Sony Ericsson reports third quarter results

Q3 highlights:
  • Break even results, excluding restructuring charges, as challenging business conditions continued 
  • C902 Cyber-shot(TM) camera phone is hit model of the quarter
  • First Xperia(TM) branded multimedia phone X1 began shipping
  • Expansion of music service offering with announcement of PlayNow(TM) plus 
London, UK - 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 charges (Euro m.)
2
8
393
   Operating margin excl. restructuring charges (%)
0%
0%
13%
Income before taxes (IBT) (Euro m.)
-23
8
384
   IBT excl. restructuring charges (Euro m.)
12
19
384
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(TM) 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(TM) plus, the next step in its music service offering. PlayNow(TM) 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(TM) 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(TM) 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(TM), and started shipping the phone, the Xperia(TM) 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(TM) and WALKMAN® are trademarks of Sony Corporation.
The Liquid Identity logo, Xperia(TM) and the Xperia(TM) logo and PlayNow(TM) 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:

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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