SOURCE: Ericsson

October 17, 2008 02:38 ET

Sony Ericsson reports third quarter results

LONDON--(Marketwire - October 17, 2008) -


Q3 highlights:

  * Break even results, excluding restructuring charges, as
    challenging business conditions continued
  * C902 Cyber-shot™ camera phone is hit model of the quarter
  * First Xperia™ branded multimedia phone X1 began shipping
  * Expansion of music service offering with announcement of
    PlayNow™ plus

The consolidated financial summary for Sony Ericsson Mobile Communications AB (Sony Ericsson) for the third quarter ended September 30, 2008 is as follows:



                                          Q3 2008   Q2 2008   Q3 2007
Number of units shipped (million)            25.7      24.4      25.9
Sales (Euro m.)                             2,808     2,820     3,108
Gross margin (%)                              22%       23%       31%
Operating income (Euro m.)                    -33        -2       393
Operating margin (%)                          -1%       -0%       13%
   Restructuring charges (Euro m.)             35        11         0
   Operating income excl. restructuring         2         8       393
charges (Euro m.)
   Operating margin excl. restructuring        0%        0%       13%
charges (%)
Income before taxes (IBT) (Euro m.)           -23         8       384
   IBT excl. restructuring charges             12        19       384
(Euro m.)
Net income (Euro m.)                          -25         6       267

Average selling price (Euro)                  109       116       120


Units shipped in the quarter were 25.7 million, a sequential increase but flat year-on-year, while sales for the quarter were Euro 2,808 million, a decrease of 10% compared to the third quarter of 2007. Most of this decrease reflects the impact of exchange rate fluctuations, as well as a shift of the product mix to more lower priced phones. Gross margin also decreased year-on-year and sequentially due to continued price pressure at a time of adverse cost trends in the supplier base. This was partially mitigated by the introduction of new products at the end of the second quarter, such as the C902 Cyber-shot™ camera phone, which is selling well; however, strong competition continues, particularly in Europe. Income before taxes for the quarter was Euro 12 million, excluding restructuring charges of Euro 35 million, a decrease compared to the third quarter of 2007.

Average selling price (ASP) for Sony Ericsson decreased both sequentially and year-on-year in line with levels seen in previous quarters. This is due to selling more lower priced phones and increased price competition in the market for mid- to high-end phones. Sequentially, market share for the third quarter remained flat and is estimated to be around 8%.

"As expected the third quarter has continued to be challenging for Sony Ericsson. We have moved forward with our plans to align operations and resources with the consolidation of R&D facilities into a more agile and cost efficient organisational structure. As previously announced, our target remains to reduce operating expenses by Euro 300 million annually by the end of the second quarter 2009, with the full effects expected to appear in the second half of 2009.These plans are progressing in line with expectations," said Dick Komiyama, President, Sony Ericsson. "We are committed to executing our alignment plan as speedily as possible to ensure we have the right size and organisational structure to return the business to healthy profitability."

During the third quarter Sony Ericsson announced PlayNow™ plus, the next step in its music service offering. PlayNow™ plus is a high speed and high quality music download service for both the phone and PC that will launch in the fourth quarter with Telenor in Sweden with a special edition Sony Ericsson W902 Walkman® phone integrated with the PlayNow™ plus service. Further roll-outs of the service are planned with other network partners around the world in early 2009.

Sony Ericsson also announced a number of new phones in the quarter, including three new Walkman® phones, its first UMA handset (G705u) and the first models with integrated You Tube™ connectivity (W595, W902, G705). In addition, Sony Ericsson started a major marketing initiative to launch its first multimedia convergence phone under the new sub-brand; Xperia™, and started shipping the phone, the Xperia™ X1, at the end of the quarter.

As communicated previously, Sony Ericsson paid a second dividend to the parent companies totalling Euro 300 million (Euro 150 million each) in the quarter based on 2007 earnings, and at the end of September 2008 Sony Ericsson had net cash of Euro 1.4 billion.

Sony Ericsson forecasts that the global handset market for 2008 will grow at a rate of around 10% from more than 1.1 billion units in 2007, while the industry ASP will continue to decline. The majority of this growth is expected to be in emerging markets where lower priced phones dominate.


