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(TM) and Satio(TM) 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(TM) and Satio(TM) 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(TM) and Aino(TM) 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/ 


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


- ENDS -


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.  For more information please visit: www.sonyericsson.com.


CONTACTS:


Investors / analysts


Ericsson investor relations
Gary Pinkham (Stockholm)
+46 10 719 0858
Susanne Andersson (Stockholm)
+46 10 719 4631
Lars Jacobsson (Stockholm)
+46 10 719 9489




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


Press / media
Sony Ericsson global communications and PR


Aldo Liguori (London)
+44 20 8762 5860
Merran Wrigley (London)  
+44 20 8762 5862


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
2009
2008
  Change
Net sales
1,619
2,808
-42%
Cost of sales
-1,367
-2,192
-38%
Gross profit
252
616
-59%
Gross margin %
15.5%
21.9%
-6%
Research and development expenses
-260
-337
-23%
Selling and administrative expenses
-205
-303
-32%
Operating expenses
-465
-640
-27%
Other operating income, net
21
-8
356%
Operating income
-193
-33
488%
Operating margin %
-11.9%
-1.2%
-11%
Financial income
3
25
-88%
Financial expenses
-9
-15
-36%
Income after financial items
-199
-23
776%
Taxes
42
6
549%
Minority interest
-6
-8
-26%
Net income
-164
-25
565%
Number of units shipped (million)
14.1
25.7
-45%
ASP (EUR)
114
109
5%
EUR Million
Jul-Sep
  Jul-Sep
Restructuring charges
2009
2008
  Cost of sales
0
0
  Research and development expenses
1
26
  Sales and administrative expenses
1
3
  Other operating income, net
0
6
Total
2
35

 
Sony Ericsson
CONSOLIDATED INCOME STATEMENT




Jan-Sep
EUR million
2009
2008
  Change
Net sales
5,038
8,330
-40%
Cost of sales
-4,441
-6,274
-29%
Gross profit
597
2,056
-71%
Gross margin %
11.9%
24.7%
-13%
Research and development expenses
-808
-1,020
-21%
Selling and administrative expenses
-665
-883
-25%
Operating expenses
-1,473
-1,903
-23%
Other operating income, net
39
-3
-1233%
Operating income
-837
149
-661%
Operating margin %
-16.6%
1.8%
-18%
Financial income
18
73
-76%
Financial expenses
-34
-44
-23%
Income after financial items
-853
179
-577%
Taxes
200
-50
-499%
Minority interest
-16
-14
15%
Net income
-669
114
-685%
Number of units shipped (million)
42.5
72.5
-41%
ASP (EUR)
119
115
3%
EUR Million
Jan-Sep
  Jan-Sep
Restructuring charges
2009
2008
  Cost of sales
-2
8
  Research and development expenses
12
28
  Sales and administrative expenses
4
4
  Other operating income, net
0
6
Total
15
46


Sony Ericsson
CONSOLIDATED INCOME STATEMENT - ISOLATED QUARTERS




2009
2008
EUR million
Q3
Q2
Q1
Q4
Q3
Q2
Q1
Net sales
1,619
1,684
1,736
2,914
2,808
2,820
2,702
Cost of sales
-1,367
-1,483
-1,591
-2,476
-2,192
-2,168
-1,914
Gross profit
252
200
145
438
616
653
788
Gross margin %
15.5%
11.9%
8.4%
15.0%
21.9%
23.1%
29.2%
Research and development expenses
-260
-245
-303
-359
-337
-344
-339
Selling and administrative expenses
-205
-235
-225
-366
-303
-310
-270
Operating expenses
-465
-480
-528
-725
-640
-653
-610
Other operating income, net
21
6
13
24
-8
-2
6
Operating income
-193
-274
-369
-262
-33
-2
184
Operating margin %
-11.9%
-16.3%
-21.3%
-9.0%
-1.2%
-0.1%
6.8%
Financial income
3
6
9
28
25
25
24
Financial expenses
-9
-15
-10
-27
-15
-14
-15
Income after financial items
-199
-283
-370
-261
-23
8
193
Taxes
42
74
84
81
6
0
-57
Minority interest
-6
-4
-6
-7
-8
-3
-3
Net income
-164
-213
-293
-187
-25
6
133
Number of units shipped (million)
14.1
13.8
14.5
24.2
25.7
24.4
22.3
ASP (EUR)
114
122
120
121
109
116
121
EUR Million
2009
2008
Restructuring charges
Q3
Q2
Q1
Q4
Q3
Q2
  Cost of sales
0
-9
7
67
0
8
  Research and development expenses
1
9
2
35
26
2
  Sales and administrative expenses
1
1
3
24
3
1
  Other operating income, net
0
0
0
3
6
0
Total
2
1
12
129
35
11


Sony Ericsson
CONSOLIDATED BALANCE SHEET




Sep 30
Jun 30
Dec 31
Sep 30
EUR million
2009
2009
2008
2008
ASSETS
Total fixed and financial assets
757
736
590
649
Current assets
Inventories
397
404
531
717
Accounts receivables
917
936
1,629
1,815
Other assets
416
379
585
527
Other short-term cash investments
464
456
707
918
Cash and bank
532
509
418
555
Total current assets
2,726
2,685
3,870
4,532
Total assets
3,482
3,421
4,460
5,180


