Cell Network AB - publ - Interim Report for the Period From January 1 to March 31, 2000; Strong Growth, Net Profits, International Operations Profitable.

Business Editors

GOTHENBURG, Sweden--(BUSINESS WIRE)--April 26, 2000

Cell Network

-- Consolidated sales for the period amounted to SEK 118.7 M

(42,3), which was an increase of 181 %, after adjustment for

divested units. Profit before goodwill amortization increased

to SEK 8.3 M (loss: 0.4), corresponding to a margin of 7.0 %.

Profit before tax and after goodwill amortization increased to

SEK 3.0 M (loss: 1.7). Calculated on an annual basis, sales

per employee amounted to about SEK 930,000, compared with SEK

801,000 during the first quarter1999. The corresponding sales

figure for international operations amounted to SEK 1,300,000

during the period.

-- Cell Strategy, which is the corporate unit for strategy and

business development, was established in January 2000 and has

shown strong growth. By the end of March, Cell Strategy

consisted of about 85 employees with extensive experience from

leading management consulting companies and had established

operations in Sweden, Norway, Switzerland, Germany, France and

the UK.

-- Sales in subsidiaries outside the Nordic region amounted to

SEK 29.0 M (0). Compared with the fourth quarter of 1999, this

was an increase of 206 %. During the first quarter, countries

outside the Nordic region accounted for 24 % of consolidated

sales. During the fourth quarter of 1999, this share was 8 %.

-- At the closing of the reporting period, the equity assets

ratio amounted to 76.4 %, while liquid funds amounted to SEK

512.1 M.

-- At the end of March, Cell Network had a total of 608

employees, which was a 32 % increase since January 1, 2000.

-- In early February, the boards of directors of Cell Network and

Mandator approved a proposal recommending to the owners that

the two companies be merged through a share exchange. This

merger will create Europe's largest Internet company with more

than 1,800 employees.

-- As part of the company's strategy to create opportunities for

participation in and synergies with dot.com and dot.corp

companies, a decision was taken in March 2000 to allocate SEK

250 M to Cell Innovation Europe, a wholly owned subsidiary for

pan-European venture capital investments in e-business

companies. Cell Innovation Europe will focus on

Internet-related business concepts, primarily in the

business-to-business segment.

Comments From Marcus Backlund, President

During the first quarter, a new period began in which the differentiation among companies in the industry will become clearer. This applies both within our sector, as well as in the traditional IT segment. Our strong growth, particularly in markets outside the Nordic region, shows that we are well positioned to emerge as a stronger company through this transition process. Our first-quarter report shows that the integration of Linne Group, Cell Consulting Group and New Media Science, which took place last year, was successful. Strong international growth continues, and it is gratifying to note that this part of our operations already shows excellent profitability. Growth and margins within Cell Strategy verify our strategy of positioning the company high in the value chain, close to our global customers. We believe that this strategy is essential for continued growth.

The First Quarter of 2000 in Brief

During the first quarter, consolidated net sales increased 106% to SEK 118.7 M (57,7). Profit before goodwill amortization amounted to SEK 8.3 M (loss. 0.4), resulting in a margin of 7.0 %, which is completely in line with the forecast of 6 % for the full year 2000. Profit before tax increased to SEK 3.0 M (loss: 1.7). Repayments from SPP were not taken up as income.

Consolidated equity amounted to SEK 1,055.4 M at the end of the period, compared with SEK 1,028.1 M at year-end 1999. This meant that the equity/assets ratio amounted to 76.4 %, compared with 87 % at year-end 1999. Liquid funds amounted to SEK 512.1 M, compared with SEK 568.3 M at year-end 1999.

The number of employees in Group companies increased during the first quarter by 32 % or 148 persons, from 460 to 608 employees. The full-year forecast of 100 % growth in the number of employees is thus within reach. Personnel turnover amounted to about 15.6 %.

International Expansion

During the first quarter, Cell Network completed the acquisitions of BRG Interactive Digital Media (IDM) in Kuala Lumpur, Malaysia and WEB Internet Marketing Solutions (WEB) in Milano, Italy. Both companies reported satisfactory margins during the first quarter with strong positions in their home markets, meaning that they contribute to strengthening Cell Network's strategic base for further expansion in Europe and Asia. Letters of intent were signed for the acquisition of the Internet consulting companies designSpirit Limited in the UK and Sarajarvi & Hellen OY in Finland.

International expansion plans are progressing in accordance with previously established goals, which are to achieve broad European coverage, to increase market presence in Asia and to establish a link to the North American market. As part of this strategy, Cell Strategy Limited was established during the first quarter. Cell Strategy concentrates extensive competence in strategic business development in a purely strategic consulting company. In three months, the company has grown to encompass 85 persons in six countries. Cell Strategy was already able to report strong volume growth and satisfactory profitability in its first quarter of operations.

On March 22, 2000, the German Internet consulting company Pixelpark announced its intention to make a bid for the merged company Cell Network/Mandator. Two weeks later, the bid was withdrawn.