Cyber-shot™ and WALKMAN® are trademarks of Sony Corporation. The Liquid Identity logo, Xperia™ and the Xperia™ logo and PlayNow™ are trademarks or registered trademarks of Sony Ericsson Mobile Communications AB. Sony is a trademark or registered trademark of Sony Corporation. Ericsson is the trademark or registered trademark of Telefonaktiebolaget LM Ericsson. Other product and company names mentioned herein may be the trademarks of their respective owners. Any rights not expressly granted herein are reserved. Subject to change without prior notice.


EDITOR'S NOTES:

Financial statements and additional information:

Financial statements:

Consolidated income statement  (2)
Consolidated income statement - isolated quarters
Consolidated balance sheet
Consolidated statement of cash flows (2)
Consolidated statement of cash flows - isolated quarters

Additional information:

Net sales by market area by quarter

- ENDS -

Sony Ericsson is a top, global industry player with sales of over 100 million phones in 2007. Diversity is one of the core strengths of the company, with operations in over 80 countries including manufacturing in China and R&D sites in China, Europe, India, Japan and North America. Sony Ericsson was established as a 50:50 joint venture by Sony and Ericsson in October 2001, with global corporate functions located in London. For more information about Sony Ericsson please visit www.sonyericsson.com


CONTACTS:

Investors / Analysts
Ericsson Investor Relations
Gary Pinkham (Stockholm) +46 8 719 0858
Susanne Andersson (Stockholm) + 46 8 719 4631

Sony Investor
Relations

Shinji Tomita (London) +44 20 7426 8696
Gen Tsuchikawa (Tokyo) +81 3 6748 2180

Press / Media
Sony Ericsson Global Communications and PR
Aldo Liguori (London) +44 20 8762 5860
Merran Wrigley (London) +44 20 8762 5862
Simone Bresi-Ando (London) +44 20 8762 5863

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.


Sony Ericsson
CONSOLIDATED INCOME STATEMENT


                                          Jul-Sep
EUR million                           2008   2007 Change

Net sales                            2,808  3,108   -10%
Cost of sales                       -2,192 -2,154     2%
Gross profit                           616    954   -35%
Gross margin %                       21.9%  30.7%    -9%

Research and development expenses     -337   -280    20%
Selling and administrative expenses   -303   -280     8%
Operating expenses                    -640   -560    14%

Other operating income, net             -8     -1  -586%
Operating income                       -33    393  -108%
Operating margin %                   -1.2%  12.7%   -14%

Financial income                        25      7   274%
Financial expenses                     -15    -16   -11%
Income after financial items           -23    384  -106%

Taxes                                    6   -109  -106%
Minority interest                       -8     -8     1%
Net income                             -25    267  -109%


Number of units shipped (million)     25.7   25.9    -1%
ASP (EUR)                              109    120    -9%




EUR million                        Jul-Sep
Restructuring charges                 2008
 Cost of sales                           0
 Research and development expenses      26
 Sales and administrative expenses       3
 Other operating income, net             6
Total                                   35



Sony Ericsson
CONSOLIDATED INCOME STATEMENT


                                          Jan-Sep
EUR million                           2008   2007 Change

Net sales                            8,330  9,145    -9%
Cost of sales                       -6,274 -6,384    -2%
Gross profit                         2,056  2,760   -26%
Gross margin %                       24.7%  30.2%    -6%

Research and development expenses   -1,020   -824    24%
Selling and administrative expenses   -883   -885     0%
Operating expenses                  -1,903 -1,709    11%

Other operating income, net             -3      2  -239%
Operating income                       149  1,055   -86%
Operating margin %                    1.8%  11.5%   -10%

Financial income                        73     43    72%
Financial expenses                     -44    -25    76%
Income after financial items           179  1,073   -83%

Taxes                                  -50   -306   -84%
Minority interest                      -14    -27   -47%
Net income                             114    741   -85%


Number of units shipped (million)     72.5   72.6     0%
ASP (EUR)                              115    126    -9%




EUR million                        Jan-Sep
Restructuring charges                 2008
 Cost of sales                           8
 Research and development expenses      28
 Sales and administrative expenses       4
 Other operating income, net             6
Total                                   46


