Sony Ericsson reports fourth quarter and full year 2010 results
Highlights:
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Four consecutive quarters of profitability during 2010
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Improvement of Euro 1.1 billion of income before taxes, excluding restructuring charges, for the full year
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Over 9 million Android-based Xperia(TM) phones shipped since launch
The consolidated financial summary for Sony Ericsson Mobile Communications AB (Sony Ericsson) for the fourth quarter and full year ended December 31, 2010 is as follows:
| Q4 2009 | Q3 2010 | Q4 2010 | FY 2009 | FY 2010 | |
| Number of units shipped (million) | 14.6 | 10.4 | 11.2 | 57.1 | 43.1 |
| Sales (Euro m.) | 1,750 | 1,603 | 1,528 | 6,788 | 6,294 |
| Gross margin (%) | 23% | 30% | 30% | 15% | 29% |
| Operating income (Euro m.) | -181 | 63 | 39 | -1,018 | 159 |
| Operating margin (%) | -10% | 4% | 3% | -15% | 3% |
| Restructuring charges (Euro m.) | -150 | -4 | -3 | -164 | -42 |
| Operating income excl. restructuring charges (Euro m.) | -32 | 67 | 43 | -854 | 202 |
| Operating margin excl. restructuring charges (%) | -2% | 4% | 3% | -13% | 3% |
| Income before taxes (IBT) (Euro m.) | -190 | 62 | 35 | -1,043 | 147 |
| IBT excl. restructuring charges (Euro m.) | -40 | 66 | 39 | -878 | 189 |
| Net income (Euro m.) | -167 | 49 | 8 | -836 | 90 |
| Average selling price (Euro) | 120 | 154 | 136 | 119 | 146 |
Bert Nordberg, President & CEO of Sony Ericsson commented, "2010 was a turnaround year for Sony Ericsson. Our four consecutive quarters of profit reflect the success of our shift towards an Android-based smartphone portfolio. We will celebrate the 10th anniversary of the creation of Sony Ericsson in 2011, and as shown by the recently announced Xperia(TM) arc, we will continue to focus on delivering the most entertaining smartphones worldwide."
Income before taxes, excluding restructuring charges, was Euro 189 million for the full year 2010, compared with a loss of Euro 878 million in 2009. The improvement of approximately Euro 1.1 billion was driven by the success of a streamlined product portfolio focused on higher-end smartphones and an improved cost structure. Sales for the full year 2010 were Euro 6,294 million, a decrease of 7% from 2009, while gross margin improved from 15% in 2009 to 29%, in 2010.
During 2010 Sony Ericsson completed its company-wide transformation programme, improving its cost of sales ratio, reducing its global workforce by approximately 4,000 people in total, consolidating its facilities worldwide and decreasing annual operating expenses by more than Euro 880 million. The total restructuring charges for the transformation programme were Euro 381 million.
Units shipped during the fourth quarter were 11.2 million, a year-on-year decrease of 23%, consistent with the streamlining of the portfolio to focus on higher-end smartphones. The sequential increase of 8%, related to seasonal factors, was somewhat constrained by a lack of new product launches during the quarter. Average selling price (ASP) for the quarter was Euro 136, a 13% increase year-on-year. ASP decreased 12% sequentially, mainly due to price erosion, foreign exchange and product mix. Sales for the quarter were Euro 1,528 million, a decrease of 13% year-on-year and a decrease of 5% sequentially.
The gross margin for the fourth quarter was 30%, an increase of 7 percentage points year-on-year and essentially flat sequentially, including the benefit of some one-time items, relating to certain royalty matters and warranty estimates.
Income before taxes for the fourth quarter, excluding restructuring charges, was a profit of Euro 39 million, an increase of Euro 79 million year-on-year and a decrease of Euro 27 million sequentially, mainly due to lower sales.
Sony Ericsson's net cash position as of December 31, 2010 was Euro 375 million. The negative cash flow from operating activities for the quarter was Euro 128 million, mainly due to increases in inventory due to seasonal factors as well as payments related to the transformation programme.
During the quarter term loan facilities of Euro 150 million matured and were repaid in full.
Sony Ericsson estimates that the global handset market for the full year 2010 increased slightly in volume to almost 1.2 billion units. The company estimates that the global handset market for the fourth quarter was essentially flat year-on-year and its market share for the fourth quarter was approximately 3% in units and approximately 5% in value. Sony Ericsson estimates that its market share for the full year 2010 was approximately 4% in units and approximately 6% in value.
Sony Ericsson forecasts modest growth in 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
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. Sony Ericsson's 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.
