Carl-Henric Svanberg's speech to Ericsson's annual general meeting on April 6, 2005

Press release
Apr 06, 2005 16:17 (GMT +00:00)
Ladies and gentlemen, honored shareholders

The past year has been a remarkable one for us at Ericsson.

I pleased to announce a profit of more than SEK 28 billion - the highest in Ericsson history and an important measure of value for you as well as for all of us working with the company.

Our goal is to deliver the industry's best margins - and that is what we have done. Our financial position is also very strong. We are debt-free and have a net worth close to SEK 43 billion. This gives us important freedom of movement for the future.

I want to take this opportunity to pass on warm thanks to all of our 50,000 or so employees around the world who have contributed to this major success.

As I am sure you remember, I predicted at last year's annual meeting that we would perform so well that the board would be able to propose a dividend payment. So you can understand that it is with great pleasure that I can say we have kept our promise, and the board now has the opportunity to propose a dividend payment to the shareholders.

To our shareholders, I don't believe I am exaggerating when I say that Ericsson is stronger than ever. But we cannot rest on our laurels.

We have identified three areas that are essential for our success.

These three areas are: Customer focus, Technical leadership, and Operational excellence.

Let me go through these three areas quickly and explain how we are working to ensure that we continue to lead the telecom industry.

We have always focused on our customers. We have expanded geographically and today we are present in 140 countries around the world. We have never left a customer or a market. We stay with our customers and develop in pace with the technology and the industry.

During the 1980s and 1990s, we invented and rolled out mobile telephony around the world. We were the experts and we had the answers. It was more about teaching people than listening.

And development is moving on further. With the help of technology, we can offer internet services, music, TV and much more through our mobiles and PC cards.

Now more than ever we need to understand what different users want: young, old, privately and at work. Development must be driven from the market and user perspectives.

We have created a network with 14,000 independent developers and users, Ericsson Mobility World, where everyone shares their experiences. At the same time, we have a dialog with our customers, the operators, and are working actively to develop the solutions that they, and eventually all we consumers, want.

In principle, all the world's largest operators are our customers. We have been a global company since the 1880s. By the end of the 19th century, we already had customers in China, Mexico and Russia, and 95 percent of our turnover was outside Sweden.

We have built up a fantastic understanding of the world's telecom operators and the world's consumers over the years, and above all this has to do with listening and being innovative.

The second success factor that we have identified is technical leadership. We are basically a technology company. We have driven the industry for more than a hundred years - from the birth of telephony, through the rollout of fixed-line telephony around the world, to mobile telephony, first analog and then digital.

We have maintained our leadership through good times and bad. Our strength is confirmed not least by our success in rolling out a totally new technology, 3G, at the same time as we carried out dramatic downsizing at the beginning of the decade when we reduced the number of employees from 110,000 to 50,000.

Almost a third of our employees work within research and development. These 16,000 employees make up a fantastic knowledge resource base. We have a portfolio of 16,000 patents and a further 15,000 pending. We have led the development of standards such as GSM, GPRS, EDGE and WCDMA.

And now we are leading the development of new technical solutions such as HSDPA, which I will discuss more a bit later.

The third success factor is operational excellence. Operational excellence is a prerequisite for us to continue as the world's leading vendor within the telecom industry. It obviously includes efficiency and productivity, but it is also much more than that. It also includes how we look on our customers and ourselves.

At Ericsson, we measure operational excellence in three ways:

It primarily involves how satisfied our customers are. Supplying equipment and carrying out service assignments according to agreement both in terms of time and functionality is an important competitive factor and essential for our leadership. We carry out continuous customer surveys to keep track of developments.

It is just as important to keep track of how satisfied our employees are. A good atmosphere at our company is directly connected to how well we work together. Our way of working is characterized by simplicity, clarity and responsibility. And everyone should have the opportunity to carry out their duties and develop at work.

Every autumn our employees answer questions about everything from enjoyment at work and commitment to leadership and obstacles to improved efficiency. At the last instance, 45,000, a whole 95 percent, of our employees completed the survey.

