Telefonaktiebolaget Lm Ericsson Class A · OMXSTO:ERIC_A
Telefonaktiebolaget Lm Ericsson Class A — Ericsson — Investor Day (November 2016)
81 slides from Telefonaktiebolaget Lm Ericsson Class A's investor day presentation, Nov 10, 2016
Slide 1: Ericsson investor update
de title 44 pt evel 1 m 24 pt vel 2-5 m 20 pt Ericsson investor update lmnopqrst ãäåæçèéêë ğĠġĢģĪīĮįİıĶķ űŲųŴŵŶŷŸŹ ĽŃŃŅŅŇŇŌŌ ΆΈΉΊΰαβγ УФХЦЧШЩ ХЦЧШЩЪЫ in the NOVEMBER 10, 2016 NEW YORK er area © Telefonaktiebolaget LM Ericsson | Ericsson Investor Update 2016 11 10 | Page 1
Slide 2: Peter Nyquist, Head of Investor Relations
de title 44 pt evel 1 m 24 pt vel 2-5 m 20 pt lmnopqrst ãäåæçèéêë ğĠġĢģĪīĮįİıĶķ űŲųŴŵŶŷŸŹ ĽŃŃŅŅŇŇŌŌ ΆΈΉΊΰαβγ УФХЦЧШЩ ХЦЧШЩЪЫ Peter Nyquist Head of Investor Relations in the er area © Telefonaktiebolaget LM Ericsson | Ericsson Investor Update 2016 11 10 | Page 2
Slide 3: Agenda Investor update
Agenda Investor update de title 44 pt 09:00 Company performance, Priorities & Industry trends 11:00 Business Segments evel 1 m 24 pt Introduction – Peter Nyquist & Jan Frykhammar Introduction – Jan Frykhammar & Carl Mellander vel 2-5 Business environment & Strategic priorities Networks – Arun Bansal
Slide 4: Investor update 2016
Slide title Investor update 2016 70 pt APITALS This presentation contains forward-looking statements. Such statements are based on our current expectations and are subject to certain risks and uncertainties that subtitle could negatively affect our business. Please read our um 30 pt earnings reports
Slide 5: Jan Frykhammar, President and CEO
de title 44 pt evel 1 m 24 pt vel 2-5 m 20 pt lmnopqrst ãäåæçèéêë ğĠġĢģĪīĮįİıĶķ űŲųŴŵŶŷŸŹ ĽŃŃŅŅŇŇŌŌ ΆΈΉΊΰαβγ УФХЦЧШЩ ХЦЧШЩЪЫ Jan frykhammar President and CEO in the er area © Telefonaktiebolaget LM Ericsson | Ericsson Investor Update 2016 11 10 | Page 5
Slide 6: Reflections last 12 months
Reflections last 12 months de title 44 pt evel 1 m 24 pt › Mobile broadband market tougher than expected – adapting to weaker demand vel 2-5 m 20 pt › Targeted growth areas has shown resilience in a softer market environment › Customers’ 5G agenda has accelerated vs last year lmnopqrst ãäåæçèéêë ğĠġ
Slide 7: Recap of 2016 Q3 performance
Recap of 2016 Q3 performance de title 44 pt evel 1 Q3 2016 result m 24 pt SEK b. 15Q3 16Q3 YoY › Negative industry trend accelerated vel 2-5 − Top line decline m 20 pt Sales 59.2 51.1 -14% − Reduced gross margin › Opex -7% in Q3 YoY, excluding restructuring charges › Challenging cash flow lmnopqrst
Slide 8: Sales development
sales development de title 44 pt Ericsson sales development (SEK b.) › In particular emerging markets evel 1 impacted by weak macro m 24 pt › Europe declined due to lower vel 2-5 m 20 pt capacity sales and completion of large mobile broadband projects 173 › Networks in North America stable, lmnopqrs
Slide 9: Business Environment & Strategic Priorities
de title 44 pt evel 1 m 24 pt vel 2-5 Business Environment m 20 pt lmnopqrst & Strategic Priorities ãäåæçèéêë ğĠġĢģĪīĮįİıĶķ űŲųŴŵŶŷŸŹ ĽŃŃŅŅŇŇŌŌ ΆΈΉΊΰαβγ УФХЦЧШЩ ХЦЧШЩЪЫ Investor update 2016 NOVEMBER 10, 2016 NEW YORK in the er area © Telefonaktiebolaget LM Ericsson | Ericsson Investor Update 2016 11
Slide 10: Business environment 2016
Business environment 2016 de title 44 pt evel 1 Market Ericsson m 24 pt vel 2-5 Challenging macro, especially in emerging › Sales and gross margin declined primarily m 20 pt markets, impacting operator investment levels related to mobile broadband business › Professional services margins negatively
Slide 11: Current industry trends
Current industry trends de title 44 pt Macro development Mobile infrastructure evel 1 m 24 pt Global Real GDP Growth % YoY change RAN equipment market, % YoY change vel 2-5 3.0 Forecast Oct ’15 100% m 20 pt 2.9 -10% 2.8 90% -2% 2.8 2.6 2.5 80% -15% -6% Forecast Oct ’16 lmnopqrst 2.4 70% ãäåæçèéêë 2.
