Telefonaktiebolaget Lm Ericsson Class A · OMXSTO:ERIC_A
Telefonaktiebolaget Lm Ericsson Class A — Ericsson — Investor Day (November 2020)
122 slides from Telefonaktiebolaget Lm Ericsson Class A's investor day presentation, Nov 10, 2020
Slide 1: Ericsson Capital Markets Day 2020
Ericsson Capital Markets Day 2020 November 10, 2020
Slide 2: Welcome & introduction
Welcome & introduction Peter Nyquist Vice President, Head of IR
Slide 3: Safe harbor statement
Safe harbor statement This presentation contains forward-looking statements. Such statements are based on our current expectations and are subject to risks and uncertainties that could materially affect our business and results. Please read our earnings reports and our most recent annual report for
Slide 4: Agenda
Agenda 3:00 – 4:45PM CET 4:45-7:00PM CET Strategy execution & the next chapter Highlights from Market Areas Börje Ekholm, CEO Chris Houghton, Head of Market Area North East Asia Niklas Heuveldop, Head of Market Area North America R&D as a value creator Erik Ekudden, Chief Technology Officer Update f
Slide 5: Capital Markets Day 2020
Capital Markets Day 2020 Börje Ekholm Chief Executive Officer
Slide 6: A complex and dynamic business environment
A complex and dynamic business environment Climate Economic Geopolitics Urbanisation Change Volatility Connectivity Population Data Populism COVID-19 Increase Security © Telefonaktiebolaget LM Ericsson 2020 | Ericsson Capital Markets Day 2020, Nov 10 | Page 6
Slide 7: Our focused strategy has yielded results
Our focused strategy has yielded results 25,000 20% 25% Workforce reductions1 Share of workforce in R&D2 SEK 40 b. Annual R&D investment in technology leadership3 31% 40% -18% +2% Gross Margin4 Organic sales growth improvements5 Global leaders in 5G Commercial Live networks 116 Agreements 69 worldwi
Slide 8: We are defining the next phase of our growth
We are defining the next phase of our growth Intelligent, sustainable and connected Full value for service providers Our customers’ needs New revenue streams End-customer experience Relentless efficiency Our focus Digital infrastructure… Leadership in 5G, scalable, resilient and reliable networks an
Slide 9: Consumer 5G demand is there and can be monetized
Consumer 5G demand is there and can be monetized The better experience of 5G Consumers are willing to spend Take rate is predicted to be faster drives consumer demand on improved service with 5G if supported by roll-out 3-5 30% 1.5-2 years 5G measured 3-5 times faster than Initial 5G premium across
Slide 10: 5G measurements taken with Speedtest® (2019 Q2)
5G measurements taken with Speedtest® 2019 Q2 World total: 73,716 5G tests taken with Speedtest Source: Ericsson analysis on Speedtest Intelligence® data from Ookla® © Telefonaktiebolaget LM Ericsson 2020 | Ericsson Capital Markets Day 2020, Nov 10 | Page 10
Slide 11: 5G measurements taken with Speedtest® (2020 Q3)
5G measurements taken with Speedtest® 2020 Q3 World total: 1,774,713 5G tests taken with Speedtest Source: Ericsson analysis on Speedtest Intelligence® data from Ookla® © Telefonaktiebolaget LM Ericsson 2020 | Ericsson Capital Markets Day 2020, Nov 10 | Page 11
Slide 12: Enterprise digitalization is an attractive opportunity
Enterprise digitalization is an attractive opportunity The enterprise opportunity in enterprise Enterprise digitalization use cases requiring 5G and the mobile industry can address digitalization is sizable high performance mobile connectivity this opportunity >25% CAGR 5G was designed to solve ente
Slide 13: Our enterprise approach: Building on top of the core business
Our enterprise approach: Building on top of the core business Ericsson Enterprise Sell through/with packaged solutions Ericsson technology for the digital infrastructure Communication Networks Enterprises Service Providers Digital Services Managed Services Emerging Business Core business © Telefonak
Slide 14: Strategic steps enhancing the enterprise approach
Strategic steps enhancing the enterprise approach Dedicated • Mobile SD-WAN, enterprise- + + class routing and security, Networks cloud-based management Ericsson and control Enterprise • Subscription-based, delivered as a Service IoT • Connecting sites, vehicles, Accelerator field forces, and IoT de
Slide 15: Deriving value from responsible and sustainable action
Deriving value from responsible and sustainable action Transforming whole 15% sectors of the global ICT potential to enable greenhouse-gas economy emission reductions of in other sectors by 2030 A leading actor and influencer in global social and Covid-19 environmental responsibility Supporting 15 -
Slide 16: Underpinning our long-term growth ambitions
Underpinning our long-term growth ambitions M&A – Portfolio near acquisitions & technology focus Growth in Enterprise business – 5G and IoT use cases Growth in core businesses – Market share gain Outgrow the Carbon neutral market 15%-18% of 9%-12% of sales sales in operations by (market growth expec
Slide 17: R&D as a value creator
R&D as a value creator Erik Ekudden Senior Vice President, Chief Technology Officer
Slide 18: SEK 40 b. R&D
SEK 40 b. R&D © Telefonaktiebolaget LM Ericsson 2020 | Ericsson Capital Markets Day 2020, Nov 10 | Page 18
Slide 19: Ericsson R&D investments have resulted in a strong 5G portfolio
Ericsson R&D investments have resulted in a strong 5G portfolio R&D Spend, SEK b. Major contributors to 5G standards (essential patents) 40 38 39 39 36 35 15.8% 35 +23% 32 14.1% 30 12.6% 25 10.9% 10.9% 8.8% 8.6% 20 6.8% 15 10 5 0 2014 2015 2016 2017 2018 2019 Source: Law firm Bird & Bird © Telefonak
Slide 20: Technology strategy focus – where has it taken us…
Technology strategy focus – where has it taken us… Innovation in the network platform and new business Technologies providing for new business IoT platform onboarding and serving Global facilitation and aggregation of industry devices and use-cases network assets for third party services Technologie
Slide 21: Technology strategy focus – where has it taken us…
Technology strategy focus – where has it taken us… Innovation in the network platform and new business IOT solutions Technologies providing for new business Network exposure and established as a fast orchestration are enabling growing business IoT platform onboarding and serving industry Global faci
Slide 22: 5G – Ericsson leadership in creating a platform for the future
5G – Ericsson leadership in creating a platform for the future Adding new use cases by software… Ericsson leads in driving 5G standards • Flexible air-interface supporting a range of deployment cases o Based on use case requirements, geography, frequency bands • Lean-carrier air interface design o N
Slide 23: 5G driven digital infrastructure
5G driven digital infrastructure - Key enabler for digital transformation Ericsson enterprise Communication service providers offerings Enterprise IoT solutions Private Trusted execution networks environment Wireless edge WAN Service Wireless edge Network slicing orchestration solutions Dedicated ne
Slide 24: 5G driven digital infrastructure
5G driven digital infrastructure - Key enabler for digital transformation Ericsson enterprise Communication service providers offerings BA Technologies Enterprise & New Businesses Private IoT solutions Trusted execution networks environment Wireless edge WAN Service Wireless edge Network slicing orc
Slide 25: Ericsson technology foresight— From voice to Internet of Senses
Ericsson technology foresight— From voice to Internet of Senses Haptic feedback XR in live production Network assisted XR Internet of Senses — Remote operation of — AR assisted trouble — Split rendering in — Full immersive industrial equipment shooting device & network experience — Increased efficie
Slide 26: Exploring the future in D-15
Exploring the future in D-15 Defining the next generation of everything, "Really enjoyed 5G Things this week. It was together. like watching TV – the — Ericsson D-15 is our new 5G-connected production value, speakers, subject matter co-creation and innovation center. A home for were all excellent.“
Slide 27: Ericsson Technology Trends 2020
Ericsson Technology Trends 2020 Drivers — A collaborative, automated physical world — Connected intelligent machines — The internet of senses Enablers — Limitless connectivity — Network compute fabric — Trustworthy infrastructure — Cognitive networks © Telefonaktiebolaget LM Ericsson 2020 | Ericsson
Slide 28: Ericsson strategy
Ericsson strategy Purpose and vision Mission Empowering an intelligent, sustainable Enabling the full value of connectivity and connected world. for service providers. Our customers’ needs New revenue streams End-customer experience Relentless efficiency Our focus Digital infrastructure… Leadership
Slide 29: Key takeaways
Key takeaways Ericsson R&D focus 5G – the innovation Ericsson leads into platform the future SEK 40 b. in R&D Drives digital Consumer & enterprise transformation focus Strongest portfolio Future prepared Everything connected © Telefonaktiebolaget LM Ericsson 2020 | Ericsson Capital Markets Day 2020,
Slide 30: Financial update and targets
Financial update and targets — Carl Mellander — Senior Vice President, Chief Financial Officer — © Telefonaktiebolaget LM Ericsson 2020 | Ericsson Capital Markets Day 2020, Nov 10 | Page 30
Slide 31: Solid foundation for the future
Solid foundation for the future Value creation strategy Targets © Telefonaktiebolaget LM Ericsson 2020 | Ericsson Capital Markets Day 2020, Nov 10 | Page 31
Slide 32: Solid foundation for the future
Solid foundation for the future Value creation strategy Targets © Telefonaktiebolaget LM Ericsson 2020 | Ericsson Capital Markets Day 2020, Nov 10 | Page 32
Slide 33: Ericsson turnaround journey since 2017
Ericsson turnaround journey since 2017 Net sales Underlying gross margin2 Operating income3 (SEK b. – Rolling 4Q) (SEK b. – Rolling 4Q) 230 45 30 43 220 41 20 39 10 210 37 35 0 200 33 31 -10 190 29 -20 27 25 -30 17Q1 17Q3 18Q1 18Q3 19Q1 19Q3 20Q1 20Q3 17Q1 17Q3 18Q1 18Q3 19Q1 19Q3 20Q1 20Q3 17Q1 17Q
Slide 34: Growing profit converted into free cash flow
Growing profit converted into free cash flow FCF (bef. M&A) and OM% Cash position Rating Payment of SEK b. SEK b. 10 BSEK to SEC and DOJ 78 18 18 72 68 69 Agency Rating Outlook 10% 10% BBB- Stable Fitch (IG) (Jul 2018) 8% 8% 42 35 36 34 66 55 Positive 4% S&P BB+ (Sep 2019) 5 44 4 32 2% 24 2% 16 1% S
Slide 35: Value creation strategy
Solid foundation for the future Value creation strategy Targets © Telefonaktiebolaget LM Ericsson 2020 | Ericsson Capital Markets Day 2020, Nov 10 | Page 35
Slide 36: Value creation via performance and investment
Value creation via performance and investment Long-term cash flow generation R&D Market Share M&A Business performance, cost and capital efficiency Value creation mindset embedded into Ericsson´s company culture © Telefonaktiebolaget LM Ericsson 2020 | Ericsson Capital Markets Day 2020, Nov 10 | Pag
Slide 37: R&D investments – a key for sales and margin driver
R&D investments – a key for sales and margin driver Technology leadership R&D1 and underlying gross margin2 ─ Investments in R&D a key part of our focused (SEK b. Rolling 4Q) (% – quarterly) business strategy 45 R&D Underlying gross margin 45 43 ─ Significant investments carried out in Ericsson 40 4
Slide 38: Market share gains by leveraging the technology shift
Market share gains by leveraging the technology shift and our competitive offering Market share gains through Ericsson RAN market shares +5% – Leveraging the technology shift to 5G 53% – Spectrum sharing and carrier aggregation 48% – Credible long-term roadmap – Solid balance sheet supports R&D stra
Slide 39: M&A as long-term value creation lever
M&A as long-term value creation lever ─ Market leader in Wireless WAN Edge 4G and 5G solutions for Disciplined end to end Cradlepoint the enterprise market practice for M&A ─ Operates as a standalone subsidiary within Ericsson. Recent Execution & Follow-up Strategy M&A integration & develop ─ Furthe
Slide 40: Return on capital improvements from profits and efficiency
Return on capital improvements from profits and efficiency Operating margin (before restr) and Capital turnover Key insights OM% Strong portfolio and economies of scale 12 2020 Q3 26% ROCE Rolling 4Q2 (excl cash) 10 8 Shorter lead-time from order to cash 6 4 Decision making based on 2% ROCE value cr
Slide 41: Targets
Solid foundation for the future Value creation strategy Targets © Telefonaktiebolaget LM Ericsson 2020 | Ericsson Capital Markets Day 2020, Nov 10 | Page 41
Slide 42: Long-term targets
Long-term targets Financial and sustainability targets Sales Outgrow the market Baseline – >1% market growth Enterprise – 5G and IOT Market share gain M&A – Portfolio near EBITA margin1 15%-18% of sales – EBITA more relevant for a growth strategy including M&A Free Cash Flow 9%-12% of sales (before
Slide 43: Long term financial target - EBITA margin
Long term financial target - EBITA margin Key elements of profit improvement Operating margin from rolling 4Q to long-term Illustrative – Sales growth mainly in EB&O, Networks and Digital Service EBITA 15%-18%2 – Gross margin expansion mainly in Digital Service (software) and EB&O (Cradlepoint) – In
Slide 44: Long-term financial target – FCF before M&A
Long-term financial target – FCF before M&A Bridge from operating income to free cash flow Illustrative Comments % of net sales – Focus on delivering high cash EBITA1 15%-18% conversion from operating income - Financial net, tax and other -4%-5% – Ongoing activities to reduce costs + Add back deprec
Slide 45: Strengthened confidence in delivering on 2020 targets
Strengthened confidence in delivering on 2020 targets CMD 2017 Before Focused Strategy FY Targets Current Status 2016 2020 Q320, 4Q Rolling Sales SEK 220.3 b. SEK 230 - 240 b. SEK 229.2 b. Gross 31.4%1 37% - 39%1 39.6%1 Margin Operating 5.8%1 >10%1 10.4%2 Margin 1Numbers exclude restructuring charge
Slide 46: Going into 2021
Going into 2021 Networks Digital Services Managed Services Emerging Business & Other — Selective global market — 5G business momentum will — Continued volume decrease — Continued growth in our IoT expansion based on generate revenues in 2021 in a North American contract platform technology and and b
Slide 47: Target 2022 – Segment update
Target 2022 – Segment update EBIT1 12-14% no later than 2022 Rolling 4Q Investor Update 2019 CMD 2020 Segments Q3 20201 20221 20221 Networks 17.0% 15% - 17% 16% - 18% Digital Services -7.0% 10% - 12% 4% - 7% Managed Services 7.4% 8% - 10% 9% - 11% Emerging Business and Other -41.9%2 - - Sum of the p
Slide 48: Bridge to 2022 targets
Bridge to 2022 targets Activities going forward Operating margin from rolling 4Q to 2022 Illustrative – Networks delivering close to range – 17% – Footprint improvement driven by 5G offering EBIT 12%-14%2 – Digital Services still loss making – 5G core will drive sales EBIT – Higher software in mix 1
Slide 49: Key takeaways
Key takeaways Focus on delivering Disciplined capital New long-term strong free cash flow allocation for long- financial targets term value creation including 15%-18% EBITA margin © Telefonaktiebolaget LM Ericsson 2020 | Ericsson Capital Markets Day 2020, Nov 10 | Page 49
Slide 50: 5G business and market opportunity in North East Asia
5G business and market opportunity in North East Asia Chris Houghton Senior Vice President and Head of Market Area North East Asia
Slide 51: Competitive environment in North East Asia (NEA)
Competitive environment in North East Asia (NEA) — Very early adopter of 5G, all NEA markets had launched 5G commercial service by Q2 2020 S. Korea — 5G will provide extensive Japan coverage of high-quality Mainland China networks for consumers — 150+ million terminals connected Hong Kong to 5G netw
Slide 52: 5G accelerates IoT adoption in MNEA
5G accelerates IoT adoption in MNEA Japan & SK IoT Connections 2025 China IoT Connections 2025 150 14% 2,500 33% 32% Million 11% Million 59% 8% 8% 8% 14% 13% +29% Automotive Retail Manufacturing Public Sector +13% Agriculture Automotive Others Manufacturing Utilities CAGR Others CAGR Source: GSMA So
Slide 53: Connected vehicles, global connectivity and private networks use cases
GM-OnStar Global connectivity Fujitsu partnership Connected Vehicles management for private networks CSP: China Telecom CSP: KDDI Enterprise: GM-OnStar Enterprise: Toyota As the Telematics Service Provider for KDDI Global Communication Platform, Fujitsu re-sells Ericsson’s Private Network SAIC-GM, O
Slide 54: Key takeaways
Key takeaways Operators in North Operators aim to Ericsson is well East Asia will build realize the 5G positioned extensive 5G opportunity in networks connecting industries and enterprises © Telefonaktiebolaget LM Ericsson 2020 | Ericsson Capital Markets Day 2020, Nov 10 | Page 54
Slide 55: Partnering to capture the enterprise opportunity in North America
Partnering to capture the enterprise opportunity in North America Niklas Heuveldop Senior Vice President and Head of Market Area North America
Slide 56: The market opportunity
The market opportunity Global CSP 5G-enabled B2B opportunity1 $39b 16%2 88%2 CSP opportunity cost reduction via Providers researching, 2030 Healthcare remote patient piloting, planning, or monitoring & wearables already remotely monitoring patients with IoT devices $700b $35b 6% 22%3 CSP opportunity
Slide 57: Accelerating the buildout of the 5G Innovation Platform
Accelerating the buildout of the 5G Innovation Platform 5G network platform is under construction Ericsson has been instrumental in Ericsson rewarded with across all three spectrum bands addressing 5G deployment challenges market share gains Illustrative Challenge Ericsson value prop # 1 RAN provide
Slide 58: Partnering to accelerate innovation with our customers
Partnering to accelerate innovation with our customers small & Started in June 2017, providing Long standing relationship with AT&T to power innovation 5G “network on wheels” to 5G use cases from mixed reality experiences to 5 hubs 500+ medium enterprises 40 power 5G use case trials in hackathons, a
Slide 59: Ericsson US 5G Smart Factory
Ericsson US 5G Smart Factory 5G Radio production 5G Smart Factory showcase Bring 5G radio volume production to the USA to meet demands of Showcase the application and usage of 5G technology through growing market. interactive and automated features. Automated production Optimized processes Maximize
Slide 60: Key takeaways
Key takeaways We partner with our We partner with our customers to customers to accelerate the build accelerate the digital of the 5G innovation transformation of platform across North industries and the America public sector © Telefonaktiebolaget LM Ericsson 2020 | Ericsson Capital Markets Day 2020
Slide 61: Networks
Networks Fredrik Jejdling Executive Vice President, Head of Business Area Networks © Telefonaktiebolaget LM Ericsson 2020 | Ericsson Capital Markets Day 2020, Nov 10 | Page 61
Slide 62: Strategic priorities 2022 and long-term
Strategic priorities 2022 and long-term Invest in technology Selective market Use-case driven Most important and cost leadership expansion based on network expansions activities to reach technology and leveraging network competitiveness investments 2022 Establish 5G as the Continue build-out and Lea
Slide 63: Agenda
Agenda 5G market and Ericsson performance Market leadership long-term Execution and financial outlook © Telefonaktiebolaget LM Ericsson 2020 | Ericsson Capital Markets Day 2020, Nov 10 | Page 63
Slide 64: Agenda
Agenda 5G market and Ericsson performance Market leadership long-term Execution and financial outlook © Telefonaktiebolaget LM Ericsson 2020 | Ericsson Capital Markets Day 2020, Nov 10 | Page 64
Slide 65: First months of 5G in numbers
First 18 months of 5G in numbers 5G is the fastest growing mobile 5G performance is a Next step in the 5G journey is technology generation prerequisite to realize future standalone deployment use-cases ● Based on Carrier Aggregation ● Consumer: automotive, and Dynamic Spectrum Sharing, ● 190M 5G use
Slide 66: R&D as core of Networks value creation
R&D as core of Networks value creation Invest in technology 2017 and cost leadership 2020 15 Operating Income +10 27 Operating Income (BSEK) R&D (BSEK) Selective market Acceleration of 5G Investments expansion based on with lead customers (BSEK) technology and cost competitiveness 32% Market share o
Slide 67: Agenda
Agenda 5G market and Ericsson performance Market leadership long-term Execution and financial outlook © Telefonaktiebolaget LM Ericsson 2020 | Ericsson Capital Markets Day 2020, Nov 10 | Page 67
Slide 68: Maintaining market leadership position long-term
Maintaining market leadership position Focus: Market long-term leadership Long-term Focus: Opportunity 2020-2022 Focus: Execution 2017-2019 Our strategic plans are aimed at reinforcing our market leadership 1 Portfolio strengths: — Architecture — Redefining the site Invest for technology and — Intel
Slide 69: Technology areas enabling us to compete
1 Portfolio Strengths Technology areas enabling us to compete Wanted position long-term Antennas & Algorithms & Wide Band System Simulations Ericsson leadership Technologies Ability to position in 2020 price Industrialization Functionality Rich & Modularity & Efficient SW Customer value Custom Silic
Slide 70: Leading in 5G uptake – Ericsson unique Massive MIMO
1 Portfolio Strengths Leading in 5G uptake Ericsson unique Massive MIMO Architecture Unique advantages 29% Beamforming Nationwide coverage Custom silicon with extended capacity Better uplink performance EMCA Full receiver than closest competitor Uplink throughput Carrier Aggregation 100 80 60 MBPS V
Slide 71: Resilient supply chain
2 Industry Trends Resilient supply chain Increasing global and local flexibility Our approach Ensuring business Supply R&D Sourcing Service Delivery continuity for our Increased our global Global R&D with Working with global Increased remote customers through supply flexibility cutting edge supplier
Slide 72: 5G an enabler for growth
2 Industry Trends 5G an enabler for growth Fastest growing mobile generation Mid-band densification 5G for industry ● 5G uptake significantly faster than LTE, ● Data traffic to grow 5x times until 2025 ● Global digitalization opportunity for 1.5-2 years ahead in adoption industries to grow 12% CAGR
Slide 73: Cloud RAN for business
2 Industry Trends Cloud RAN for business • Add more versatility in network build-outs • Achieve greater scalability and pooling options • Address enhanced mobile broadband applications Enterprise / Industry Macro deployments Data center Indoor/small cells © Telefonaktiebolaget LM Ericsson 2020 | Eri
Slide 74: Our view on evolving RAN architectures
2 Industry Trends Our view on evolving RAN architectures • Standardized and open interfaces to gradually evolve, with 100 open interfaces in 3GPP today • Focus on multi-domain orchestration and virtualization as foundation for openness • Embracing cloud architecture as a complement to high-performin
Slide 75: Agenda
Agenda 5G market and Ericsson performance Market leadership long-term Execution and financial outlook © Telefonaktiebolaget LM Ericsson 2020 | Ericsson Capital Markets Day 2020, Nov 10 | Page 75
Slide 76: Execution and financial outlook
Execution and financial outlook Strategic priorities Cross-functional Strategy Execution Strategic ambition We shall create highly scalable, cost Invest in technology Win the technology race competitive, modular platforms and cost leadership Deliver a leading portfolio in time for market need consis
Slide 77: Key takeaways
Key takeaways Ericsson is in the lead in We continue to invest in We take an orchestrating 5G, the fastest growing value creating technology role in the evolution of mobile generation ever for the benefit of our mobile networks customers and Ericsson © Telefonaktiebolaget LM Ericsson 2020 | Ericsson
Slide 78: Digital Services
Digital Services Jan Karlsson Senior Vice President, Head of Business Area Digital Services
Slide 79: Agenda
Agenda Execution achievements Strategic priorities 2022 and onwards Financial journey mid- and long-term © Telefonaktiebolaget LM Ericsson 2020 | Ericsson Capital Markets Day 2020, Nov 10 | Page 79
Slide 80: Central to customers’ 5G platform for consumer and enterprise business
Central to customers’ 5G platform for consumer and enterprise business Customer needs Digital Services’ portfolio – integral part of Ericsson’s 5G platform Business model flexibility Product catalog and monetization (BSS) (~20%) Service agility, quality and security Management and orchestration (OSS
Slide 81: Agenda
Agenda Execution achievements Strategic priorities 2022 and onwards Financial journey 2022 and onwards © Telefonaktiebolaget LM Ericsson 2020 | Ericsson Capital Markets Day 2020, Nov 10 | Page 81
Slide 82: Strategy execution – progress
Strategy execution – progress Address the 45 critical and non- Focused portfolio strategic projects Revised BSS strategy Portfolio shift Portfolio ready Growth portfolio ~75% of product 37 addressed YTD for 5G sales Q3 2020 Business traction1 Cloud 5G Cloud BSS Communication Infrastructure Core2 con
Slide 83: Approaching streamlined software-based business
Approaching streamlined software-based business Transforming business and operations for software- based and industrialized solutions and automation across the portfolio Improved gross margin • Improving commodity mix • Increasing recurring revenue Commodity mix Increasing recurring revenue Gross ma
Slide 84: Ericsson’s cloud native maturity underpinning market share gains
Ericsson’s cloud native maturity underpinning market share gains To date ~301 5G standalone core (5GC) contracts Vodafone2 Container-based cloud native core Elisa Telus Rogers BT has put us ahead of competition TDC Erillisverkot 3 undisclosed < KPN Market share gains (4G and 5G) POST SoftBank Proxim
Slide 85: 5G core beachhead for attached sales
5G core beachhead for attached sales BSS Management Foundation to expand CSP Orchestration 5GC enterprise business Communication Cloud infrastructure © Telefonaktiebolaget LM Ericsson 2020 | Ericsson Capital Markets Day 2020, Nov 10 | Page 85
Slide 86: Agenda
Agenda Execution achievements Strategic priorities 2022 and onwards Financial journey mid- and long-term © Telefonaktiebolaget LM Ericsson 2020 | Ericsson Capital Markets Day 2020, Nov 10 | Page 86
Slide 87: Strategic priorities 2022 and long-term
Strategic priorities 2022 and long-term 2022 Long-term • Grow revenue through 5G core and • Captured 5G enterprise value with leading Business attached sales with increased share of customers software revenue and recurring business • Strategic investments in cloud native and • Evolved portfolio enab
Slide 88: Agenda
Agenda Execution achievements Strategic priorities 2022 and onwards Financial journey mid- and long-term © Telefonaktiebolaget LM Ericsson 2020 | Ericsson Capital Markets Day 2020, Nov 10 | Page 88
Slide 89: Operating margin development
Operating margin development Progress to date 2017-2020 Q3 rolling 4Q1 Wanted position 2022: Operating margin: 4-7% Illustrative 1Operating income and margin excluding restructuring charges. 2017 excluding restructuring charges and SEK 14.5 b. in impairments and write downs. © Telefonaktiebolaget LM
Slide 90: Key takeaways
Key takeaways Central to customers’ Revenue from 5G Continued margin success – right deals in 2021 and improvements strategy and beyond through planned technology choices change in business made mix © Telefonaktiebolaget LM Ericsson 2020 | Ericsson Capital Markets Day 2020, Nov 10 | Page 90
Slide 91: Managed Services
Managed Services Peter Laurin Senior Vice President and Head of Business Area Managed Services
Slide 92: Agenda
Agenda Turnaround complete and stable profitability Managed Services Market Outlook Ericsson Operations Engine - New offerings © Telefonaktiebolaget LM Ericsson 2020 | Ericsson Capital Markets Day 2020, Nov 10 | Page 92
Slide 93: Agenda
Agenda Turnaround complete and stable profitability Managed Services Market Outlook Ericsson Operations Engine - New offerings © Telefonaktiebolaget LM Ericsson 2020 | Ericsson Capital Markets Day 2020, Nov 10 | Page 93
Slide 94: Turnaround completed and profitability improved
Turnaround completed and profitability improved 4Q rolling financials 30B 20% 1 Turnaround actions completed 2017-2018 15% 25B 10% 20B 5% 2 R&D investments in AI & Automation from 2018 15B 0% 10B Net Sales SEK 24.1 b. Gross margin growth and stable Operating -5% 3 Income Gross Margin 18.3 % Operatin
Slide 95: Agenda
Agenda Turnaround complete and stable profitability Managed Services Market Outlook Ericsson Operations Engine - New offerings © Telefonaktiebolaget LM Ericsson 2020 | Ericsson Capital Markets Day 2020, Nov 10 | Page 95
Slide 96: The Managed Services market outlook
The Managed Services market outlook Potential to address more Total market outlook (BUSD) Networks outsourced (%) Total market growth of 3.7% 3.7% 40.1 38.3 CAGR (2019-2025) 36.6 4.3 NDO 35.1 4.1 33.8 3.8 The market represents 27% of 32.2 32.8 3.6 3.3 3.4 CSPs’ network, IT and NDO 3.1 related OPEX I
Slide 97: New services & technologies significantly increase the requirements on operations
New services & technologies significantly increase the requirements on operations 5G OPEX Mission IoT critical services Connected Transport SDN/ NFV Smart factories Robotics AR/VR Proactive data driven operations needed to reduce cost and ensure quality for new services Time 2G 3G 4G 5G © Telefonakt
Slide 98: Agenda
Agenda Turnaround complete and stable profitability Managed Services Market Outlook Ericsson Operations Engine - New offerings © Telefonaktiebolaget LM Ericsson 2020 | Ericsson Capital Markets Day 2020, Nov 10 | Page 98
Slide 99: Ericsson Operations Engine capabilities enable data driven operations
Ericsson Operations Engine capabilities enable data driven operations Capabilities Offering Areas Network 1. Data driven processes 26 digitized and automated processes Management People & AI driven Services domain insights expertise Deployed tools platform on cloud 2. Applications & Platforms Cloud
Slide 100: Ericsson Operations Engine capabilities enable data driven operations
Ericsson Operations Engine capabilities enable data driven operations Capabilities 1. Data driven processes 26 digitized and automated processes People & AI driven domain insights expertise Deployed tools platform on cloud 2. Applications & Platforms Automation & analytics platforms in place Ericsso
Slide 101: Ericsson Operations Engine capabilities enable data driven operations
Ericsson Operations Engine capabilities enable data driven operations Capabilities Offering Areas Network Management People & AI driven Services domain insights expertise Cloud & IT Services Ericsson Operations Engine Network Data-driven Applications processes & Platforms Design Optimization Automat
Slide 102: The new Ericsson Operations Engine portfolio
The new Ericsson Operations Engine portfolio Offering Areas Base pack Value pack Software pack Network Management Services Cloud & IT Services Network Design Optimization Enterprise Services Service Centric Software Centric © Telefonaktiebolaget LM Ericsson 2020 | Ericsson Capital Markets Day 2020,
Slide 103: Ericsson Operations Engine proving value
Ericsson Operations Engine proving value Network Performance 24% 60% Reduction in Mean Time to Reduction in Network Resolution unavailability Efficiency x2 20% Increase in Automation Less work orders per node1 levels First 10 Networks Customers with 430M+ subscriptions and 300K sites © Telefonaktieb
Slide 104: Ericsson Operations Engine proving value
Ericsson Operations Engine proving value Network Performance 24% 60% Reduction in Mean Time to Reduction in Network Resolution unavailability 15% Improved network throughput potential (Mbit/sec) Efficiency x2 20% Increase in Automation Less work orders per node1 levels 30% Improved efficiency in Fir
Slide 105: Strategic Priorities 2022 and long-term
Strategic Priorities 2022 and long-term “Be a leader in AI & data driven telecom operations & optimization, delivering the best network and services experience in the most cost-effective & sustainable way.” 2022 Long-term Transform the contract base to Ericsson Operations Scale software and value pa
Slide 106: Key takeaways
Key takeaways People R&D Sales Profitability Continued Further investments Focus on value and Ericsson Operations development of our in R&D to increase AI software packs to Engine is driving people to increase & Automation deliver new value to margin growth skills in AI & capabilities current and ne
Slide 107: Emerging Business and Other
Emerging Business and Other Åsa Tamsons Senior Vice President and Head of Business Area Technologies & New Businesses
Slide 108: Agenda
Agenda Segment overview and business performance Enterprise opportunity and growth portfolio Cradlepoint acquisition Strategic priorities and key takeaways © Telefonaktiebolaget LM Ericsson 2020 | Ericsson Capital Markets Day 2020, Nov 10 | Page 108
