SIBERG KJELL SÖRME School of Economics. (1953)* (1944)* (1939)* Joined Ericsson in 1984. Executive Vice President, Executive Vice President, Executive Vice President, Has held a number of Business Segment Enter- Business Segment Con- Market Area Asia Pacific. senior positions in mobile prise Solutions. sumer Products. B.Sc. Joined Ericsson in telephony, with emphasis Native of the Nether- M. Sc. and B. Sc. 1966. Head of Product on marketing and sales. lands. B. Sc. Has been (Econ.). Joined Ericsson in Management and Named head of Business with Ericsson in various 1970. Production manager VP Systems Design, Public
SVEN-CHRISTER Area Mobile Systems in positions in Sweden and in the Business Area Public Telecommunications. Head NILSSON 1990. Executive Vice Presi- the Netherlands since Telecommunications, of Network Systems Divi- (1944)* dent, Market Area Asia 1978. President of local responsible for telecom sion Ericsson, U.S. VP President and Chief Pacific in 1999. company in the Nether- establishment in the U.S. Systems Design, Ericsson Executive Officer up to Shares held in Ericsson: lands, 1994. Head of Corporate Supply Telecom. President Erics- July 7. B 5,000. Convertible debentures: and Distribution. Since son Australia 1990–1999. Convertible debentures: 1997/2003: 145,347.*** 1994, head of Mobile Shares held in Ericsson: CARL WILHELM ROS 1997/2003: 145,347.*** Call options: 3,527. Phones and Terminals. B 31,398. (1941)* Call options: 5,187. Shares held in Ericsson: Convertible debentures: Senior Executive Vice B 15,000. 1997/2003: 145,347.*** President and Chief Convertible debentures: Call options: 4,547. Financial Officer up to 1997/2003: 145,347.*** June 30. Call options: 4,150. 81 CORPORATE EXECUTIVE TEAM
TORBJÖRN NILSSON (1953)* BENGT A. FORSSBERG BJÖRN BOSTRÖM Senior Vice President, (1937)* (1947)* Marketing and Strategic Executive Vice President, Senior Vice President, Business Development. Market Area Latin America. Supply and Information M. Sc. and M. B. A. B. Sc. Joined Ericsson in Technology. Joined Ericsson in 1978. 1960. Held various senior M. Sc. Joined Ericsson Senior positions in Market- positions in Portugal, in 1970. Has held various ing and Product Manage- Egypt, Saudi Arabia, positions in Sweden, Mexi- ment. VP Strategic Busi- Malaysia and the U.K. co and Ireland. Named ness Development in Named SVP Corporate head of Production in Mobile Systems, 1992. Markets in 1996. Mobile Systems in 1989. Shares held in Ericsson: Shares held in Ericsson: Shares held in Ericsson: B 5,510. B 1,000. B 300. Convertible debentures: Convertible debentures: Convertible debentures: 1993/2000: 8,950.** 1997/2003: 145,347.*** 1997/2003: 145,347.*** 1997/2003: 145,347.*** Call options: 2,801. Call options: 1,660. Call options: 1,660.
