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Ericsson Changes Structure

Ericsson will change its financial reporting to reflect a new business segment structure

April 24, 2007

3 Min Read

STOCKHOLM -- Ericsson (NASDAQ:ERIC) will change its financial reporting to reflect a new business segment structure and today publishes restated information for comparative prior year interim periods.

As previously announced, Ericsson has from January 1, 2007, reorganized its operating structure. From the first quarter report 2007, the company's financial reporting will be adapted to reflect this new structure. Ericsson will also take this opportunity to make other modifications to further enhance transparency with additional disclosures.

Ericsson will report the following business segments: Networks, Professional Services and Multimedia.

Phones, represented by the share in earnings of Sony Ericsson will be reported as before. However, Sony Ericsson have increased its disclosure as of the first quarter report 2007.

The changed segment reporting is in accordance with the objectives set forth in IAS 14 Segment reporting. The business activities previously reported in Other Operations have been merged into the new segments to better leverage the opportunities provided by internal business combinations.

Business segment Networks includes products for mobile and fixed broadband access, core networks, transmission and next-generation IP-networks. Related network rollout services are also included. In addition, the power modules and cables operations, previously reported under Other Operations, are now included within Networks, as well as the acquired operations of Redback and Entrisphere.

Business segment Professional Services includes all service operations, excluding Network rollout reported under Networks. Services for system integration of IP and core networks previously reported as network rollout are now reclassified as Professional Services. Sales of managed services as a part of the total Professional Services will be disclosed since this represents service revenues of a recurring nature.

Business segment Multimedia includes multimedia systems, previously reported under segment Systems, and enterprise solutions and mobile platforms, previously included in Other Operations. The operations of Tandberg TV and Mobeon will also be included in Multimedia once these acquisitions are concluded.

For each of the business segments, we will report net sales and operating margin quarterly. In addition, sales of Mobile Systems, including relevant parts of Networks and Multimedia, will continue to be disclosed.

Within the consolidated income statement, royalty revenues for intellectual property rights related to products will be included as part of net sales instead of other operating income. Accordingly, the related costs, previously reported as part of operating expenses, will now be reported within cost of sales.

Changes within the consolidated statement of cash flows include additional breakdown of "Adjustments to reconcile net income to cash", "Operating net assets" and "Investing activities". Cash flow from operations will be disclosed as before. The subtotals "Cash flow from operating investing activities" and "Cash flow before financial investing activities" will no longer be reported.

The table "Customer financing risk exposure" will no longer be separately disclosed quarterly due to the decrease in activity compared to prior years. However, significant changes to risk and exposure will be commented within the text of interim reports.

Ericsson reports first quarter results on April 26, 2007, at 7:30 CET.

Ericsson AB (Nasdaq: ERIC)

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