Slide 12: Magnus Mandersson
de title 44 pt evel 1 m 24 pt vel 2-5 m 20 pt lmnopqrst ãäåæçèéêë ğĠġĢģĪīĮįİıĶķ űŲųŴŵŶŷŸŹ ĽŃŃŅŅŇŇŌŌ ΆΈΉΊΰαβγ УФХЦЧШЩ ХЦЧШЩЪЫ Magnus mandersson Executive Vice President in the er area © Telefonaktiebolaget LM Ericsson | Ericsson Investor Update 2016 11 10 | Page 12
Slide 13: On customers' agenda
On customers’ agenda de title 44 pt evel 1 m 24 pt › Higher speeds and decreased latency on 4G vel 2-5 m 20 pt › New spectrum releases › Increased focus on 5G and IoT lmnopqrst ãäåæçèéêë ğĠġĢģĪīĮįİıĶķ › Digital transformation, e.g. OSS and BSS űŲųŴŵŶŷŸŹ ĽŃŃŅŅŇŇŌŌ ΆΈΉΊΰαβγ › Transformation in telecom
Slide 14: Evolution of Strategy and Structure for faster execution
de title Evolution of Strategy and Structure for faster execution 44 pt evel 1 Core & Targeted areas Segments m 24 pt vel 2-5 Networks m 20 pt Future/ Emerging Cloud IT & Cloud lmnopqrst IP OSS/ ãäåæçèéêë BSS ğĠġĢģĪīĮįİıĶķ űŲųŴŵŶŷŸŹ Media ĽŃŃŅŅŇŇŌŌ Radio, Core Media ΆΈΉΊΰαβγ & Trans- Telecom Present
Slide 15: Strategic business direction
strategic business direction de title 44 pt evel 1 m 24 pt vel 2-5 Excel in Extend in m 20 pt Networks Media lmnopqrst ãäåæçèéêë ğĠġĢģĪīĮįİıĶķ űŲųŴŵŶŷŸŹ ĽŃŃŅŅŇŇŌŌ Establish and extend in Expand in ΆΈΉΊΰαβγ IT & Cloud Industry & Society УФХЦЧШЩ ХЦЧШЩЪЫ in the er area A leading ICT transformation part
Slide 16: Three focus areas to drive incremental improvements
de title 44 pt Three Focus areas to drive incremental improvements ILLUSTRATIVE Operating margin (incl. restructuring) evel 1 m 24 pt vel 2-5 m 20 pt Build success in IT & Cloud, Media, Industry & Society lmnopqrst Monetize Networks ãäåæçèéêë ğĠġĢģĪīĮįİıĶķ űŲųŴŵŶŷŸŹ ĽŃŃŅŅŇŇŌŌ Efficiency ΆΈΉΊΰαβγ imp
Slide 17: Financial performance
de title 44 pt evel 1 m 24 pt vel 2-5 m 20 pt Financial performance lmnopqrst ãäåæçèéêë ğĠġĢģĪīĮįİıĶķ űŲųŴŵŶŷŸŹ ĽŃŃŅŅŇŇŌŌ ΆΈΉΊΰαβγ УФХЦЧШЩ ХЦЧШЩЪЫ Investor update 2016 NOVEMBER 10, 2016 NEW YORK in the er area © Telefonaktiebolaget LM Ericsson | Ericsson Investor Update 2016 11 10 | Page 17
Slide 18: Carl Mellander, CFO
de title 44 pt evel 1 m 24 pt vel 2-5 m 20 pt lmnopqrst ãäåæçèéêë ğĠġĢģĪīĮįİıĶķ űŲųŴŵŶŷŸŹ Carl mellander ĽŃŃŅŅŇŇŌŌ ΆΈΉΊΰαβγ УФХЦЧШЩ ХЦЧШЩЪЫ CFO in the er area © Telefonaktiebolaget LM Ericsson | Ericsson Investor Update 2016 11 10 | Page 18
Slide 19: Financial performance – cash flow
Financial performance – cash flow de title 44 pt SEK b. Net income reconciled to cash Change operating net assets evel 1 m 24 pt Operating cash flow vel 2-5 24 m 20 pt 22 22 22 21 › Net Income stable 2012-2015 19 19 17 17 16 › Cash conversion* above 70% target 2012-2015 › Coverage projects main driv
Slide 20: Priorities to drive value
Priorities to drive value de title 44 pt evel 1 m 24 pt › Effective resource allocation for growth and value vel 2-5 m 20 pt Long-term Transform › Evolve business models (new software/services models, IPR) for growth Secure resilience › Competitive portfolio and financial discipline for profitable g
Slide 21: Priorities to drive value
Priorities to drive value de title 44 pt Example activities evel 1 m 24 pt vel 2-5 › Significant investments for leadership in 5G and success in growth areas, m 20 pt Transform e.g. ~40% of Opex investments into IT & Cloud and Media for growth › Workforce transformation: 13,200 left and 11,500 joine
