Sony Ericsson reports third quarter results

Q3 highlights:

Decline in global handset market slowing down
Positive trend from continuing transformation programme
External financing arranged
Refreshed brand in time for Aino™ and Satio™ launch in Q4
The consolidated financial summary for Sony Ericsson Mobile Communications AB (Sony Ericsson) for the third quarter ended September 30, 2009 is as follows:

Q3 2008

  Q2 2009

  Q3 2009

Number of units shipped (million)

25.7

13.8

14.1

Sales (Euro m.)

2,808

1,684

1,619

Gross margin (%)

22%

12%

16%

Operating income (Euro m.) 

-33

-274

-193

Operating margin (%)

-1%

-16%

-12%

Restructuring charges (Euro m.)

35

1

2

Operating income excl. restructuring charges (Euro m.)

2

-274

-191

Operating margin excl. restructuring charges (%)

0%

-16%

-12%

Income before taxes (IBT) (Euro m.)

-23

-283

-199

IBT excl. restructuring charges (Euro m.)

12

-283

-198

Net income (Euro m.)

-25

-213

-164

 

 

 

 

Average selling price (Euro)

109

122

114

Units shipped in the quarter were 14.1 million, an increase of 2% quarter-on-quarter and a decrease of 45% year-on-year. Sales for the quarter were Euro 1,619 million, a sequential decrease of 4% and a year-on-year decrease of 42%. The sequential decline in ASP (Average Selling Price) was due to product mix and continued challenging market conditions.

Gross margin improved sequentially but dropped year-on-year due to lower sales and foreign exchange fluctuations. The sequential improvement was seen in both percentage rate and volume, driven by cost savings actions and successful sales of the W995 Walkman® phone.

Income before taxes for the quarter, excluding restructuring charges, was a loss of Euro 198 million compared to a loss of Euro 283 million from the previous quarter. The reduced loss was due to better gross margin, as well as reduced operating expenses.

“Our business in the third quarter started to show the effects of our ongoing transformation programme. Having refreshed our brand we are now better positioned to support the launch of new products such as Aino™ and Satio™ in Q4 2009. We have cleared channel inventories, and have continued to realign internal resources and improve efficiency. We have also arranged external financing to strengthen the company’s financial position,” said Dick Komiyama, outgoing President, Sony Ericsson. “Transforming the business for future growth and returning Sony Ericsson to profitability is the focus of the senior management team and will continue under the new leadership.”

As of September 30, 2009, Sony Ericsson had a net cash position of Euro 841 million.

Since the beginning of the quarter, facilities of Euro 455 million were signed to strengthen the balance sheet and improve liquidity. Euro 155 million were drawn by the end of September and Euro 100 million were drawn in the beginning of October. In addition, a two-year committed back-up facility of Euro 200 million is available but has not been utilized. The parent companies have guaranteed Euro 350 million of these facilities on a 50/50 basis.

Programmes started since mid 2008 to reduce annual operating expenses by Euro 880 million are continuing, with the full benefit expected during the second half of 2010. The total restructuring charges for these programmes are estimated to be well within the previously announced Euro 500 million.

As of October 15, 2009; Sir Howard Stringer, Chairman, CEO and President of Sony Corporation and a member of the Sony Ericsson board, became Chairman of the Sony Ericsson board succeeding Carl-Henric Svanberg. At the same time, Bert Nordberg became President of Sony Ericsson succeeding Dick Komiyama, who remains as Executive Advisor until the end of 2009.

Sony Ericsson forecasts that the global handset market for 2009 will contract by approximately 10% from around 1,190 million units in 2008. Sony Ericsson estimates that its market share in units was about 5% in the third quarter.

The liquid identity is a registered trademark of Sony Ericsson Mobile Communications AB.
Satio™ and Aino™ are trademarks or registered trademarks of Sony Ericsson Mobile Communications AB.
WALKMAN® is a trademark of Sony Corporation.
Sony is a registered trademark of Sony Corporation. Ericsson is a registered trademark of Telefonaktiebolaget LM Ericsson.
Any rights not expressly granted herein are reserved. Subject to change without prior notice.

A live webcast of the conference call will be available on October 16, 2009 at the following times:

TIMING
14:00 UK time (BST)
15:00 Central European time (CET)
09:00 US Eastern time (EDT)
22:00 Japan time (JST)

WEBCAST:
A live webcast of the conference call will be available at: http://www.ericsson.com/ericsson/investors/
Or please click here to join the webcast directly:
http://www.thomson-webcast.net/uk/dispatching/?event_id=191bc04e8408cb47571b7b46c700aca4&portal_id=ccec29148a44ec4b8077c845c5b4cbba
The archived webcast will be available approximately one hour after the completion of the conference call.

CALL-IN NUMBERS:
UK and Europe: +44 20 7806 1951
Sweden: +46 8 5352 6408
US: +1 718 354 1385
Japan: +81 3 3570 8227

REPLAY:
A replay of the conference call will be available approximately two hours after the completion of the conference call until 11:00 pm UK time on October 21, 2009.
UK and Europe: +44 20 7111 1244
Sweden: +46 8 5051 3897
US: +1 347 366 9565
Japan: +81 3 5767 9615

Replay passcode: 2462154#
EDITOR’S NOTES:

Financial statements and additional information:

Financial statements:

Consolidated income statement
Consolidated income statement – isolated quarters
Consolidated balance sheet
Consolidated statement of cash flows
Consolidated statement of cash flows – isolated quarters

Additional information:

Net sales by market area by quarter

Sony Ericsson is a 50:50 joint venture by Sony and Ericsson established in October 2001, with global corporate functions located in London and operations in all major markets. Our vision is to become the industry leader in Communication Entertainment; where new styles of communicating through the internet and social media, become entertainment. Sony Ericsson offers exciting consumer experiences through phones, accessories, content and applications.

This press release contains forward-looking statements that involve inherent risks and uncertainties. We have identified certain important factors that may cause actual results to differ materially from those contained in such forward-looking statements. For a detailed description of risk factors see Sony’s and Ericsson’s filings with the US Securities and Exchange Commission, particularly each company’s latest published Annual Report on Form 20-F.