Sony Ericsson
CONSOLIDATED INCOME STATEMENT - ISOLATED QUARTERS


                           2008                      2007
EUR million            Q3     Q2     Q1       Q4     Q3     Q2     Q1

Net sales           2,808  2,820  2,702    3,771  3,108  3,112  2,925
Cost of sales      -2,192 -2,168 -1,914   -2,573 -2,154 -2,192 -2,039
Gross profit          616    653    788    1,198    954    921    886
Gross margin %      21.9%  23.1%  29.2%    31.8%  30.7%  29.6%  30.3%

Research and
development
expenses             -337   -344   -339     -349   -280   -283   -261
Selling and
administrative
expenses             -303   -310   -270     -375   -280   -321   -284
Operating expenses   -640   -653   -610     -724   -560   -604   -545

Other operating
income, net            -8     -2      6       15     -1     -2      5
Operating income      -33     -2    184      489    393    315    346
Operating margin %  -1.2%  -0.1%   6.8%    13.0%  12.7%  10.1%  11.8%

Financial income       25     25     24       19      7     18     18
Financial expenses    -15    -14    -15       -7    -16     -6     -2
Income after
financial items       -23      8    193      501    384    327    362

Taxes                   6      0    -57     -118   -109    -97   -100
Minority interest      -8     -3     -3      -10     -8    -10     -9
Net income            -25      6    133      373    267    220    254


Number of units
shipped (million)    25.7   24.4   22.3     30.8   25.9   24.9   21.8
ASP (EUR)             109    116    121      123    120    125    134




EUR million                        2008
Restructuring charges              Q3 Q2
 Cost of sales                      0  8
 Research and development expenses 26  2
 Sales and administrative expenses  3  1
 Other operating income, net        6  0
Total                              35 11






Sony Ericsson
CONSOLIDATED BALANCE SHEET


                                    Sep 30   Jun 30   Dec 31   Sep 30
EUR million                           2008     2008     2007     2007

ASSETS

Total fixed and financial
assets                                 649      590      572      511

Current assets
Inventories                            717      538      437      620
Accounts receivables                 1,815    1,905    1,870    1,803
Other assets                           527      511      345      544
Other short-term cash
investments                            918      966    1,431      954
Cash and bank                          555      624      724      804
Total current assets                 4,532    4,544    4,808    4,725


Total assets                         5,180    5,134    5,380    5,236

SHAREHOLDERS' EQUITY AND
LIABILITIES

Shareholders' equity                 1,429    1,684    2,026    1,663
Minority interest                       50       35       64       70
Total equity                         1,480    1,719    2,090    1,733

Total long-term liabilities             39       25       26       22

Accounts payable                     1,453    1,436    1,263    1,602
Other current liabilities            2,208    1,954    2,001    1,879
Total current liabilities            3,661    3,390    3,264    3,481

Total shareholders' equity and
liabilities                          5,180    5,134    5,380    5,236

Net cash*                            1,374    1,591    2,155    1,758

* Net cash is defined as cash and bank plus short-term cash
investments less interest bearing liabilities.



Sony Ericsson
CONSOLIDATED STATEMENT OF CASH FLOWS


                                              Jul-Sep
EUR million                                  2008  2007

OPERATIONS
Net income                                    -25   267
Adjustments to reconcile net income to cash    39    32
                                               15   299

Changes in operating net assets                88    88
Cash flow from operating activities           102   387

INVESTMENTS
Investing activities                          -55   -53
Cash flow from investing activities           -55   -53

FINANCING
Financing activities                        - 238 - 300
Cash flow from financing activities          -238  -300

Net change in cash                           -191    34
Cash, beginning of period                   1,591 1,730
Translation difference in Cash                 74    -6
Cash, end of period                         1,473 1,758



Sony Ericsson
CONSOLIDATED STATEMENT OF CASH FLOWS


                                              Jan-Sep
EUR million                                  2008  2007

OPERATIONS
Net income                                    114   741
Adjustments to reconcile net income to cash   109    90
                                              223   831

Changes in operating net assets              -155  -349
Cash flow from operating activities            68   482

INVESTMENTS
Investing activities                         -105  -138
Cash flow from investing activities          -105  -138

FINANCING
Financing activities                        - 708  -849
Cash flow from financing activities          -708  -849