Slide 22: Cost & efficiency program
de title 44 pt Cost & efficiency program Ambition summary evel 1 m 24 pt › SEK 9 b. in net reduction 2014 2017 2H vel 2-5 November − ~50% in Opex m 20 pt − ~50% in CoS › Opex run-rate SEK 53 b., 2016 › Opex reduction ambition doubled lmnopqrst excluding restructuring ãäåæçèéêë ğĠġĢģĪīĮįİıĶķ July › I
Slide 23: Operating expenses - progress
Operating expenses - progress de title 44 pt Examples of major activities SEK b. evel 1 Operating expenses, excluding restructuring Portfolio review m 24 pt › Exit Modems 2014 (1,600 employees) vel 2-5 70 64.4 R&D transformation m 20 pt 63.0 61.4 › Acquired Ericpol 2016 (2,000 SW R&D subcontractors)
Slide 24: Cost of sales - progress
Cost of sales - progress de title 44 pt SEK b. Sales Gross margin (%) › Sales decline in mobile broadband evel 1 m 24 pt › Growth in Professional Services Gross income, excluding restructuring vel 2-5 m 20 pt 36.2% Gross margin 32.2% › Lower capacity sales in Networks 29.4% › Increased services shar
Slide 25: Key cost of sales activities
Key cost of Sales activities de title 44 pt Cost of Sales 2016 09 YTD Reductions in Spain, mainly Announced service delivery reductions evel 1 (SEK 107 b.*) m 24 pt Reductions in UK, mainly >2,000 employees service delivery plus consultants vel 2-5 m 20 pt Intended reductions in Sweden Improve margi
Slide 26: Capital
de title 44 pt evel 1 m 24 pt vel 2-5 m 20 pt CAPITAl lmnopqrst ãäåæçèéêë ğĠġĢģĪīĮįİıĶķ űŲųŴŵŶŷŸŹ ĽŃŃŅŅŇŇŌŌ ΆΈΉΊΰαβγ УФХЦЧШЩ ХЦЧШЩЪЫ Investor update 2016 NOVEMBER 10, 2016 NEW YORK in the er area © Telefonaktiebolaget LM Ericsson | Ericsson Investor Update 2016 11 10 | Page 33
Slide 27: Carl Mellander, CFO
de title 44 pt evel 1 m 24 pt vel 2-5 m 20 pt lmnopqrst ãäåæçèéêë ğĠġĢģĪīĮįİıĶķ űŲųŴŵŶŷŸŹ Carl mellander ĽŃŃŅŅŇŇŌŌ ΆΈΉΊΰαβγ УФХЦЧШЩ ХЦЧШЩЪЫ CFO in the er area © Telefonaktiebolaget LM Ericsson | Ericsson Investor Update 2016 11 10 | Page 34
Slide 28: Capital ambition
capital Ambition de title 44 pt Ambition 2015 Full year 2016 09 evel 1 m 24 pt Equity ratio > 40% 52% 49% vel 2-5 m 20 pt Net cash* Positive and larger than SEK 41 b. SEK 16 b. the pension liability (Pension SEK 23 b.) (Pension SEK 32 b.) lmnopqrst ãäåæçèéêë -84% YTD ğĠġĢģĪīĮįİıĶķ űŲųŴŵŶŷŸŹ ĽŃŃŅŅŇŇŌ
Slide 29: Gross and net cash development
Gross and net cash development de title 44 pt Cash balance 2012-2015 (SEK b.) 90 evel 1 m 24 pt 80 77 77 72 vel 2-5 70 66 m 20 pt › Our cash position secures financial 60 flexibility and supports rating 48 48 48 50 44 › Dented cash position Q3 2016, but 41 40 should be viewed on full year basis lmno
Slide 30: Cash flow and usage of cash
Cash flow and Usage of cash de title 44 pt Cash flow and usage 2012-2015 (SEK b.) evel 1 m 24 pt 9 vel 2-5 CAPEX (PPE and development) m 20 pt 21 › ~3% of net sales per annum 2012-2015 7 › Planning assumption going forward ~2% 88 15 lmnopqrst ãäåæçèéêë 79 Acquisitions and divestments ğĠġĢģĪīĮįİıĶķ ű
Slide 31: EPS and dividend development
Eps and dividend development de title 44 pt EPS and dividend (SEK/share) evel 1 m 24 pt 53% 52% 50% vel 2-5 49% m 20 pt 4.17 3.72 3.57 3.40 3.70 Dividend policy takes into account 3.00 last year’s earnings and balance 2.75 lmnopqrst sheet structure, as well as coming 1.80 ãäåæçèéêë ğĠġĢģĪīĮįİıĶķ űŲų
Slide 32: Industry trends
