Sony Ericsson reports first quarter 2011 results

Highlights:

  • Shift to Android-based smartphone portfolio drives profitability
  • Smartphone share of total sales more than doubled year-on-year
  • Xperia(TM) arc, Xperia(TM) PLAY and Xperia(TM) neo began shipping towards the end of the quarter
  • Some supply chain disruption due to the Japan earthquake

The consolidated financial summary for Sony Ericsson Mobile Communications AB (Sony Ericsson) for the first quarter ended March 31, 2011 is as follows:

   Q1 2010  Q4 2010  Q1 2011
Number of units shipped (million)
Average selling price (Euro)
10.5
134
11.2
136
8.1
141
Sales (Euro m.) 1,405 1,528 1,145
Gross margin (%) 31% 30% 33%
Operating income (Euro m.)  20 39 19
Operating margin (%) 1% 3% 2%
   Restructuring charges (Euro m.) -3 -3  -
   Operating income excl. restructuring charges (Euro m.) 23 43 19
   Operating margin excl. restructuring charges (%) 2% 3% 2%
Income before taxes (IBT) (Euro m.) 18 35 15
   IBT excl. restructuring charges (Euro m.) 21 39 15
Net income (Euro m.) 21 8 11

Bert Nordberg, President & CEO of Sony Ericsson commented, "Sony Ericsson's profitability continues as we accelerate our shift towards an Android-based smartphone portfolio, with smartphones comprising over 60% of our total sales during the quarter. Towards the end of the quarter we introduced the highly anticipated Xperia(TM) arc and Xperia(TM) PLAY, which have been well received by both operators and consumers around the world. However, the Japan earthquake made it a challenging quarter operationally and we are experiencing some disruptions to our supply chain. We will continue to evaluate the situation."

Units shipped during the quarter were 8.1 million, a 23% decrease year-on-year and a 28% decrease sequentially, due to a decline in the number of feature phones shipped, introduction of new products towards the end of the quarter and seasonality.    

Average selling price (ASP) for the quarter was Euro 141, a 5% increase year-on-year and a 4% increase sequentially, as a result of product and geographical mix more than offsetting price erosion.  

Sales for the quarter were Euro 1,145 million, a 19% decrease year-on-year and 25% decrease sequentially.  

The gross margin for the quarter was 33%, an increase of 2 percentage points year-on-year and an increase of 3 percentage points sequentially, which includes the impact from higher ASP and benefit of some larger than normal items relating to royalty matters and warranty estimates.

Income before taxes for the quarter was a profit of Euro 15 million, a decrease of Euro 3 million year-on-year and a decrease of Euro 20 million sequentially, with the impact of lower sales offset by higher gross margin percentage and lower operating expenses.

Net income for the quarter was Euro 11 million, a decrease of Euro 10 million compared to the same period previous year which included a tax benefit. Net income increased Euro 3 million sequentially, despite a decline in income before taxes of Euro 20 million, reflective of a lower effective tax rate.  

Cash flow from operating activities during the quarter was negative Euro 353 million, mainly due to inventory investments, non cash items in the income statement and seasonality. New external borrowings of Euro 375 million were made during the quarter to enhance liquidity and growth, resulting in total borrowings of Euro 604 million at the end of the quarter. Total cash balances at March 31, 2011 amounted to Euro 599 million.      

Sony Ericsson estimates that its market share for smartphones during the quarter was approximately 5% in units and approximately 3% in value.

Sony Ericsson forecasts modest growth in total units in the global handset market for 2011.

The liquid identity is a registered trademark of Sony Ericsson Mobile Communications AB. Xperia(TM) is a trademark of Sony Ericsson Mobile Communications AB. 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 and subject to change without prior notice.

EDITOR'S NOTES:

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
Net sales by market area by quarter

About Sony Ericsson
Sony Ericsson celebrates its 10th year as a joint venture between Sony Corporation and Ericsson in October, 2011. Over the years Sony Ericsson has brought together the best communication technologies with superior entertainment user experiences to create its Xperia(TM) line of the 'most entertaining smartphones' in the mobile handset industry. With its global corporate functions in London, Sony Ericsson has sales and marketing operations in all major regions of the world, as well as manufacturing in China, and product development sites in China, Japan, Sweden and Silicon Valley, California. For more information, please visit: www.sonyericsson.com/press .