Net change in cash                           -745  -504
Cash, beginning of period                   2,155 2,273
Translation difference in Cash                 62   -11
Cash, end of period                         1,473 1,758



 Sony Ericsson
CONSOLIDATED STATEMENT OF CASH FLOWS - ISOLATED QUARTERS


                         2008                    2007
EUR million   Jul-Sep Apr-Jun Jan-Mar Oct-Dec Jul-Sep Apr-Jun Jan-Mar

OPERATIONS
Net income        -25       6     133     373     267     220     254
Adjustments
to reconcile
net income to
cash               39      40      31      17      32      30      28
                   15      46     164     390     299     250     282

Changes in
operating net
assets             88    -142    -101      44      88      16    -454
Cash flow
from
operating
activities        102     -96      64     434     387     266    -172

INVESTMENTS
Investing
activities        -55     -29     -22     -27     -53     -31     -53
Cash flow
from
investing
activities        -55     -29     -22     -27     -53     -31     -53

FINANCING
Financing
activities      - 238     - 8   - 462       0   - 300   - 548     - 1
Cash flow
from
financing
activities       -238      -8    -462       0    -300    -548      -1

Net change in
cash             -191    -133    -421     408      34    -312    -226
Cash,
beginning of
period          1,591   1,711   2,155   1,758   1,730   2,045   2,273
Translation
difference in
Cash               74      13     -24     -10      -6      -3      -2
Cash, end of
period          1,473   1,591   1,711   2,155   1,758   1,730   2,045



Sony Ericsson
NET SALES BY MARKET AREA BY QUARTER


EUR million
                            2008                    2007
Isolated quarters        Q3    Q2    Q1       Q4    Q3    Q2    Q1
Europe, Middle East &
Africa *              1,427 1,386 1,494    2,251 1,715 1,729 1,598
Americas                703   740   486      636   573   499   365
Asia                    678   694   722      884   820   885   961
Total                 2,808 2,820 2,702    3,771 3,108 3,112 2,925
* of which Western
Europe                  947   900   979    1,569 1,103 1,102 1,078


                            2008                    2007
Sequential change (%)    Q3    Q2    Q1       Q4    Q3    Q2    Q1
Europe, Middle East &
Africa *                 3%   -7%  -34%      31%   -1%    8%  -26%
Americas                -5%   52%  -24%      11%   15%   37%  -34%
Asia                    -2%   -4%  -18%       8%   -7%   -8%  -11%
Total                    0%    4%  -28%      21%    0%    6%  -23%
* of which Western
Europe                   5%   -8%  -38%      42%    0%    2%  -27%


                            2008                    2007
Year over year change
(%)                      Q3    Q2    Q1       Q4    Q3    Q2    Q1
Europe, Middle East &
Africa *               -17%  -20%   -7%       5%    7%   59%   55%
Americas                23%   48%   33%      15%   37%   52%   46%
Asia                   -17%  -21%  -25%     -18%   -8%    4%   35%
Total                  -10%   -9%   -8%       0%    7%   37%   47%
* of which Western
Europe                 -14%  -18%   -9%       6%   -1%   47%   60%


                            2008                    2007
Year to date           0809  0806  0803     0712  0709  0706  0703
Europe, Middle East &
Africa *              4,324 2,879 1,494    7,293 5,042 3,328 1,598
Americas              1,930 1,226   486    2,072 1,436   864   365
Asia                  2,076 1,416   722    3,550 2,666 1,846   961
Total                 8,330 5,522 2,702   12,916 9,145 6,037 2,925
* of which Western
Europe                2,826 1,879   979    4,852 3,283 2,179 1,078


                            2008                     2007
YTD year over year
change (%)             0809  0806  0803     0712  0709  0706  0703
Europe, Middle East &
Africa *               -14%  -13%   -7%      24%   36%   57%   55%
Americas                34%   42%   33%      34%   44%   49%   46%
Asia                   -22%  -23%  -25%       0%    8%   18%   35%
Total                   -9%   -9%   -8%      18%   27%   42%   47%
* of which Western
Europe                 -14%  -14%   -9%      21%   29%   53%   60%


The full report (including tables) can be downloaded from the following link: http://hugin.info/1061/R/1260503/275845.pdf


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