Q2 report 2014
Ericsson's financial report was released at 7.30am CET, on July 18, 2014. On this page you will find: CEO Comments, Press Conference webcast and the Media & Analyst conference call information.
Comments from Hans Vestberg, President and CEO
Sales for comparable units, adjusted for currency, recovered compared to the previous quarter and were down by -1% year-over-year. Operating margin improved year-over-year, mainly driven by stronger performance in segment Networks.
Sales in the quarter year-over-year were driven by growth in the Middle East, China and India, as well as continued capacity business in North America. This was offset by, as previously communicated, lower revenues from two large mobile broadband coverage projects in North America that peaked in the first half of 2013, and reduced activity in Japan.
The operating margin improved year-over-year, especially in segment Networks. This was due to a higher gross margin primarily from improved business mix with an increased share of mobile broadband capacity projects in advanced LTE markets, as well as higher recurring IPR revenues and efficiency improvements.
After a slow start of the year, we are executing on previously awarded 4G/LTE contracts in Mainland China and Taiwan. Furthermore, the investment climate in India is improving following the concluded spectrum auctions and government elections held in May.
Political unrest prevails in parts of the Middle East and Africa and is still impacting sales. There is also a continued political uncertainty in Russia and the Ukraine, but this had no negative impact on sales in the quarter.
As previously stated and with current visibility, key contracts awarded will gradually impact sales and business mix in the second half of the year.
In line with our strategic agenda, we have continued investing into new and targeted areas. The addition of the modems and Mediaroom businesses, as well as increased investments in IP, have resulted in increased R&D spending. At the same time, we continue to execute on profit improvement activities.
Our modems business will start generating sales by the end of this year, as our modem M7450 will be featured in smartphones and data devices. During the first half of 2014, we have invested SEK 1.2 b. primarily in R&D and we have a strong technology platform. However, the performance of the business is linked to our customers' success. As previously communicated, success will be measured in an 18-24 months timeframe after integration of the modems business, which was completed in August 2013.
Support Solutions showed negative result in the quarter due to lower sales related to legacy portfolio. However, the transition from traditional telecom software license business models to recurrent license revenue deals continues.
Operating cash flow was positive in the quarter driven mainly by improved income and maintained working capital days. The execution of the company-wide order-to-cash initiative continues and shows good progress.
In a transforming ICT market, we continue to evolve through investments in both our core business as well as in new and targeted areas. Through our technology and services leadership we are well positioned to continue to be a strategic partner to our customers as they move to capture new market opportunities.
Conference call for analysts, investors and media
The conference call for financial analysts, investors and media began at 14:00 CET (13:00 UK time, 08:00 Eastern Standard Time in the US, and 22:00 local time in Japan).
President and CEO Hans Vestberg, CFO Jan Frykhammar and Head of Segment Networks Johan Wibergh commented on the report and took questions.
A replay of the conference call will be available after the scheduled end time. The playback will be available from 12:15am CET on July 18, until 11:59pm CET August 24, 2014.
Sweden: +46 8 505 202 94
International replay number: +44 20 776 964 25
Replay passcode: 1444 3037#
Press conference and live webcast, 9AM CET
Ericsson held a press briefing, which was live webcasted, that started at 09:00 CET at Ericsson Studio, Grönlandsgången 4, Kista.
Ericsson President and CEO and CFO commented on the report and answered questions. The press briefing was open to journalists and analysts.
After the Q&A session, Hans Vestberg was available for short comments to individual media representatives.
Note: Webcast viewers was not able to pose questions.