 

- ENDS -

 

CONTACTS:

 

Ericsson investor relations
Susanne Andersson (Stockholm) +46 10 719 4631

 

Sony investor relations
Yoshinori Hashitani (Tokyo) +81 3 6748 2111
Yas Hasegawa (London) +44 20 7426 8696   

Press / Media
Sony Ericsson global communications and PR
Cathy Davies (London) +44 208 762 5879
Holly Rossetti (London) + 44 208 762 5851
Gustaf Brusewitz (London) +44 208 762 5805

 

This press release contains forward-looking statements that involve inherent risks and uncertainties.  Sony Ericsson has 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

 

  Jan-Mar  
EUR million 2010 2011 Change  
         
Net sales 1,405 1,145 -19%  
Cost of sales -975 -763 -22%  
Gross profit 429 382 -11%  
Gross margin % 31% 33% 2%  
         
Research and development expenses -185 -173 -6%  
Selling and administrative expenses -238 -199 -16%  
Operating expenses * -423 -372 -12%  
         
Other operating income, net 14 10 -29%  
Operating income 20 19 -5%  
Operating margin % 1% 2% 1%  
         
Financial income 7 3 -57%  
Financial expenses -9 -8 -11%  
Income before taxes 18 15 -17%  
         
Taxes 6 -5    
Minority interest -3 1    
Net income 21 11 -48%  
         
         
Number of units shipped (million) 10.5 8.1 -23%
ASP (EUR) 134 141 5%
         
EUR million Jan-Mar Jan-Mar    
Restructuring charges 2010 2011    
  Cost of sales 2 -    
  Research and development expenses -2 -    
  Selling and administrative expenses -3 -    
Total -3 -    

 

* Operating expenses in 2010 have been restated to reflect certain organizational changes.

Sony Ericsson
CONSOLIDATED INCOME STATEMENT - ISOLATED QUARTERS

 

  2010   2011  
EUR million Q1 Q2 Q3 Q4   Q1  
               
Net sales 1,405 1,757 1,603 1,528   1,145  
Cost of sales -975 -1,266 -1,130 -1,069   -763  
Gross profit 429 492 473 459   382  
Gross margin % 31% 28% 30% 30%   33%  
               
Research and development expenses -185 -191 -179 -191   -173  
Selling and administrative expenses -238 -272 -241 -236   -199  
Operating expenses * -423 -463 -420 -427   -372  
               
Other operating income, net 14 7 10 7   10  
Operating income 20 36 63 39   19  
Operating margin % 1% 2% 4% 3%   2%  
               
Financial income 7 2 7 2   3  
Financial expenses -9 -7 -8 -6   -8  
Income before taxes 18 31 62 35   15  
               
Taxes 6 -16 -12 -27   -5  
Minority interest -3 -4 -2 0   1  
Net income 21 12 49 8   11  
               
               
Number of units shipped (million) 10.5 11.0 10.4 11.2   8.1
ASP (EUR) 134 160 154 136   141
 

 
             
               
EUR million 2010   2011  
Restructuring charges Q1 Q2 Q3 Q4   Q1  
  Cost of sales 2 -33 -3 2   -  
  Research and development expenses -2 -1 5 0   -  
  Selling and administrative expenses -3 2 -6 -5   -  
Total -3 -32 -4 -3   -  

 

* Operating expenses in 2010 have been restated to reflect certain organizational changes.

 

 

Sony Ericsson
CONSOLIDATED BALANCE SHEET

    Mar 31   Dec 31   Mar 31
EUR million   2010   2010   2011
             
ASSETS            
             
Total fixed and financial assets   791   803   791
             
Current assets            
Inventories   384   460   510
Accounts receivable   849   836   755
Other assets   369   295   304
Other short-term cash investments   537   276   417
Cash and bank   443   329   182
Total current assets   2,582   2,196   2,168
             
             
Total assets   3,373   2,999   2,959
             
SHAREHOLDERS' EQUITY AND LIABILITIES            
             
Shareholders' equity   438   532   496
Minority interest   54   42   38
Total equity   492   574   534
             
Borrowing, Non Current   100   100   0
Other long-term liabilities   37   32   30
Total long-term liabilities   137   132   30
             
Accounts payable   829   769   701
Borrowing, Current   316   130   604
Other current liabilities   1,599   1,394   1,090
Total current liabilities   2,744   2,293   2,394
             