de title 44 pt evel 1 m 24 pt vel 2-5 m 20 pt Industry trends lmnopqrst ãäåæçèéêë ğĠġĢģĪīĮįİıĶķ űŲųŴŵŶŷŸŹ ĽŃŃŅŅŇŇŌŌ ΆΈΉΊΰαβγ УФХЦЧШЩ ХЦЧШЩЪЫ Investor update 2016 NOVEMBER 10, 2016 NEW YORK in the er area © Telefonaktiebolaget LM Ericsson | Ericsson Investor Update 2016 11 10 | Page 26
Slide 33: Ulf Ewaldsson, CTO & Head of Strategy
de title 44 pt evel 1 m 24 pt vel 2-5 m 20 pt lmnopqrst ãäåæçèéêë ğĠġĢģĪīĮįİıĶķ űŲųŴŵŶŷŸŹ ĽŃŃŅŅŇŇŌŌ ΆΈΉΊΰαβγ УФХЦЧШЩ ХЦЧШЩЪЫ ULF EWaldSson in the CTO & Head of Strategy er area © Telefonaktiebolaget LM Ericsson | Ericsson Investor Update 2016 11 10 | Page 27
Slide 34: Operator reality
de title 44 pt Operator reality 2015-2018 evel 1 REVENUE EBITDA CAPEX m 24 pt vel 2-5 m 20 pt +2.4% +1.0% -1.0% lmnopqrst ãäåæçèéêë ğĠġĢģĪīĮįİıĶķ űŲųŴŵŶŷŸŹ ĽŃŃŅŅŇŇŌŌ ΆΈΉΊΰαβγ УФХЦЧШЩ ХЦЧШЩЪЫ Figures represent approximate CAGR 2015-2018 Sources: Ericsson Analysis, Thomson Reuters › Financial Analyst
Slide 35: Market Outlook
Market Outlook de title 44 pt USD b. Growth CAGR Media -2% 1-3% 2016-2018 Investments pick up as operators consolidate evel 1 218 215-225 m 24 pt 212 ~210 9 - 11% and choose technology Media (Products & vel 2-5 Services) m 20 pt IT & Cloud 5 - 7% IT & Cloud (Products & Major transformations ahead pr
Slide 36: Smartphone development
Smartphone development de title 44 pt evel 1 m 24 pt vel 2-5 m 20 pt lmnopqrst ãäåæçèéêë ğĠġĢģĪīĮįİıĶķ űŲųŴŵŶŷŸŹ ĽŃŃŅŅŇŇŌŌ ΆΈΉΊΰαβγ УФХЦЧШЩ ХЦЧШЩЪЫ Source: Ericsson Mobility Report, November 2016 This slide contains forward-looking statements. Actual result may be materially different. in the er are
Slide 37: Our reading on networks and operators
de title 44 pt Our reading on networks and operators evel 1 m 24 pt OPERATOR TECHNOLOGY vel 2-5 BUSINESS m 20 pt Applications decoupled from network Operators will focus on network as an open platform lmnopqrst ãäåæçèéêë ğĠġĢģĪīĮįİıĶķ űŲųŴŵŶŷŸŹ Cloud deployed applications Experimentation with servic
Slide 38: Network efficiency and performance
de title 44 pt Network efficiency and performance evel 1 m 24 pt Mobility & Cloud & Analytics & Applications connectivity data automation & services vel 2-5 m 20 pt Smartphones App cloud lmnopqrst ãäåæçèéêë ğĠġĢģĪīĮįİıĶķ űŲųŴŵŶŷŸŹ ĽŃŃŅŅŇŇŌŌ ΆΈΉΊΰαβγ УФХЦЧШЩ ХЦЧШЩЪЫ in the er area Increased efficienc
Slide 39: Increased network relevance for other industries
de title 44 pt Increased Network relevance for other industries Mobility & Cloud & Analytics & Applications connectivity data automation & services evel 1 m 24 pt Devices/IoT Enterprise IT cloud vel 2-5 m 20 pt lmnopqrst ãäåæçèéêë ğĠġĢģĪīĮįİıĶķ űŲųŴŵŶŷŸŹ ĽŃŃŅŅŇŇŌŌ ΆΈΉΊΰαβγ УФХЦЧШЩ ХЦЧШЩЪЫ 1000X 5X M
Slide 40: The global architecture
THE global architecture de title 44 pt evel 1 m 24 pt Devices/IoT Access/Mobility Service Service provider Enterprise Industry provider core IT cloud IT cloud Industry vel 2-5 & Society m 20 pt & Society IT & Cloud Management & Control Access Networks IT & Cloud Applications Media Mobile lmnopqrst ã
Slide 41: 5G use cases
de title 44 pt Broadband and media everywhere Sensors everywhere evel 1 5g m 24 pt vel 2-5 m 20 pt Smart vehicles, transport Infrastructure, monitor and control lmnopqrst ãäåæçèéêë USE CASES ğĠġĢģĪīĮįİıĶķ űŲųŴŵŶŷŸŹ ĽŃŃŅŅŇŇŌŌ ΆΈΉΊΰαβγ Critical control of remote devices УФХЦЧШЩ ХЦЧШЩЪЫ Interaction hum
Slide 42: The evolution of 5G