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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
Aldo Liguori (London) +44 20 8762 5860
Gustaf Brusewitz (London) +44 7960 58 19 68
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
| Oct-Dec | Jan-Dec | ||||||
| EUR million | 2009 | 2010 | Change | 2009 | 2010 | Change | |
| Net sales | 1,750 | 1,528 | -13% | 6,788 | 6,294 | -7% | |
| Cost of sales | -1,341 | -1,069 | -20% | -5,782 | -4,440 | -23% | |
| Gross profit | 409 | 459 | 12% | 1,006 | 1,853 | 84% | |
| Gross margin % | 23% | 30% | 7% | 15% | 29% | 14% | |
| Research and development expenses | -299 | -214 | -28% | -1,108 | -840 | -24% | |
| Selling and administrative expenses | -299 | -212 | -29% | -964 | -893 | -7% | |
| Operating expenses | -599 | -427 | -29% | -2,072 | -1,732 | -16% | |
| Other operating income, net | 8 | 7 | -13% | 48 | 38 | -21% | |
| Operating income | -181 | 39 | -1,018 | 159 | |||
| Operating margin % | -10% | 3% | -15% | 3% | |||
| Financial income | 4 | 2 | -50% | 21 | 18 | -14% | |
| Financial expenses | -12 | -6 | -50% | -46 | -30 | -35% | |
| Income before taxes | -190 | 35 | -1,043 | 147 | |||
| Taxes | 36 | -27 | 236 | -48 | |||
| Minority interest | -12 | 0 | -29 | -9 | -69% | ||
| Net income | -167 | 8 | -836 | 90 | |||
| Number of units shipped (million) | 14.6 | 11.2 | -23% | 57.1 | 43.1 | -25% | |
| ASP (EUR) | 120 | 136 | 13% | 119 | 146 | 23% | |
| EUR million | Oct-Dec | Jan-Dec | |||||
| Restructuring charges | 2009 | 2010 | 2009 | 2010 | |||
| Cost of sales | -41 | 2 | -39 | -32 | |||
| Research and development expenses | -72 | 0 | -84 | 7 | |||
| Sales and administrative expenses | -37 | -5 | -41 | -17 | |||
| Total | -150 | -3 | -164 | -42 | |||
Sony Ericsson
CONSOLIDATED INCOME STATEMENT - ISOLATED QUARTERS
| 2009 | 2010 | ||||||||
| EUR million | Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Q4 | |
| Net sales | 1,736 | 1,684 | 1,619 | 1,750 | 1,405 | 1,757 | 1,603 | 1,528 | |
| Cost of sales | -1,591 | -1,483 | -1,367 | -1,341 | -975 | -1,266 | -1,130 | -1,069 | |
| Gross profit | 145 | 200 | 252 | 409 | 429 | 492 | 473 | 459 | |
| Gross margin % | 8% | 12% | 16% | 23% | 31% | 28% | 30% | 30% | |
| Research and development expenses | -303 | -245 | -260 | -299 | -216 | -218 | -191 | -214 | |
| Selling and administrative expenses | -225 | -235 | -205 | -299 | -207 | -245 | -228 | -212 | |
| Operating expenses | -528 | -480 | -465 | -599 | -423 | -463 | -420 | -427 | |
| Other operating income, net | 13 | 6 | 21 | 8 | 14 | 7 | 10 | 7 | |
| Operating income | -369 | -274 | -193 | -181 | 20 | 36 | 63 | 39 | |
| Operating margin % | -21% | -16% | -12% | -10% | 1% | 2% | 4% | 3% | |
| Financial income | 9 | 6 | 3 | 4 | 7 | 2 | 7 | 2 | |
| Financial expenses | -10 | -15 | -9 | -12 | -9 | -7 | -8 | -6 | |
| Income before taxes | -370 | -283 | -199 | -190 | 18 | 31 | 62 | 35 | |
| Taxes | 84 | 74 | 42 | 36 | 6 | -16 | -12 | -27 | |
| Minority interest | -6 | -4 | -6 | -12 | -3 | -4 | -2 | 0 | |
| Net income | -293 | -213 | -164 | -167 | 21 | 12 | 49 | 8 | |
| Number of units shipped (million) | 14.5 | 13.8 | 14.1 | 14.6 | 10.5 | 11.0 | 10.4 | 11.2 | |
| ASP (EUR) | 120 | 122 | 114 | 120 | 134 | 160 | 154 | 136 | |
| EUR million | 2009 | 2010 | |||||||