SHAREHOLDERS' EQUITY AND LIABILITIES
Shareholders' equity
532
694
1,217
1,429
Minority interest
43
66
57
50
Total equity
575
760
1,274
1,480
Total long-term liabilities
81
30
30
39
Accounts payable
1,019
848
990
1,453
Other current liabilities
1,807
1,782
2,166
2,208
Total current liabilities
2,826
2,630
3,156
3,661
Total shareholders' equity and liabilities
3,482
3,421
4,460
5,180
Net cash*
841
965
1,072
1,374


* 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
2009
    2008
OPERATIONS
Net income
-164
-25
Adjustments to reconcile net income to cash
20
39
-143
15
Changes in operating net assets
49
88
Cash flow from operating activities
-94
102
INVESTMENTS
Investing activities
-42
-55
Cash flow from investing activities
-42
-55
FINANCING
Financing activities
 159
- 238
Cash flow from financing activities
159
-238
Net change in cash
22
-191
Cash, beginning of period
965
1,591
Translation difference in Cash
9
74
Cash, end of period
996
1,473


Sony Ericsson
CONSOLIDATED STATEMENT OF CASH FLOWS




Jan-Sep
EUR million
2009
    2008
OPERATIONS
Net income
-669
114
Adjustments to reconcile net income to cash
87
108
-583
223
Changes in operating net assets
431
-155
Cash flow from operating activities
-152
68
INVESTMENTS
Investing activities
-74
-105
Cash flow from investing activities
-74
-105
FINANCING
Financing activities
 106
-708
Cash flow from financing activities
106
-708
Net change in cash
-120
-745
Cash, beginning of period
1,125
2,155
Translation difference in Cash
-9
62
Cash, end of period
996
1,473


 Sony Ericsson
CONSOLIDATED STATEMENT OF CASH FLOWS - ISOLATED QUARTERS




2009
2008
EUR million
Jul-Sep
Apr-Jun
Jan-Mar
Oct-Dec
Jul-Sep
Apr-Jun
Jan-Mar
OPERATIONS
Net income
-164
-213
-293
-187
-25
6
133
Adjustments to reconcile net income to cash
20
37
29
37
39
40
31
-143
-176
-263
-150
15
46
164
Changes in operating net assets
49
60
321
-168
88
-142
-101
Cash flow from operating activities
-94
-115
58
-318
102
-96
64
INVESTMENTS
Investing activities
-42
-13
-19
41
-55
-29
-22
Cash flow from investing activities
-42
-13
-19
41
-55
-29
-22
FINANCING
Financing activities
 159
 0
- 53
- 46
- 238
- 8
- 462
Cash flow from financing activities
159
0
-53
-46
-238
-8
-462
Net change in cash
22
-128
-14
-323
-191
-133
-421
Cash, beginning of period
965
1,116
1,125
1,473
1,591
1,711
2,155
Translation difference in Cash
9
-23
5
-25
74
13
-24
Cash, end of period
996
965
1,116
1,125
1,473
1,591
1,711


Sony Ericsson
NET SALES BY MARKET AREA BY QUARTER


EUR million
2009
2008
Isolated quarters
Q3
Q2
Q1
Q4
Q3
Q2
Q1
Europe, Middle East & Africa *
875
927
977
1,642
1,427
1,386
1,494
Americas
232
195
200
636
703
740
486
Asia 
512
562
559
636
678
694
722
Total
1,619
  1,684
  1,736
     2,914
  2,808
  2,820
  2,702
* of which Western Europe
636
678
721
1,117
947
900
979
2009
2008
Sequential change (%)
Q3
Q2
Q1
Q4
Q3
Q2
Q1
Europe, Middle East & Africa *
-6%
-5%
-40%
15%
3%
-7%
-34%
Americas
19%
-3%
-69%
-10%
-5%
52%
-24%
Asia 
-9%
1%
-12%
-6%
-2%
-4%
-18%
Total
-4%
-3%
-40%
4%
0%
4%
-28%
* of which Western Europe
-6%
-6%
-35%
18%
5%
-8%
-38%
2009
2008
Year over year change (%)
Q3
Q2
Q1
Q4
Q3
Q2
Q1
Europe, Middle East & Africa *
-39%
-33%
-35%
-27%
-17%
-20%
-7%
Americas
-67%
-74%
-59%
0%
23%
48%
33%
Asia 
-25%
-19%
-23%
-28%
-17%
-21%
-25%
Total
-42%
-40%
-36%
-23%
-10%
-9%
-8%
* of which Western Europe
-33%
-25%
-26%
-29%
-14%
-18%
-9%
2009
2008
Year to date
0909
0906
0903
0812
0809
0806
0803
Europe, Middle East & Africa *
2,778
1,903
977
5,947
4,306
2,879
1,494
Americas
627
395
200
2,566
1,930
1,226
486
Asia 
1,633
1,121
559
2,731
2,094
1,416
722
Total
5,038
3,419
1,736
11,244
8,330
5,522
2,702
* of which Western Europe
2,036
1,400
721
3,943
2,826
1,879
979
2009
2008
YTD year over year change (%)
0909
0906
0903
0812
0809
0806
0803
Europe, Middle East & Africa *
-35%
-34%
-35%
-18%
-15%
-13%
-7%
Americas
-67%
-68%
-59%
24%
34%
42%
33%
Asia 
-22%
-21%
-23%
-23%
-21%
-23%
-25%
Total
-40%
-38%
-36%
-13%
-9%
-9%
-8%
* of which Western Europe
-28%
-26%
-26%
-19%
-14%
-14%
-9%


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 100,000 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 2017 were SEK 201.3 billion (USD 23.5 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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