We see many improvements we can make, both for our customers and our employees, but first and foremost we see a clear, positive and inspiring trend.

Last but not least, we naturally measure our profitability. A company's profitability is basically proof of how a company is functioning and the appreciation that we get from our customers. We see the fact that we can report the industry's best margins as good evidence that we are heading in the right direction.

And I can promise that we will spare no efforts in our continued fight for operational excellence.

A lot has happened in the telecom industry since the IT bubble burst at the beginning of the decade - and we and our competitors were forced to restructure. The industry has actually undergone a fundamental shift. The market is no longer simply technology-driven; rather it now has much more focus on the consumer and that in itself places further demands on technical development.

There are also fewer vendors on the market and competition is fierce. I would therefore like to say that it is thanks to our employees' important performance that we have succeeded in growing more than the market last year.

The world market for mobile systems grew last year by between 17 and 18 percent. And we grew by 26 percent. That gives us a good position from which we can continue to grow. And we are optimistic about the future.

Since Ericsson was founded 129 years ago, we have had a clear common vision. We see communication as a basic human requirement. And we want to contribute to creating a world where people can reach each other wherever we are, whenever we want.

Last year we saw the largest increase in the number of mobile subscribers: 300 million new users. For many of them, the mobile telephone is their first - and only - contact with the outside world.

But two-thirds of the world's population still lacks telecommunication. That is why we want to make mobile voice communication available to everyone at a reasonable price.

At the same time, we have the challenge of meeting consumers' needs in those parts of the world where we long have been used to advanced telecom services. These advanced users are in fact found across the world.

In countries where many still lack telecommunications, we can find users in the cities who are at least as advanced as any we could find at Stureplan in Stockholm or Times Square in New York.

These consumers expect services that are continually advanced, affordable, easy to use and that let them communicate anywhere, any time, and in the way they themselves choose.

Our job is to ensure that our customers - the operators - can offer such competitive services.

I would like to explain briefly some important technical breakthroughs that are vital for our customers, the operators, to be able to meet consumer demands.

First of all, we can state that 2004 was a breakthrough year for 3G. We now have more than 18 million WCDMA subscribers around the world, a figure growing by several million per month.

There are 3G networks across all of Western Europe, and we are currently building others in Asia and Australia. And last fall, our important US customer Cingular decided to build 3G coverage using WCDMA across the entire United States.

With 3G, we open the doors to richer services for consumers. They can combine speech with images. With 3G we can use our telephones and portable computers for downloading information and music, playing games, and much more.

We made an important breakthrough in 3G technology a few weeks ago when we set a world record for data transfer using HSDPA. Yes, I know our industry has a weakness for abbreviations. But I would still ask you to try to remember this one.

HSDPA stands for High-Speed Downlink Packet Access. It is a powerful further development of 3G. HSDPA allows us to download files with our 3G equipment at speeds comparable to the broadband connection we have at home or at the office. This opens up totally new areas.

Let me touch on an interesting another area for the future. Within the telecom industry, we talk about Triple Play.

Put simply, it is ONE offering with THREE services. Triple Play is when we run telephony, internet and TV services in a single infrastructure.

This development has already happened in the fixed network. We see it today, with operators offering telephony, internet access and TV from a single outlet in the wall.

The mobile behavior that we as consumers have today is driving this development.  We naturally want to have the same services and same speeds wherever we are, whenever we want them. That is user-friendly and shows how technology can simplify our everyday life. That is why there is such great interest in what we call MOBILE Triple Play.

HSDPA makes this possible. That is to say that we should be able to do all these things using our computers or our mobile phones, wherever we are. It opens up a world of change when it comes to our way of communicating.

Let me give you some examples of how this can work.

We will be able to download MP3 files to our telephones in just a few seconds. And in your hand you suddenly have a Walkman.

Within healthcare, home care-givers for the elderly, for example, can get up-to-date information on what the other members of their teams have already done, in terms of delivering food or organizing cleaning.

And emergency services can quickly get images and other information from an accident scene.

I would also like to say a few words about Sony Ericsson.