The evolution of 5g de title 44 pt evel 1 PHASE 3 m 24 pt vel 2-5 m 20 pt PHASE 2 PHASE 1 lmnopqrst ãäåæçèéêë ğĠġĢģĪīĮįİıĶķ űŲųŴŵŶŷŸŹ ĽŃŃŅŅŇŇŌŌ NEW DOMAINS OF CONNECTIVITY SOFTWARE ADJACENT BUSINESS VALUE CAPTURE ANALYTICS MODELS BASED ON SENSORS THE TECHNOLOGY ΆΈΉΊΰαβγ УФХЦЧШЩ ХЦЧШЩЪЫ DEVICES PLATF
Slide 43: Building the 5G ecosystem
Building the 5g ecosystem de title 44 pt evel 1 m 24 pt Operator 2020 vel 2-5 agreements 5G standard m 20 pt Research Test-beds, collaborations trials, products, Early launches devices lmnopqrst ãäåæçèéêë ğĠġĢģĪīĮįİıĶķ űŲųŴŵŶŷŸŹ Global Standardization Industrial ĽŃŃŅŅŇŇŌŌ engagements open source col
Slide 44: Market overview North America
de title 44 pt evel 1 m 24 pt Market overview vel 2-5 m 20 pt lmnopqrst ãäåæçèéêë ğĠġĢģĪīĮįİıĶķ North america űŲųŴŵŶŷŸŹ ĽŃŃŅŅŇŇŌŌ ΆΈΉΊΰαβγ УФХЦЧШЩ ХЦЧШЩЪЫ Investor update 2016 NOVEMBER 10, 2016 NEW YORK in the er area © Telefonaktiebolaget LM Ericsson | Ericsson Investor Update 2016 11 10 | Page 38
Slide 45: Rima Quereshi, Head of Region North America
de title 44 pt evel 1 m 24 pt vel 2-5 m 20 pt lmnopqrst ãäåæçèéêë ğĠġĢģĪīĮįİıĶķ űŲųŴŵŶŷŸŹ ĽŃŃŅŅŇŇŌŌ ΆΈΉΊΰαβγ УФХЦЧШЩ ХЦЧШЩЪЫ Rima Quereshi Head of Region North America in the er area © Telefonaktiebolaget LM Ericsson | Ericsson Investor Update 2016 11 10 | Page 39
Slide 46: North America market situation
de title 44 pt North America Market situation evel 1 1 Mobile investment stable 3 Operators transforming network and IT m 24 pt • RAN capex flat to low growth • Operators implementing programmable vel 2-5 architectures for agility and cost reduction m 20 pt • Exponential data growth (+50% YoY) • Lar
Slide 47: Strategic partnership with Cisco
de title 44 pt strategic partnership with Cisco Progress Background Routing evel 1 • Partnership to create the networks of the future m 24 pt • Cross license agreement signed Data center vel 2-5 m 20 pt • Global joint activity across all regions Partnership areas Networking Expansion and innovation
Slide 48: Business Segment Introduction
de title 44 pt evel 1 m 24 pt vel 2-5 m 20 pt Business Segment Introduction lmnopqrst ãäåæçèéêë ğĠġĢģĪīĮįİıĶķ űŲųŴŵŶŷŸŹ ĽŃŃŅŅŇŇŌŌ ΆΈΉΊΰαβγ УФХЦЧШЩ ХЦЧШЩЪЫ Investor update 2016 NOVEMBER 10, 2016 NEW YORK in the er area © Telefonaktiebolaget LM Ericsson | Ericsson Investor Update 2016 11 10 | Page 45
Slide 49: Overview of new segments
Overview of new segments de title 44 pt Operating Addressable market evel 1 % of Ericsson Main components Main components margin, excl. 2016 (USD b.), m 24 pt sales 2015 products services restr. 20151 CAGR ’16-’182 vel 2-5 Customer Support m 20 pt Radio Network Rollout Networks ~ 75% Mid-teens ~100
Slide 50: 2017 reporting structure
2017 reporting structure de title 44 pt evel 1 Net sales Profitability Market dimension m 24 pt vel 2-5 Total net sales Gross income Sales breakdown by m 20 pt Networks - of which products Operating income market area and “Other” - of which services EBITA Total net sales Gross income Sales breakdown
Slide 51: Networks
de title 44 pt evel 1 m 24 pt vel 2-5 m 20 pt networks lmnopqrst ãäåæçèéêë ğĠġĢģĪīĮįİıĶķ űŲųŴŵŶŷŸŹ ĽŃŃŅŅŇŇŌŌ ΆΈΉΊΰαβγ УФХЦЧШЩ ХЦЧШЩЪЫ Investor update 2016 NOVEMBER 10, 2016 NEW YORK in the er area © Telefonaktiebolaget LM Ericsson | Ericsson Investor Update 2016 11 10 | Page 48