| Restructuring charges | Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Q4 | |
| Cost of sales | -7 | 9 | 0 | -41 | 2 | -33 | -3 | 2 | |
| Research and development expenses | -2 | -9 | -1 | -72 | -2 | -1 | 10 | 0 | |
| Sales and administrative expenses | -3 | -1 | -1 | -37 | -3 | 2 | -11 | -5 | |
| Total | -12 | -1 | -2 | -150 | -3 | -32 | -4 | -3 | |
Sony Ericsson
CONSOLIDATED BALANCE SHEET
| Dec 31 | Jun 30 | Sep 30 | Dec 31 | |||||
| EUR million | 2009 | 2010 | 2010 | 2010 | ||||
| ASSETS | ||||||||
| Total fixed and financial assets | 779 | 836 | 813 | 803 | ||||
| Current assets | ||||||||
| Inventories | 358 | 467 | 457 | 460 | ||||
| Accounts receivable | 832 | 1,063 | 986 | 836 | ||||
| Other assets | 415 | 412 | 328 | 295 | ||||
| Other short-term cash investments | 489 | 477 | 440 | 276 | ||||
| Cash and bank | 389 | 562 | 482 | 329 | ||||
| Total current assets | 2,483 | 2,981 | 2,692 | 2,196 | ||||
| Total assets | 3,262 | 3,817 | 3,505 | 2,999 | ||||
| SHAREHOLDERS' EQUITY AND LIABILITIES | ||||||||
| Shareholders' equity | 381 | 510 | 480 | 532 | ||||
| Minority interest | 47 | 66 | 62 | 42 | ||||
| Total equity | 428 | 575 | 541 | 574 | ||||
| Borrowing, Non Current | 0 | 101 | 100 | 100 | ||||
| Other long-term liabilities | 32 | 40 | 30 | 32 | ||||
| Total long-term liabilities | 32 | 141 | 130 | 132 | ||||
| Accounts payable | 852 | 973 | 922 | 769 | ||||
| Borrowing, Current | 258 | 329 | 284 | 130 | ||||
| Other current liabilities | 1,692 | 1,798 | 1,628 | 1,394 | ||||
| Total current liabilities | 2,802 | 3,101 | 2,834 | 2,293 | ||||
| Total shareholders' equity and liabilities | 3,262 | 3,817 | 3,505 | 2,999 | ||||
| Net cash* | 620 | 609 | 538 | 375 |
* Net cash is defined as cash and bank plus short-term cash investments less interest-bearing liabilities.
Sony Ericsson
CONSOLIDATED STATEMENT OF CASH FLOWS
| Oct-Dec | Jan-Dec | ||||
| EUR million | 2009 | 2010 | 2009 | 2010 | |
| OPERATING | |||||
| Net income | -167 | 8 | -836 | 90 | |
| Adjustments to reconcile net income to cash | 48 | -50 | 135 | -156 | |
| -119 | -42 | -701 | -65 | ||
| Changes in operating net assets | -97 | -86 | 333 | -183 | |
| Cash flow from operating activities | -216 | -128 | -368 | -248 | |
| INVESTING | |||||
| Investing activities | -10 | -18 | -84 | -4 | |
| Cash flow from investing activities | -10 | -18 | -84 | -4 | |
| FINANCING | |||||
| Financing activities | 100 | - 178 | 205 | - 60 | |
| Cash flow from financing activities | 100 | -178 | 205 | -60 | |
| Net change in cash | -126 | -324 | -247 | -312 | |
| Cash, beginning of period | 996 | 921 | 1,125 | 878 | |
| Translation difference in Cash | 8 | 7 | -1 | 38 | |
| Cash, end of period | 878 | 605 | 878 | 605 | |
Sony Ericsson
CONSOLIDATED STATEMENT OF CASH FLOWS - ISOLATED QUARTERS
| 2009 | 2010 | ||||||||
| EUR million | Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Q4 | |
| OPERATING | |||||||||
| Net income | -293 | -213 | -164 | -167 | 21 | 12 | 49 | 8 | |
| Adjustments to reconcile net income to cash | 29 | 37 | 20 | 48 | -44 | 4 | -66 | -50 | |
| -263 | -176 | -143 | -119 | -23 | 16 | -17 | -42 | ||
| Changes in operating net assets | 321 | 60 | 49 | -97 | -72 | 13 | -38 | -86 | |
| Cash flow from operating activities | 58 | -115 | -94 | -216 | -94 | 29 | -54 | -128 | |