Slide 109: Segment Emerging Business and Other
Segment Emerging Business and Other Sustainable Focus Discipline Accelerate growth Invest in value- Exit non-strategic or Accelerate cellular Monetize our creating, standalone, non-performing adoption customers network businesses targeting businesses in the enterprise investments the enterprise segm
Slide 110: Portfolio optimization has improved financials and focus
Portfolio optimization has improved financials and focus Improved Media Focus investments in growth businesses targeting enterprise Exit Business results Media Kind Red Bee IoT Dedicated Cradlepoint New iConectiv Media Networks Businesses Edge 51% Global Market Inter- Gravity divested Improved conne
Slide 111: Strong momentum in emerging businesses
Strong Strongmomentum momentumininemerging emergingbusinesses businesses IoT Platform Dedicated Networks Cradlepoint • Net sales growing 3x • Winning important deals • Closed acquisition faster than market rate • Growing faster than market rate • Recurring revenue model • Recurring revenue SaaS mode
Slide 112: Our enterprise opportunity: Scale enterprise solutions
Our enterprise opportunity: Scale enterprise solutions offering reliable, secure and wireless connectivity Unlock Advance Create intelligence operations wireless agility © Telefonaktiebolaget LM Ericsson 2020 | Ericsson Capital Markets Day 2020, Nov 10 | Page 112
Slide 113: Portfolio focus: Solutions addressing enterprise needs
Portfolio focus: Solutions addressing enterprise needs IoT Global Connectivity Dedicated and Cradlepoint wireless Management site Connectivity WAN edge solutions o Global cellular connectivity o Local cellular connectivity o End-point connections at the customer premise o Seamless and scalable o Wir
Slide 114: A horizontal connectivity platform that scales IoT solutions
A horizontal connectivity platform that scales IoT solutions across enterprise segments Clean air & water Safer roads Critical IoT Connected cars Smart meters Smart factory Smart meters Logistics UN development goal Telstra & Lexus Audi Microsoft E.on Hexagon Telia T-Mobile IoT Platform Connected ca
Slide 115: Reusing R&D and bringing the ecosystem together
Reusing R&D and bringing the ecosystem together CAPEX/OPEX model through CSP resellers Professional Industry services partners and Research solutions partners Channel Software & partners applications Devices & Hardware 30+ deals YTD © Telefonaktiebolaget LM Ericsson 2020 | Ericsson Capital Markets D
Slide 116: Creating wireless agility with Cradlepoint
Creating wireless agility with Cradlepoint – global leader in Wireless WAN Edge solutions Connects sites, vehicles, field forces, and IoT devices, anywhere. Simply. Securely. Wirelessly. Branch Offices Mobile Units Stationary Units Mobile SD-WAN, unified edge security NetCloud manager 5G cellular ro
Slide 117: Targeting sizable and rapidly growing enterprise markets
Targeting sizable and rapidly growing enterprise markets IoT Global Connectivity Dedicated and Cradlepoint Management site Connectivity wireless WAN edge solutions USD 3 b.1 25% 3X Nascent, high potential USD 4 b.2 30% >1X market with strong growth Added value through security-, network near- and in
Slide 118: Characteristics of the businesses going forward
Characteristics of the businesses going forward Accelerated sales Gross margin improvement Investment intensity Investing in reduction Targeting enterprise .. markets with strong businesses with Opex / Gross Margin • >2.5x in 2020 growth healthy gross margin • Will decrease over time potential >25%
Slide 119: Key takeaways
Key takeaways 5G and IoT open up Focus on enterprise Strong momentum in The Cradlepoint new opportunities for value pools with a new businesses acquisition will Enterprises, disciplined approach targeting enterprise accelerate growth, operators and to growth, segments building on our Ericsson capita
Slide 120: Key takeaways - CEO
Key takeaways - CEO Turnaround complete Existing telco Increasing our Set on a new growth – platform to invest business growth investment in and margin trajectory in the future driven by new use enterprise cases for consumer applications and enterprise 5G Primary connectivity for digitalizing indust
Slide 121: www.ericsson.com/investors
www.ericsson.com/investors
Slide 122: Forward-looking statements
Forward-looking statements This presentation includes forward-looking statements, including statements reflecting management’s current views relating to the growth of the market, future market conditions, future events, financial condition, and expected operational and financial performance, includi