Cell Innovation Europe

In March, Cell Network's board of directors approved a proposal to establish Cell Innovation Europe, which is a newly started company for venture capital investments, whose operations will be closely coordinated with the consulting operations. The primary objective for Cell Innovation Europe is to participate actively in the development of so-called dot.com and dot.corp companies. Exploiting the synergies arising between consulting operations and the venture capital company will not only create a knowledge company, but also generate new revenue flows than time-based consulting fees. One of the initial investments is Dx3 Europe, in which Cell Innovation Europe is investing SEK 25 M for a 10% ownership share, while being designated "preferred partner" in the areas of technology, design and business development.

Cell Network Nordic

Net sales for consulting operations in the Nordic area increased 111% and amounted to SEK 94.3 M (44.6), while operating profit before goodwill amortization amounted to SEK 4.2 M (0.2).

In Sweden, Cell Network received a new assignment during the first quarter from GE Capital Equipment Finance to develop the company's e-business strategy. The relationship with Ericsson Mobile Communications was expanded with the result that Cell Network will now produce interactive manuals in 40 languages for distribution with new mobile phones.

A partnership was initiated with Newmand Technologies to develop new consumer services for mobile intranets. In the area of e-learning, Cell Network is supplying several services to Volvo Trucks and Volvo Cars. AstraZeneca also ordered an IT-based sales support training system for Nexium, which is the successor to Losec.

The subsidiary Cell DTV with 25 employees, which changed its name to Cell Interactive TV, is now the Nordic region's leading consulting company in interactive TV. Work on an interactive advertising spot for Telia.se was completed in March and shown on several Nordic digital TV channels in April.

In Norway, Cell Network and Birdstep Technology began joint development work on mobile Internet solutions. The close relationship with Telenor Mobil continued, and Telenor's new WAP portal was launched in February. Cell Network was also selected as the producer of Marine Provider, an interactive information and trading center for the international shipping industry.

In Denmark, Cell Network supplied Click-to-Music, a Nordic meeting place for domestic and international artists. During the spring, several web solutions were produced for such customers as Midtbank and Gudme Raaschou.

Cell Network International

Sales for Cell Network International, which consolidates the company's operations outside the Nordic region, amounted to SEK 29.0 M (0), corresponding to 24% of total sales. Operating profit before goodwill amortization amounted to SEK 10.6 M (0). Successful international expansion strengthened Cell Network's position as a total supplier in the new digital economy and resulted in new customer relationships in Scandinavia, as well as the rest of Europe and Asia.

WEB, Cell Network's newly acquired Italian company, established the WEB Pharma business area during the first quarter to further strengthen its expertise in the pharmaceuticals industry. WEB created information channels for the international pharmaceuticals companies SPA and Pierre Farbe Pharma, as well as for the University of Genoa.

In France, Cell Network is working on two strategic development projects in e-business for Citroen Automobile and United News Miller Freeman. Cell Network also received an assignment from Parashop, the leading French pharmaceuticals company, for an information system similar to that developed by WEB Pharma.

At the end of March, Cell Network's Spanish operations consisted of an office in Madrid with nine consultants. The first projects included a strategy assignment for GE Capital in Madrid, a design project for GE Power Controls and a campaign site for the Swedish Embassy.

In Malaysia, Cell Network has worked on an Internet based solution, which was launched in April, for the American company Intel's product and service offering. Other projects include design work for Hewlett Packard and content solutions for the Maxis Net portal. The Malaysian company will provide a base for further expansion in Asia.

Merger With Mandator

Operations during the first quarter of 2000 were affected by the decision to merge Cell Network and Mandator. Significant economic and personnel resources were devoted to the integration process, which was initiated shortly after the merger was announced on February 8, 2000. The merger is being implemented through an offer from Mandator to the shareholders in Cell Network to exchange their shares for shares in Mandator. For every ten Cell Network shares, shareholders are being offered 17 newly issued Mandator shares. Over 90 % of Cell Network shareholders had accepted the offer by April 17, 2000, when the normal subscription period expired. The subscription period was subsequently extended until May 23, 2000.

The merger advances the company's position in the Scandinavian market and creates opportunities for continued rapid expansion. Cell Network and Mandator complement each other well, particularly in view of the fact that strategic consulting and technical services are increasingly demanded by customers and are expected to provide significant added value in the future. The goal is to become a world-leading Internet consulting company in the new digital economy with a strong focus on e-business and business development. The new company, which will have 1,800 employees in 12 countries, will adopt the name Cell Network.

Share Data

The number of registered shares on January 1, 2000 was 19,969,157. On March 31, 2000, the number of registered shares was 20,293,584. After the issue of new shares to the sellers of IDM and WEB, the number of shares will be 20,453,034. After the new issues for IDM and WEB and with full dilution, the number of shares amounts to 22,509,741. Under the condition that the General Meeting approves the issuance of shares to the sellers of Cell Strategy Limited the number of shares, based on current circumstances, will increase by about 1,095,000.

Next Report

The interim report for the period from January to June 2000 will be published on August 24, 2000.

Gothenburg, April 26, 2000

Cell Network AB (publ)

Marcus Backlund, president and CEO 

This report has not been subject to an examination by the company's auditors.

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