Slide 52: Arun Bansal and Fredrik Jejdling
de title 44 pt evel 1 m 24 pt vel 2-5 m 20 pt lmnopqrst ãäåæçèéêë ğĠġĢģĪīĮįİıĶķ űŲųŴŵŶŷŸŹ ĽŃŃŅŅŇŇŌŌ ΆΈΉΊΰαβγ УФХЦЧШЩ ХЦЧШЩЪЫ Arun bansal Fredrik jejdling Head of Business Unit Head of Business Unit in the er area Network Products Network Services © Telefonaktiebolaget LM Ericsson | Ericsson Investor
Slide 53: Ericsson Networks business
Ericsson Networks business de title 44 pt Ericsson product related business evel 1 m 24 pt Radio and Site Solutions Network Network vel 2-5 software and hardware Rollout Design m 20 pt Transport Network Customer lmnopqrst software and hardware Tuning Support ãäåæçèéêë ğĠġĢģĪīĮįİıĶķ űŲųŴŵŶŷŸŹ ĽŃŃŅŅŇŇ
Slide 54: Market realities
Market realities de title 44 pt Developed markets Emerging markets evel 1 m 24 pt › Flat operator revenues › Operator capex impacted by negative macro-economic environment vel 2-5 › Operator focus on costs m 20 pt › 2-3% operator revenue growth › Video drives data: monetization challenges › Coverage
Slide 55: Business cycles Mobile infrastructure
de title business cycles Mobile infrastructure 44 pt Population 11X coverage Video traffic Capacity evel 1 › Upgrade, densification, capacity increase m 24 pt 49 Exabytes › Shorter order cycles vel 2-5 › Accretive to company gross margin m 20 pt › More software, support and optimization services >80
Slide 56: Coverage & capacity realities
Coverage & capacity realities de title 44 pt Capacity evel 1 › Works well in markets where end-users are willing to m 24 pt pay for data usage and quality vel 2-5 › Slow/no take-up of small cell indoor business m 20 pt › Growing discrepancy between user expectation and network performance due to low
Slide 57: Improved mobile broadband business
de title Improved Mobile broadband Business 44 pt Service efficiency Scale Ericsson Radio System evel 1 › Continued cost efficiency gains › 20% less RAN Total Cost of Ownership (TCO) m 24 pt through resource pyramid › High flexibility and 5G ready optimization and global delivery vel 2-5 › Cost-base
Slide 58: Ericsson 5G momentum
Ericsson 5g momentum de title 44 pt North America: Asia: Feb 2016: 10 Gbps peak with beam forming and beam tracking Feb 2016: 20 Gbps data throughput: 2 devices/MIMO Sept 2016: >12 Gbps downloads; <2 ms latency Aug 2016: 27.5 Gbps peak throughput; 2 ms latency Oct 2016: Speeds up to 14 Gbps Aug 2016
Slide 59: Products & Services mid-term priorities
Mid-term joint Priorities de title 44 pt evel 1 Monetize installed base & Drive competitive portfolio Undisputed leadership m 24 pt expand business horizon with best TCO and e2e cost in evolution to 5G vel 2-5 m 20 pt › Grow Managed Services by › Leverage Service delivery › Front-end capabilities to
Slide 60: IT & Cloud
de title 44 pt evel 1 m 24 pt vel 2-5 m 20 pt It & cloud lmnopqrst ãäåæçèéêë ğĠġĢģĪīĮįİıĶķ űŲųŴŵŶŷŸŹ ĽŃŃŅŅŇŇŌŌ ΆΈΉΊΰαβγ УФХЦЧШЩ ХЦЧШЩЪЫ Investor update 2016 NOVEMBER 10, 2016 NEW YORK in the er area © Telefonaktiebolaget LM Ericsson | Ericsson Investor Update 2016 11 10 | Page 15
Slide 61: Jean-Philippe Poirault and Anders Lindblad
de title 44 pt evel 1 m 24 pt vel 2-5 m 20 pt Jean-Philippe Poirault Head of Business Unit lmnopqrst IT & Cloud Services ãäåæçèéêë ğĠġĢģĪīĮįİıĶķ űŲųŴŵŶŷŸŹ ĽŃŃŅŅŇŇŌŌ ΆΈΉΊΰαβγ Anders lindblad УФХЦЧШЩ ХЦЧШЩЪЫ Head of Business Unit IT & Cloud Products in the er area © Telefonaktiebolaget LM Ericsson | E