| INVESTING | |||||||||
| Investing activities | -19 | -13 | -42 | -10 | 27 | -15 | 2 | -18 | |
| Cash flow from investing activities | -19 | -13 | -42 | -10 | 27 | -15 | 2 | -18 | |
| FINANCING | |||||||||
| Financing activities | - 53 | 0 | 159 | 100 | 150 | 0 | - 32 | - 178 | |
| Cash flow from financing activities | -53 | 0 | 159 | 100 | 150 | 0 | -32 | -178 | |
| Net change in cash | -14 | -128 | 22 | -126 | 83 | 15 | -85 | -324 | |
| Cash, beginning of period | 1,125 | 1,116 | 965 | 996 | 878 | 980 | 1,039 | 921 | |
| Translation difference in Cash | 5 | -23 | 9 | 8 | 19 | 45 | -33 | 7 | |
| Cash, end of period | 1,116 | 965 | 996 | 878 | 980 | 1,039 | 921 | 605 | |
Sony Ericsson
NET SALES BY MARKET AREA BY QUARTER
| EUR million | ||||||||||
| 2009 | 2010 | |||||||||
| Isolated quarters | Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Q4 | ||
| Europe, Middle East & Africa * | 977 | 927 | 875 | 966 | 711 | 876 | 837 | 795 | ||
| Americas | 200 | 195 | 232 | 222 | 201 | 223 | 222 | 205 | ||
| Asia | 559 | 562 | 512 | 562 | 493 | 659 | 544 | 528 | ||
| Total | 1,736 | 1,684 | 1,619 | 1,750 | 1,405 | 1,757 | 1,603 | 1,528 | ||
| * of which Western Europe | 721 | 678 | 636 | 678 | 525 | 668 | 632 | 569 | ||
| 2009 | 2010 | |||||||||
| Sequential change (%) | Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Q4 | ||
| Europe, Middle East & Africa * | -40% | -5% | -6% | 10% | -26% | 23% | -4% | -5% | ||
| Americas | -69% | -3% | 19% | -4% | -9% | 11% | 0% | -8% | ||
| Asia | -12% | 1% | -9% | 10% | -12% | 34% | -17% | -3% | ||
| Total | -40% | -3% | -4% | 8% | -20% | 25% | -9% | -5% | ||
| * of which Western Europe | -35% | -6% | -6% | 7% | -23% | 27% | -5% | -10% | ||
| 2009 | 2010 | |||||||||
| Year over year change (%) | Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Q4 | ||
| Europe, Middle East & Africa * | -35% | -33% | -39% | -41% | -27% | -6% | -4% | -18% | ||
| Americas | -59% | -74% | -67% | -65% | 1% | 14% | -4% | -8% | ||
| Asia | -23% | -19% | -24% | -12% | -12% | 17% | 6% | -6% | ||
| Total | -36% | -40% | -42% | -40% | -19% | 4% | -1% | -13% | ||
| * of which Western Europe | -26% | -25% | -33% | -39% | -27% | -1% | -1% | -16% | ||
| 2009 | 2010 | |||||||||
| Year to date | 0903 | 0906 | 0909 | 0912 | 1003 | 1006 | 1009 | 1012 | ||
| Europe, Middle East & Africa * | 977 | 1,903 | 2,778 | 3,744 | 711 | 1,587 | 2,424 | 3,219 | ||
| Americas | 200 | 395 | 627 | 850 | 201 | 424 | 646 | 851 | ||
| Asia | 559 | 1,121 | 1,633 | 2,194 | 493 | 1,152 | 1,695 | 2,224 | ||
| Total | 1,736 | 3,419 | 5,038 | 6,788 | 1,405 | 3,162 | 4,765 | 6,294 | ||
| * of which Western Europe | 721 | 1,400 | 2,036 | 2,714 | 525 | 1,193 | 1,825 | 2,393 | ||
| 2009 | 2010 | |||||||||
| YTD year over year change (%) | 0903 | 0906 | 0909 | 0912 | 1003 | 1006 | 1009 | 1012 | ||
| Europe, Middle East & Africa * | -35% | -34% | -35% | -37% | -27% | -17% | -13% | -14% | ||
| Americas | -59% | -68% | -68% | -67% | 1% | 7% | 3% | 0% | ||
| Asia | -23% | -21% | -22% | -20% | -12% | 3% | 4% | 1% | ||
| Total | -36% | -38% | -40% | -40% | -19% | -8% | -5% | -7% | ||
| * of which Western Europe | -26% | -25% | -28% | -31% | -27% | -15% | -10% | -12% | ||
The full report (including tables) can be downloaded from the following link: