Ericsson Nikola Tesla's performance in 2003

Facing new challenges after 55 years 
    Ake Enell, President of Ericsson Nikola Tesla
Financial highlights 
    Maria Radtke, Finance Director
Cutting edge communications solutions 
    Gordana Kovačević, Vice President of Ericsson Nikola Tesla
Performance on company's markets 
    Milivoj Pejković, Senior Marketing & Sales Advisor to President 

Ericsson Nikola Tesla in 2004

Continuing on the way to business excellence
    Ake Enell, President of Ericsson Nikola Tesla

Ericsson Nikola Tesla's performance in 2003

Facing new challenges after 55 years 
    Ake Enell, President of Ericsson Nikola Tesla

Since 1995 when it became a member of the Ericsson Group, Ericsson Nikola Tesla has been sharing the corporate destiny and that is why the corporate achievements are important for understanding of its performance. During the last year's fourth quarter Ericsson was profitable and as that makes the second positive quarter in a row we can say that Ericsson has reached its goal: financial stability. Now the corporation has to fight for keeping this trend. Its main driver was the mobile communications market, which during 2003 grew significantly. The growth of the traffic volume and a new investment wave that supported network upgrades and network performance improvements. New conditions on the mobile telecom market, together with internal measures aimed at the increase of the internal efficiency and reduction of operational costs, resulted in Ericsson's overall positive performance and in its further operation the corporation will focus on its leading role in 2G and 3G communications on the global market. Ericsson's forecasts point to further growth of the mobile communications market in 2004 and the corporation has high hopes about the strong growth of professional communications services. 

Ericsson Nikola Tesla's performance in such business environment is more than satisfactory. The expected drop of the orders booked in the past year was compensated by the reduction of the operational costs and together with net sales at the level of the year 2002, positive cash flow and income before taxes higher by 20% percent than in 2002 we can say that Ericsson Nikola Tesla was very successful in the past year. During 2003 the company operated as one of the biggest home exporters of brainware – the export share in the overall company's operation was as high as 80%.

In all Ericsson Nikola Tesla's performance reports it is always clearly stated that the overall company's achievement is a result of the dedicated work of its professional and competent employees. Ana Jožinec, Director of Human Resources and Organization, introduces that expert team of about one thousand people: 80% of team members have university education and 8% among them are masters or doctors of science; average age is 38; in Ericsson Nikola Tesla 30% of employees are women many of whom work at managerial positions – 25% of company managers are women. Over 55 years the company has built the image of the best employer in the country. Among the employee benefits we single out the possibility of competence development, modern working environment and flexible working time, management candidates assessment program, awards for individual contribution to the success of the company projects and different other bonuses, including favorable credit lines. 

Financial Highlights 
    Maria Radtke, Finance Director 

Ericsson Nikola Tesla's total last year's sales expressed in kuna value is at the level of the 2002 performance. However, considering that the dollar value has dropped considerably over the past year it actually means that the company has sold more solutions, systems and services than in 2002. The ratio between orders booked and net sales is below 1, which means that Ericsson Nikola Tesla is faced with a period of reduced sales. Orders booked dropped in 2003 by 32% in relation to the previous year. Net sales amounted to 1.404 million kunas, which is by 1% less than the result realized in 2002. Income before taxes grew by 20%, which amounts to 202 million kunas. 

Operational costs in 2003 were kept at the same low level as in 2002, although the increased provisions for doubtful debts had a negative effect upon total operational costs. During the past year Ericsson Nikola Tesla used financial tools more than in previous years to alleviate consequences of financial deviations so that at the end the total costs, including financial expenses, were reduced in comparison to 2002 by 4%. 

The company achieved a positive cash flow amounting to 148 million kunas, which is by 208% more than in 2002. By generating such a high cash flow through operations the company managed to cover the redemption payment completely. 