Slide 62: Digital transformation
digital transformation de title 44 pt BUSINESS DRIVERS FOR OUR CUSTOMERS evel 1 m 24 pt vel 2-5 Digital operations Digital engagement Digital services m 20 pt lmnopqrst Respond quickly Interact consistently ãäåæçèéêë ğĠġĢģĪīĮįİıĶķ űŲųŴŵŶŷŸŹ with agile processes with customers and Innovate to launch
Slide 63: Segment IT & Cloud
de title 44 pt Segment IT & CLOUD Products and Consulting & IT Customer Leading position in evel 1 technology Systems Integration operations Support Telecom IT & Cloud services m 24 pt vel 2-5 Support Systems (OSS and BSS) m 20 pt OSS and BSS market leader1 Customer & Revenue management Service prov
Slide 64: Business traction
de title 44 pt Business Traction evel 1 Delivered value m 24 pt vel 2-5 Support Systems transformation m 20 pt • Customer experience – reduced churn • Personalized upselling – improved conversion rates lmnopqrst Telecom core transformation ãäåæçèéêë ğĠġĢģĪīĮįİıĶķ • Simplification and automation – re
Slide 65: Market realities
de title 44 pt Market realities › Digital transformation and 5G journey within operators • Investing in front-office IT systems and consistent omnichannel customer experience evel 1 • Focus on agility and cost cuts drive investments in IT consolidation, automation and network virtualization m 24 pt
Slide 66: Efficiency journey
Efficiency Journey de title 44 pt evel 1 m 24 pt Run-rate Off-shore service Central delivery of vel 2-5 in R&D delivery hours ratio industrialized work m 20 pt packages lmnopqrst 16% down 18% - points up 10x increase ãäåæçèéêë ğĠġĢģĪīĮįİıĶķ űŲųŴŵŶŷŸŹ Jan 2015 – Dec 2016 Jan 2015 – Dec 2016 YoY Sep 2
Slide 67: Business direction
Business Direction de title 44 pt ILLUSTRATIVE INVESTMENTS REVENUE SPLIT CUSTOMERS evel 1 m 24 pt Growth portfolio Growth portfolio Enterprises / I&S vel 2-5 • Omnichannel transformation m 20 pt • Analytics platform • Revenue Manager • 5G Ready Core, VoLTE, NFV/SDN • Hyperscale cloud • Digital – Con
Slide 68: Products & Services mid-term priorities
IT & CLOUD Mid-term Priorities de title 44 pt evel 1 m 24 pt Monetize leading Re-focus Go-To- Portfolio Development & People and vel 2-5 position Market model shift service delivery competence shift m 20 pt PRODUCTS & SERVICES • Leverage installed • Focus on growing • From classic to • Modernized to
Slide 69: Summary
SUMMARY de title 44 pt evel 1 m 24 pt vel 2-5 m 20 pt Digitalization changes the game Monetize leading position in lmnopqrst ãäåæçèéêë ğĠġĢģĪīĮįİıĶķ IT Telecom services, OSS & BSS and Telecom core űŲųŴŵŶŷŸŹ ĽŃŃŅŅŇŇŌŌ ΆΈΉΊΰαβγ УФХЦЧШЩ ХЦЧШЩЪЫ Portfolio transformation to support customer transformatio
Slide 70: Media
de title 44 pt evel 1 m 24 pt vel 2-5 m 20 pt MEDIA lmnopqrst ãäåæçèéêë ğĠġĢģĪīĮįİıĶķ űŲųŴŵŶŷŸŹ ĽŃŃŅŅŇŇŌŌ ΆΈΉΊΰαβγ УФХЦЧШЩ ХЦЧШЩЪЫ Investor update 2016 NOVEMBER 10, 2016 NEW YORK in the er area © Telefonaktiebolaget LM Ericsson | Ericsson Investor Update 2016 11 10 | Page 25
Slide 71: Per Borgklint, Head of Business Unit Media
de title 44 pt evel 1 m 24 pt vel 2-5 m 20 pt lmnopqrst ãäåæçèéêë ğĠġĢģĪīĮįİıĶķ űŲųŴŵŶŷŸŹ ĽŃŃŅŅŇŇŌŌ ΆΈΉΊΰαβγ УФХЦЧШЩ ХЦЧШЩЪЫ Per Borgklint Head of Business Unit in the er area Media © Telefonaktiebolaget LM Ericsson | Ericsson Investor Update 2016 11 10 | Page 26