STEPHAN ALMQVIST Senior Vice President, BRITT REIGO Corporate Audit and (1943)* Security. Senior Vice President, Convertible debentures: Human Resources and 1997/2003: 145,347.*** Organization. Call options: 1,563. JAN WÄREBY LARS A STÅLBERG JAN UDDENFELDT M. Sc. Joined Ericsson
(1956)* (1940)* (1950)* in 1988 as Senior Vice CARL OLOF Executive Vice President, Senior Vice President, Senior Vice President, President Human BLOMQVIST Market Area Europe, Mid- Communications. Technology. Resources and Organiza- Senior Vice President, dle East and Africa. M. B. A. Joined Ericsson D. Tech., Hon. D. Tech. tion. Earlier, with SAS as Corporate Legal Affairs. M. Sc. Joined Ericsson in 1989 following a long Joined Ericsson in 1978. Director of Inflight Service, in 1980, in the transmission career in the Swedish Since 1985 has held senior with SSAB as Administra- VIDAR MOHAMMAR business. Various senior Ministry of Foreign Affairs, positions in research and tive VP, and with SPP as Senior Vice President, positions in Mobile Sys- where he held a number of development of Mobile VP Personnel. Worked in Corporate Treasury. tems, including VP in Sales diplomatic positions. VP Systems. Named VP Tech- China in 1995, building up Convertible debentures: and Marketing in Ericsson Corporate Markets. SVP nology in Ericsson Radio local company’s organiza- 1997/2003: 145,347.*** Radio Systems U.S. and Information since 1996. Systems and manager of tion. Call options: 606. EVP American Standard, Convertible debentures: Mobile Systems’ world- Shares held in Ericsson: Ericsson Radio Systems, 1997/2003: 145,347.*** wide R&D operations in B 3,000. 1998. Call options: 2,178. 1990. Convertible debentures: * Year within paren- Shares held in Ericsson: Shares held in Ericsson: 1997/2003: 145,347.*** theses indicates date B 1,940. B 208. Call options: 3,112. of birth Convertible debentures: Convertible debentures: ** Conversion price: 1997/2003: 145,347.*** 1993/2000: 2,400.** SEK 36.10 Call options: 2,481. 1997/2003: 145,347.*** *** Conversion price: Call options: 1,867. SEK 235 82
has been prepared for a - (Digital Advanced Mobile Phone System) broad group of readers who may not be Earlier designation of American standard for familiar with technical terms in this Annual digital mobile telephony used primarily in Report. However, brief definitions of these North America, Latin America, Australia and TtermsT cannot provide complete explanations. parts of Russia and Asia. Now known as tdma. See also tdma and is-. (Asymmetrical Digital Subscriber Line) A method to increase transmission speed in a cop- per cable. adsl facilitates the division of capacity A technology that gives gsm and tdma similar into a channel with higher speed to the subscriber, capacity to handle services for the third generation typically for video transmission, and a channel with of mobile telephony. Developed to enable the trans- significantly lower speed in the other direction. mission of large amounts of data at a high speed, kilobits per second in mobile applications. (Advanced Mobile Phone System) The original American standard specification for analog systems. Used primarily in North Ameri- An operating system for mobile terminals, devel- ca, Latin America, Australia and parts of Russia oped by Symbian (Ericsson joint-venture company and Asia including Matsushita, Motorola, Nokia and Psion).
(Asynchronous Transfer Mode) (General Packet Radio Service) A technology for broadband transmission of A packet-linked technology that enables high- voice, data and video transmission of telecom speed ( kilobit per second) wireless Internet signals in large amounts. In addition to high- and other data communications. capacity signal transmission, atm provides con- siderable flexibility, since the individual sub- (Global System for Mobile Communication) scriber is able to adapt the capacity of a switched Originally developed as a pan-European standard connection to current requirements. for digital mobile telephony, gsm has become the world’s most widely used mobile system. It is (Application Service Positioning) used on the MHz and MHz frequencies A technology that facilitates downloading of in Europe, Asia and Australia, and the MHz software of the Internet instead of purchasing the frequency in North America and Latin America. program over the counter – against a fixed fee. - (International Mobile Telecommunica- tions) An open architecture, Ericsson’s communications Standard adopted by the itu for the third gener- platform. A system for computer-controlled ation of mobile telephony. Actually a family of digital exchanges that constitute the nodes in five different specifications for the radio interface large public telecommunications networks. The in this new system generation. basis for Ericsson’s wireline and mobile systems. (Internet Protocol) Bluetooth The Internet protocol defines how information A radio technology developed by Ericsson and travels between systems across the Internet. other companies built around a new chip that makes it possible to transmit signals over short - distances between telephones, computers and A digital mobile telephony standard based on other devices without the use of wires. cdma technology. See also cdma.
(Code Division Multiple Access) - A technology for digital transmission of radio A digital mobile telephony standard based on signals between, for example, a mobile telephone tdma technology. See also tdma and d-amps. cdma MP3 player, based on three volt and a radio base station. In , a frequency is platform, to be attached to divided into a number of codes. See also is-. (Internet Service Provider) mobile phone. A company specializing in offering end-users access to the Internet. As a rule does not have own communications network but functions as a link between the user and the net operator.
(International Telecommunication Union) A United Nations agency that deals with telecommunications issues. 83 GLOSSARY
A standard for digital signal transmission within transport networks.
(Third-generation Partnership Project) A global cooperative project in which in which standardization bodies in Europe, Japan, South Korea and the United States as founders are coor- dinating wcdma issues. See also wcdma.
