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LSE: IIR authorised by

Telefonaktiebolaget LM Ericsson 07 July 2008

Update Report – 1Q 08 Results

Gloomy outlook for FY 2008, improvement expected in FY 2009

Common BUY Fundamental research indicates a 21% upside in the common stock over the next 6-12 months. We
Direct
have access
calculated the to theprice
target fullbased
report free of charge
on fundamental at a weighted average of target
factors, using
Stock prices obtained using DCF and comparative valuation methodologies.
Ticker: ERICB.ST
http://www.iirgroup.com/researchoracle/viewreport/show/20215
Target price: SEK77.34 We reiterate the common stock a BUY with a 6-12 month target price of SEK77.34 per share.
Current price: SEK63.801

ADR BUY The ADR is expected to appreciate approximately 32% over the next 6-12 months as the 21%
fundamental upside is augmented by approximately 11 percentage points upside attributable purely
to the anticipated appreciation of the Swedish kroner against the US dollar over the same period. We
have taken a 6-12 month investment horizon for this stock as we expect a significant currency impact
Ticker: ERIC over the medium term2.
Target price: US$14.06
We reiterate the ADR (1 ADR = 1 common share) a BUY with a 6-12 month target price of US$14.06.
Current price: US$10.651

Supervisor: Shilpen Shah

Analyst: Puneet Bansal
Editor: Shem Pennant
Global Research Director:
Satish Betadpur, CFA
Investment horizon - short term actionable trading strategies
This report addresses the needs of strategic investors with a long term investment horizon of 6-12 months. If this
report is provided to you by your broker under the Global Settlement, you may now also access (free of charge) the
short term trading outlook that we publish from time to time for this issuer, looking at the coming 5-30 days for
readers with a shorter trading horizon. These are available online only at www.researchoracle.com

Next news due: 2Q 08 results,

22 July 2008
Report summary
Telefonaktiebolaget L.M. Ericsson’s (Ericsson) net sales were in line with our estimate in 1Q 08.
However, margins declined y-o-y and were substantially lower than our expectations. Although there
was significant growth in both the Professional services and Multimedia segments to support net sales
growth, margins declined due to the increased percentage of emerging markets in the sales mix,
increased expenditure on Research and Development (R&D), ongoing cost reduction programs and
lower sales from Sony Ericsson Mobile Communications AB (Sony Ericsson). Going forward, the
Professional services and Multimedia segments are expected to be the growth drivers for the
company. However, we have reduced our margin estimates for FY 2008 and FY 2009 considering the
company’s focus on R&D towards upcoming technologies like Long Term Evolution (LTE) and Internet
Protocol Television (IPTV), increase in sales in emerging markets, depressed outlook by Sony Ericsson.
However, after the successful completion of the ongoing cost reduction program, we expect bottom-
line to improve in FY 2009. Moreover, after the recent decline in common stock price, we believe the
common stock presents positive medium term investment from current levels.

Currency impact for US investors

The impact by itself of the anticipated currency movements on the ADR (now US$10.65), without
considering changes in the share price, is positive and is expected to be:

Over 6 months: US$11.10

Over 12 months: US$11.60

Page 1 Refer to page 5 for footnotes