Slide 72: Segment Media
Segment media de title 44 pt PRODUCTS SERVICES evel 1 m 24 pt vel 2-5 Compression, software and hardware Playout operations and Media management m 20 pt Video processing and Storage Access lmnopqrst Content discovery Cloud based TV-platforms ãäåæçèéêë ğĠġĢģĪīĮįİıĶķ űŲųŴŵŶŷŸŹ ĽŃŃŅŅŇŇŌŌ ΆΈΉΊΰαβγ Sport
Slide 73: Mobile video consumption quotes
de title 44 pt “35% of all video consumption today is happening on a mobile device” evel 1 m 24 pt vel 2-5 m 20 pt “Mobile video consumption is by far lmnopqrst ãäåæçèéêë ğĠġĢģĪīĮįİıĶķ űŲųŴŵŶŷŸŹ outgrowing traditional linear” ĽŃŃŅŅŇŇŌŌ ΆΈΉΊΰαβγ “BY 2019, 80% of the traffic going through УФХЦЧШЩ ХЦЧШ
Slide 74: Market realities
Market realities de title 44 pt › The Cable market is moving towards all IP delivery. This plays directly to Ericsson’s strengths in IPTV evel 1 m 24 pt › Convergence of industry requires new skills and opens opportunities for Ericsson´s broad capabilities vel 2-5 m 20 pt › Increased openess for out
Slide 75: Media industry is converging
Media industry Is converging de title 44 pt Highlights evel 1 LGI m 24 pt acquiring BASE - AT&T acquiring vel 2-5 Charter Belgium content to break m 20 pt acquired Time the value chain Warner Cable Telefonica - Telefonica acquiring Vodafone Verizon acquiring Canal + Spain acquiring Kabel moving into
Slide 76: Our media transformation
Our media transformation de title 44 pt Product portfolio Go-to-market strategy evel 1 Declining low double digit Growing low triple digits m 24 pt Legacy Next-Generation Today Going forward vel 2-5 m 20 pt • Hardware-based • Software-based • Fragmented • Focused • Compression • Compression and Go-t
Slide 77: Media going forward
Media going forward de title 44 pt evel 1 m 24 pt vel 2-5 m 20 pt Transform to capture synergies Transform broadcast business from new organization and Be the Video transformation model to platform based increase focus in Go-to-market partner of our customers services lmnopqrst ãäåæçèéêë ğĠġĢģĪīĮįİı
Slide 78: Summary
de title 44 pt evel 1 m 24 pt vel 2-5 m 20 pt SUMMARY lmnopqrst ãäåæçèéêë ğĠġĢģĪīĮįİıĶķ űŲųŴŵŶŷŸŹ ĽŃŃŅŅŇŇŌŌ ΆΈΉΊΰαβγ УФХЦЧШЩ ХЦЧШЩЪЫ Investor update 2016 NOVEMBER 10, 2016 NEW YORK in the er area © Telefonaktiebolaget LM Ericsson | Ericsson Investor Update 2016 11 10 | Page 39
Slide 79: Jan Frykhammar, President and CEO
de title 44 pt evel 1 m 24 pt vel 2-5 m 20 pt lmnopqrst ãäåæçèéêë ğĠġĢģĪīĮįİıĶķ űŲųŴŵŶŷŸŹ ĽŃŃŅŅŇŇŌŌ ΆΈΉΊΰαβγ УФХЦЧШЩ ХЦЧШЩЪЫ Jan frykhammar President and CEO in the er area © Telefonaktiebolaget LM Ericsson | Ericsson Investor Update 2016 11 10 | Page 40
Slide 80: Three focus areas to drive incremental improvements
de title 44 pt Three Focus areas to drive incremental improvements ILLUSTRATIVE Operating margin (incl. restructuring) evel 1 m 24 pt vel 2-5 m 20 pt Build success in lmnopqrst IT & Cloud, Media, ãäåæçèéêë ğĠġĢģĪīĮįİıĶķ Industry & Society űŲųŴŵŶŷŸŹ ĽŃŃŅŅŇŇŌŌ Monetize Networks ΆΈΉΊΰαβγ УФХЦЧШЩ ХЦЧШЩЪ
Slide 81: Near-term priorities
Near-term Priorities de title 44 pt evel 1 m 24 pt A strong business partner supporting customers’ agenda vel 2-5 m 20 pt Secure company performance lmnopqrst ãäåæçèéêë ğĠġĢģĪīĮįİıĶķ űŲųŴŵŶŷŸŹ ĽŃŃŅŅŇŇŌŌ Accelerate our transformation ΆΈΉΊΰαβγ УФХЦЧШЩ ХЦЧШЩЪЫ Fine-tune execution of strategies to captu