Total shareholders' equity and liabilities   3,373   2,999   2,959
             
Net cash*   563   375   -5

 

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

 

 

 

Sony Ericsson
CONSOLIDATED STATEMENT OF CASH FLOWS

 

  Jan-Mar
EUR million 2010 2011
     
OPERATING    
Net income 21 11
Adjustments to reconcile net income to cash -44 -137
  -23 -127
     
Changes in operating net assets -72 -226
Cash flow from operating activities -94 -353
     
INVESTING    
Investing activities 27 -14
Cash flow from investing activities 27 -14
     
FINANCING    
Financing activities  150  375
Cash flow from financing activities 150 375
     
Net change in cash 83 8
Cash, beginning of period 878 605
Translation difference in Cash 19 -14
Cash, end of period 980 599

 

 

 

Sony Ericsson
CONSOLIDATED STATEMENT OF CASH FLOWS - ISOLATED QUARTERS

 

  2010   2011
EUR million Q1 Q2 Q3 Q4   Q1
             
OPERATING            
Net income 21 12 49 8   11
Adjustments to reconcile net income to cash -44 4 -66 -50   -137
  -23 16 -17 -42   -127
             
Changes in operating net assets -72 13 -38 -86   -226
Cash flow from operating activities -94 29 -54 -128   -353
             
INVESTING            
Investing activities 27 -15 2 -18   -14
Cash flow from investing activities 27 -15 2 -18   -14
             
FINANCING            
Financing activities  150  0 - 32 - 178    375
Cash flow from financing activities 150 0 -32 -178   375
             
Net change in cash 83 15 -85 -324   8
Cash, beginning of period 878 980 1,039 921   605
Translation difference in Cash 19 45 -33 7   -14
Cash, end of period 980 1,039 921 605   599

 

 

 

Sony Ericsson
NET SALES BY MARKET AREA BY QUARTER

EUR million   2010   2011
Isolated quarters   Q1 Q2 Q3 Q4   Q1
Europe, Middle East & Africa *   711 876 837 795   485
Americas   201 223 222 205   151
Asia    493 659 544 528   509
Total   1,405 1,757 1,603 1,528   1,145
* of which Western Europe   525 668 632 569   307
               
               
    2010   2011
Sequential change (%)   Q1 Q2 Q3 Q4   Q1
Europe, Middle East & Africa *   -26% 23% -4% -5%   -39%
Americas   -9% 11% 0% -8%   -26%
Asia    -12% 34% -17% -3%   -4%
Total   -20% 25% -9% -5%   -25%
* of which Western Europe   -23% 27% -5% -10%   -46%
               
               
    2010   2011
Year over year change (%)   Q1 Q2 Q3 Q4   Q1
Europe, Middle East & Africa *   -27% -6% -4% -18%   -32%
Americas   1% 14% -4% -8%   -25%
Asia    -12% 17% 6% -6%   3%
Total   -19% 4% -1% -13%   -19%
* of which Western Europe   -27% -1% -1% -16%   -42%
               
               
    2010   2011
Year to date   1003 1006 1009 1012   1103
Europe, Middle East & Africa *   711 1,587 2,424 3,219   485
Americas   201 424 646 851   151
Asia    493 1,152 1,695 2,224   509
Total   1,405 3,162 4,765 6,294   1,145
* of which Western Europe   525 1,193 1,825 2,393   307
               
               
    2010   2011
YTD year over year change (%)   1003 1006 1009 1012   1103
Europe, Middle East & Africa *   -27% -17% -13% -14%   -32%
Americas   1% 7% 3% 0%   -25%
Asia    -12% 3% 4% 1%   3%
Total   -19% -8% -5% -7%   -19%
* of which Western Europe   -27% -15% -10% -12%   -42%

The full report (including tables) can be downloaded from the following link:

About Us

Ericsson is a world leader in communications technology and services with headquarters in Stockholm, Sweden. Our organization consists of more than 111,000 experts who provide customers in 180 countries with innovative solutions and services. Together we are building a more connected future where anyone and any industry is empowered to reach their full potential. Net sales in 2016 were SEK 222.6 billion (USD 24.5 billion). The Ericsson stock is listed on Nasdaq Stockholm and on NASDAQ in New York. Read more on www.ericsson.com.

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