(Time Division Multiple Access) A technology for digital transmission of radio signals between, for example, a mobile phone and a radio base station. In tdma, the frequency band is split into a number of channels that are stacked into short time units so that several calls can share a single channel without interfering with one another. tdma is also the name of a digital tech- nology based on the is- standard. tdma is the current designation for what was formerly known as d-amps. See also is- and d-amps.
(Universal Mobile Telecommunications System) The name of the third-generation mobile phone standard in Europe, standardized by etsi.
Cordless Phone 260, cordless DECT-phone with built-in speaker and digital answering machine. VoIP (Voice over Internet Protocol) A technology for transmitting ordinary (Local Area Network) telephone calls over the Internet using packet- A small data network covering a limited area, linked routes. Also called ip telephony. such as within a building or group of buildings. (Wireless Application Protocol) (Local Multipoint Distribution System) A free, unlicensed protocol for wireless commu- American standard for high-speed transmission nications that makes it possible to create of voice and data using so-called pmp (Point-to- advanced telecommunications services and to Multipoint) solutions. Used to provide wireless access Internet pages from a mobile telephone. broadband traffic to small and medium-size wap is the de facto standard that is supported by a companies or in apartment buildings. large number of suppliers.
(Private Branch Exchange) (Wideband Code Division Multiple An exchange system used in companies and orga- Access) nizations to handle internal and external calls. A technology for wideband digital radio commu- nications of Internet, multimedia, video and (Personal Communications Services) other capacity-demanding applications. wcdma, Collective term for American mobile telephone developed by Ericsson and others, has been services in the MHz frequency band. selected for the third generation of mobile tele- phone systems in Europe, Japan and the United (Personal Digital Cellular) States. The technology is also the principal alter- A Japanese standard for digital mobile telephony native being discussed in other parts of the in the MHz and MHz bands. world, notably Asia.
Router (Wavelength Division Multiplexing) A data switch that handles connections between A new technology that uses optical signals on different networks. A router identifies the different wavelengths to increase the capacity of addresses on data passing through the switch, fiber optic networks in order to handle a number determines which route the transmission should of services simultaneously. take and collects data in so-called packets that are then sent to their destinations. - (Wireless-Local Area Network) A wireless version of the lan. Provides access to (Synchronous Digital Hierarchy) the lan even when the user is not in the office. • 84 ANNUAL GENERAL MEETING, REPORTING DATES 2000
will be held in the Victoria Hall, Stockholm Inter- Shareholders who have changed their name, mail- national Fairs, Stockholm, at : p.m. on ing address or account number should notify their Friday, March , . trustees as soon as possible, or vpc ab, Box , TSShareholders intending to participate in the se- Stockholm, Sweden. Annual General Meeting must be entered as share- holders in the share register maintained by vpc ab (Swedish Securities Register Center) not later than Interim report January–March April , March , . Interim report January–June July , A shareholder whose shares are registered in the Interim report Jan.–September October , name of a trustee must temporarily be entered in Preliminary year-end report January , the share register not later than March , , in Annual report March order to participate in the Meeting. Annual Reports and interim reports are available on request on the Internet: www.ericsson.com/reports, or by contacting: Telefonaktiebolaget LM Ericsson In addition to the requirements listed above, share- se- Stockholm, Sweden holders shall provide notice of attendance to: Telephone: + Telefonaktiebolaget LM Ericsson Corporate Legal Affairs Ericsson Inc. se- Stockholm, Sweden Park Avenue, th floor Tel: + or + New York NY , U.S.A. (between a.m. and p.m. daily), Telephone: + fax: + or Information about Ericsson is available on the e-mail: [email protected] Internet: not later than Friday, March , , p.m. www.ericsson.com In order to attend and vote as proxy on behalf of a Karin Almqvist Liwendahl shareholder at the Meeting, a power of attorney Director, Corporate Communications must be presented to the Company, preferably at Telefonaktiebolaget LM Ericsson the above address not later than March , . se- Stockholm Telephone: + Telefax: + A resolution adopted by shareholders at the Annu- E-mail: [email protected] al General Meeting will specify the date on which the share register and related list of pledge holders Gary Pinkham will be reconciled as the record day. The Board of Vice President, Ericsson Inc. Directors and President have proposed April , Park Avenue, th floor , as the record date. If the proposal is New York NY , U.S.A. approved, dividends are expected to be paid by Telephone: + vpc ab to all registered shareholders on April , Telefax: + . E-mail: [email protected]