You have followed the great progress that Sony Ericsson has made, just as eagerly as I have. When we formed the company together with Sony in 2001, we were agreed that our expertise in mobile communication and Sony's within consumer technology would be a strong combination. And this has definitely proved to be the case.

Sony Ericsson sold more than 50 percent more telephones last year than in the year before, and its result improved significantly.

This year, at the major telecom event in Cannes, Sony Ericsson's V800 telephone won the prestigious award as the world's best 3G telephone. This was the second year in a row that Sony Ericsson's telephones have been recognized in this way in Cannes. The V800 is a good example of how today's telephones now have several more functions.

We are also seeing that people are beginning to change their communications behavior. Now we have telephone, camera and music player in the same device. Sony Ericsson's new Walkman telephone is the latest exciting addition.

We also see new functions emerging. Take TV in the mobile, for example. Personally, I believe that this is a service that many consumers will come to appreciate and use.

Now I don't believe that we will be sitting and watching full-length films on our mobiles. But we will be watching news, entertainment and sports.

Last year, a Norwegian operator showed the Summer Olympics over its mobile network. I tried the service and it was great to see Stefan Holm winning Olympic gold despite the fact that I was a long way from a normal TV. I am personally interested in sport, and televised sport on the mobile would be a service that I would use a lot while traveling.

Let me now return to Ericsson.

Building a strong company needs a common strategy. For a company such as Ericsson, driven by committed and competent people, it is important that we are united around a common view of the market conditions and the direction that Ericsson as a leading company should take. In short, this means which strategy we should follow.

For the second year in a row, we are now driving our strategy efforts by involving Ericsson's top 200 managers. We hold workshops, with managers from all over the world gathered for two days to work through strategic issues. This work then leads on to our annual managers conference where we agree on the way forward.

This includes working through our values and how we conduct ourselves in relation to our customers, colleagues and other parties. Creating a common view of our values and what they stand for is always important and is actually determining factor for a knowledge-based company.

And we will reach our goals only if our culture and our values go hand-in-hand with our strategies.

The result is that Ericsson's employees now stand more than ever for our three core values: respect, professionalism and perseverance. These have been guiding principles for Ericsson employees for several decades, but now they have been discussed and gathered broad support across the company and around the world.

Ericsson Response is our assistance program that helps by establishing and restoring telecommunications in disaster areas.

Put simply, it involves transporting a shipping container housing a base station to a disaster area and lending mobile telephones to the relief crews. Functioning communications can save many lives.

Those who travel with the equipment and help set it up are Ericsson volunteers.

It warms my heart to be able to tell you that many Ericsson employees - and former employees - called us after the tsunami catastrophe offering to travel with Ericsson Response to the worst-affected areas in Indonesia.

These values - together with our strategy - form the base for our new brand platform that was launched last year. The tagline is Taking You Forward. This illustrates our lengthy and close customer relationships, and our aim to be the technology leader and to create the future together with our customers.

You have seen this here in Globen. Our brand also illustrates our vision of being the strongest driving force in a world where everyone is communicating with everyone.

Ladies and gentlemen, 2004 was a strong year for Ericsson, both financially and in business terms. We won market share and have won a number of strategic contracts that will have significance for our continued development.

We are optimistic about the future and our business can grow again. We have control of the Group and we have a common strategy.

With the restructuring and downsizing behind us, we have recreated a strong forward-looking spirit in the company.

We are now better equipped than ever to drive our technical leadership, together with our customers.

We have an exciting time ahead of us.

Back more than 100 years ago, Lars-Magnus Ericsson had a clear vision of creating a world where it would be possible for everyone to communicate. That has now become reality.

Our vision is to be the prime driver in an all-communicating world.

That means much more than just 3G.

It means technology that is adapted to human needs, and that makes it possible for people from different financial circumstances in different parts of the world to be part of an all-communicating world. And it is happening now.

My dear shareholders, I look forward to meeting you again next year, and looking back over the year that has past.

Thank you for your attention.

Ericsson is shaping the future of Mobile and Broadband Internet communications through its continuous technology leadership. Providing innovative solutions in more than 140 countries, Ericsson is helping to create the most powerful communication companies in the world.


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