Ericsson Reports Q3

STOCKHOLM -- Ericsson AB net sales in the third quarter were down 29% year-over-year and 13% sequentially. The gross margin remained stable at the same level as in the second quarter. The positive effects of our cost savings offset lower sales volume.The current operating expense run rate is SEK 52 b. per year. Thisexcludes increased customer financing risk provisions of SEK 1.3 b. and is adjusted for normal seasonality for the third quarter.Restructuring costs in the quarter were SEK 4.2 b., compared to SEK 1.5 b. in the second quarter.Share in earnings of associated companies was SEK -0.6 b. mainly due to the negative result in Sony Ericsson in the quarter.The effect of changes in foreign currency exchange rates in the quarter compared to rates one year ago was SEK 0.6 b. In the first quarter the effect was SEK 0.4 b. and in the second quarter 0.8 b.Financial net improved marginally compared to the previous quarter as a result of the net proceeds from the rights offering concluded inSeptember.Adjusted income before taxes was SEK -3.9 b. (-5.8) in the quarter.Excluding provisions for customer financing of SEK 1.3 b. and SEK 0.5 b. respectively, this is an improvement of SEK 0.4 b. from the previous quarter. Tax is calculated at an average estimated rate of 30%.Diluted earnings per share were SEK -0.93 (-1.63). Prior periods havebeen adjusted for the stock dividend element of the stock issue. Afterthe stock issue, the number of shares outstanding is now 15,974,258,678.We increased our cash position during the quarter from SEK 47.6 b. toSEK 74.4 b. primarily with the proceeds from the rights offering inearly September. Net debt was reduced from SEK 21.2 b. to SEK -5.2 b.and the equity ratio increased from 31.6 % to 38.3 %.Cash flow before financing activities was SEK -2.7 b. in the quarter.This includes SEK 2.3 b. from the sale of our Microelectronicsoperations, which was offset by the take back of off-balance sheetcustomer financing of SEK 2.3 b. Swedish pension insurance company FPGwas paid a cash collateral of SEK 1.5 b. and given a bank guarantee ofSEK 1.2 b. Excluding the cash effect of these items, cash flow beforefinancing was approximately SEK -1.2 b."Mobile communications is a long-term growth business. Over half amillion new subscribers sign up each day and people are using theirphones more and more. With only 17% worldwide penetration and mobiledata just beginning, significant need for network expansion lies ahead,"says Kurt Hellström, President and CEO of Ericsson.In a separate release:The Board of Directors of Ericsson has authorized a change in the ratioof its American Depositary Shares (ADSs) as they relate to its ClassB-shares. The change is expected to become effective as of October 23,2002.One ADS at the new ratio will be issued in exchange for every tencurrently outstanding. Following this exchange, one new ADS willrepresent 10 Class B-shares. This will result in a technical priceadjustment to the ADSs corresponding to the ratio change. The currentratio is 1:1.Ericsson's Board has authorized this change in order to comply with thelisting requirements of the Nasdaq National Market. ADS holders will notbe charged a fee for this transaction.After the change, the ADSs will temporarily trade under the interimsymbol of "ERICD" for a period of 20 days to assist in making investorsaware of the ratio change. Thereafter, the symbol will revert to theoriginal "ERICY" trading symbol.The ratio change will reduce the number of outstanding ADSs fromapproximately 1.7 billion to approximately 170 million. Citibank, N.A.,as depositary, will notify existing ADS holders as to how to exchangetheir share certificates. ADS holders will be compensated at a rate tobe determined for holdings not amounting to ten or not divisible by ten.Ericsson AB