As far as the performance on the individual company markets are concerned, it is important to say that the management of Ericsson Nikola Tesla is extremely satisfied with the sales growth in Croatia, which is leading the company's top ten markets' list. The company has timely recognized the potential within the ICT area and it presented itself at the home market as a prime system integrator, which opened opportunities within the e- government national projects. Export markets were stabile during 2003. The best export achievement is related to the Russian market, which is followed by Sweden, Bosnia and Herzegovina, Belarus, Montenegro, Ukraine and Kazakhstan. The export on the internal corporate market was lower than in 2002 but judging by the number and volume of jobs contracted for this year the cooperation with the Ericsson corporation will be very satisfactory during 2004. 
Based on the good financial results, the Supervisory Board has supported and approved Management Board decision to propose to the General Assembly to consider and approve a dividend payment of 17 kunas per share, which means 22% increase in comparison with the previous year.

Cutting edge communications solutions
    Gordana Kovačević, Vice President of Ericsson Nikola Tesla

Ericsson Nikola Tesla's Operations Unit forms a strong professional team acting as a local, regional and global expert center for total communications solutions and services. Operation's experts have rich international experience acquired in more than 50 countries round the world. This organizational unit operates as one of three Ericsson's centers of excellence for customer solutions within Europe, Middle East and Africa encompassing 115 countries. The Global Software Integration and Delivery Center is also a part of the Ericsson Nikola Tesla Operations. Its customer base includes, among others, big global operators. 

As a member of the global corporate network that gathers thousands of experts round the world and numerous partners, within the Operations Division, there operates the Ericsson Mobility World Center Croatia. The main task of the Center is the development of applications and services for the Ericsson's mobile Internet solutions and systems as required by customers.

One of extremely important achievements of this unit is the entrance into the e-systems area, to be more precise, into the area of informatization of the basic health care system in Croatia. The Operations Unit is positioned now as an expert center able to offer solutions for the informatization of big state systems. Today Ericsson Nikola Tesla is one of the strongest ICT companies in the region. 

Following the latest communications technologies and market trends, 20% of experts working in Operations have been trained and certified to work with 3G mobile networks, which confirms company's orientation towards modern communications technologies and its readiness to participate in their implementation on the local market. Also, Ericsson Nikola Tesla is an important member of the corporate research and development community. 

Performance on Company's markets
        Milivoj Pejković, Senior Marketing & Sales Advisor to President 

Besides in Croatia, Ericsson Nikola Tesla is also present on the neighboring countries' markets, in the countries of East and South Europe, Central Asia and Africa. The performance on the export markets is traditionally very good and in the last year's export operations the company was very successful. 
Net sales on the home market in 2003 amounted to 51,4 million dollars (29% of the total net sales). The markets of the Commonwealth of Independent Countries (CIS) brought in 76 million dollars (43% of the total net sales). In Bosnia and Herzegovina and Montenegro the net sales amounted to 47 million dollars (26% of the total net sales). North African and other markets account for the net sales of 3,5 million dollars (2% of the total net sales).

New technologies and communications solutions are a key to market success. Ericsson is the market leader within the mobile communications area with the most 3G contracts signed thus far with the leading world operators. Within the wireline area Ericsson is firmly positioned as the supplier of broadband access solutions and ENGINE concept supporting migration of networks for voice traffic into multimedia networks. Ericsson Nikola Tesla, as a member of this strong group and as a company with professional and dedicated experts able to offer operators timely local support, has all prerequisites for retaining a stable position within wireline area and for achieving growth within mobile communications. As a supplier of the cutting edge business systems Ericsson Nikola Tesla, of course, is concerned about the prospects within that area. It is a segment with great potentials, but also with great uncertainties. 

Ericsson Nikola Tesla in 2004

Continuing on the way to business excellence

Statement by Ake Enell, President of Ericsson Nikola Tesla, about the company's performance in 2003 and outlook for 2004:
"On the whole, 2003 brought to the company a lot of successful projects, activities, even awards and recognitions. One of the most significant achievements is the certificate Recognized for Excellence granted to Ericsson Nikola Tesla by the European Foundation for Quality Management. The company will continue to pursue operational and business excellence in 2004 and on this way the key emphasis will be on the stabilization of the orders booked, competence development and increased operational efficiency. We are aware that we operate within a very turbulent times filled with challenges, but in this year we are faced with an opportunity for significant strategic advancements, among which the most important challenge lies within the third generation mobile systems (3G) area in Croatia. Continuing on the way towards business excellence the company, which this year celebrates its 55th anniversary, will find strength to cope with these challenges. 

Company Communication 
Ericsson Nikola Tesla