Looking to the Future

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• Looking to the Future

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Agenda

• Company Overview
• Swedens Economic Environment
• Ericssons Performance and Future
• Shift to Services
• Sony-Ericsson Joint Venture
• QA

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Company Overview

• Started as a telegraph repair shop in 1876 and
  grew into the worlds leading maker of wireless
  telecom infrastructure equipment
• Present in over 140 countries
• Vallenberg family owns roughly 50 of market cap
  in Sweden
• Ericsson supplies 19 out of 20
• top service providers worldwide

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Swedens Macroeconomic Condition Previous Years

• Credible, rule-based policy supported growth of
  4 per annum (1998-2000)
• Riksbanks inflation targeting regime sound
  medium term fiscal framework
• Growth driven primarily by technology sector
• Sweden feels worldwide recession in 2001
• Telecom exports fell by one-third
• A weak Krona helped mitigate export slowdown
• Swedish economy exceeded Riksbank inflation
  target of 2

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Swedens Macroeconomic Condition 2003

• Krona has appreciated significantly
• 30 against the Dollar
• 20 against the Euro
• Domestic demand has increased
• Increased consumer confidence
• Domestic economy has stabilized
• Recently rejected adoption of Euro

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Factors leading to poor performance

• Recession
• Large economies suffering economic slowdown
  resulted in slowdown in telecommunications demand
• Ericssons customers ceased expansionary plans
• Profits and sales have been dramatically
  decreasing since 2001 due to the slowing sales at
  the consumer level
• Saturated industry
• Main markets (US, Europe) have become saturated,
  ex. Houston, Atlanta have reached saturation
  levels of 74
• Sales have been replacement phones rather then
  new contracts ? slow growth ? providers purchase
  less network equipment

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Merrill Lynch Jun 2003 presentation
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3G Ericssons Future

• Ericssons strategy assumes consumers will be
  quick to embrace new technologies
• 3G is the new wireless standard
• Allows for high-speed voice, data and multi-media
  communications
• Worldwide 3G subscriptions expected to increase
  to 350 million by 2008

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Ericsson Reaching for the Future

• Major 3G rollout was delayed until 3rd quarter,
  2003
• Consistent negative cash flows and limited demand
  contributed to this delay
• Successful SEK29 billion stock issue improved
  companies financial position
• Reduced debt to equity ratio

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Ericsson Reaching for the Future

• Cost cutting measures have been implemented to
  improve efficiency
• Massive layoffs
• Streamlining of RD expenses
• Ericsson signed lucrative contracts that allowed
  it to be the exclusive provider of 3G in certain
  areas
• Holds over 40 contracts to supply leading service
  providers with 3G technologies
• Expanded into Sri Lanka, China, Thailand,
  Lithuania in past few months

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Diversifying Interests

• Ericsson is making a shirt towards providing
  services
• Global Services Division becoming an
  ever-increasing part of Ericssons business
• Three major service areas
• Advisory Services
• Integration Services
• Managed and Support Services
• Global Services Division accounted for 30 of
  revenue in early 2003

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Sony Ericsson Joint Venture

• 50/50 joint venture began in 2001
• Ericsson wants to capitalize on Sonys strengths
  in consumer electronics, design, retail, and
  digital content
• Sony sees advantages in Ericssons networking
  expertise and operator relationships

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Sony Ericsson Joint Venture

• Venture was slow to see a profit for the first
  two years
• Economic troubles and high capital outlays
  contributed to poor performance
• Ventures recent performance has greatly improved
• Improved operating results and strong increase in
  sales so far in 2003
• Profit expected to be reached in 4th Quarter 2003
  or early 2004
• Long term venture that can endure early hardships

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Overview

• Ericsson, like most telecom companies, suffered
  setbacks during the global recession
• New technologies and services have revitalized
  the company
• Slow-starting SonyEricsson joint venture is
  starting to realize profits

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Questions?