Sony Ericsson reports third quarter 2010 results

Q3 Highlights:

• Turnaround continues with third consecutive quarter of profits
• Continued success of smartphone portfolio keeps ASP at high level
• Launch of Xperia(TM) models in new markets, including China and the U.S.

The consolidated financial summary for Sony Ericsson Mobile Communications AB (Sony Ericsson) for the third quarter ended September 30, 2010 is as follows:

	Q3 2009	Q2 2010	Q3 2010
Number of units shipped (million)	14.1	11.0	10.4
Sales (Euro m.)	1,619	1,757	1,603
Gross margin (%)	16%	28%	30%
Operating income (Euro m.)	-193	36	63
Operating margin (%)	-12%	2%	4%
Restructuring charges (Euro m.)	2	32	4
Operating income excl. restructuring charges (Euro m.)	-191	68	67
Operating margin excl. restructuring charges (%)	-12%	4%	4%
Income before taxes (IBT) (Euro m.)	-199	31	62
IBT excl. restructuring charges (Euro m.)	-198	63	66
Net income (Euro m.)	-164	12	49
Average selling price (Euro)	114	160	154

Bert Nordberg, President & CEO of Sony Ericsson commented, "Our third consecutive quarter of profitable results illustrates that Sony Ericsson's overall performance is stabilising. Our strategy to focus on the smartphone segment is succeeding and smartphones now comprise more than 50% of our total sales. During the quarter, we launched our Android-based Xperia(TM) models in new markets, such as China and the U.S., and it is our ambition to become the global number one handset provider on the Android platform."

Income before taxes for the quarter excluding restructuring charges was a profit of Euro 66 million following the positive effects of the transformation programme. Net income for the quarter was Euro 49 million, an increase of Euro 213 million year-on-year and of Euro 37 million sequentially.  

The gross margin percentage was 30% and almost doubled year-on-year, reflective of the company turnaround.

Units shipped in the quarter were 10.4 million, a decrease of 26% year-on-year and down 5% sequentially. Average selling price (ASP) in the quarter remained at a high level of Euro 154, a 34% increase year-on-year and a decrease of 4% sequentially, due to product and geographical mix. As a result, sales for the quarter were Euro 1,603 million, essentially flat year-on-year and a 9% decrease sequentially.

Sony Ericsson's net cash position as of September 30, 2010 was Euro 538 million. The negative cash flow from operating activities was Euro 54 million, mainly due to payments during the quarter related to the transformation programme.

Market share in unit base for the quarter remained flat sequentially and is estimated to be approximately 4%. The value market share is estimated to be approximately 6%.

Sony Ericsson maintains a forecast of slight growth in units in the global handset market in 2010.

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 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
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.

- ENDS -

CONTACTS:

Ericsson investor relations
Susanne Andersson (Stockholm) +46 10 719 4631
Andreas Hedemyr (Stockholm) +46 10 714 3748

Sony investor relations
Gen Tsuchikawa (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

	Jul-Sep				Jan-Sep
EUR million	2009	2010	Change		2009	2010	Change
Net sales	1,619	1,603	-1%		5,038	4,765	-5%
Cost of sales	-1,367	-1,130	-17%		-4,441	-3,371	-24%
Gross profit	252	473	88%		597	1,394	134%
Gross margin %	15.5%	29.5%	14%		11.9%	29.3%	17%
Research and development expenses	-260	-191	-27%		-808	-625	-23%
Selling and administrative expenses	-205	-228	12%		-665	-680	2%
Operating expenses	-465	-420	-10%		-1,473	-1,305	-11%
Other operating income, net	21	10	-51%		39	31	-20%
Operating income	-193	63			-837	120
Operating margin %	-11.9%	4.0%			-16.6%	2.5%
Financial income	3	7	124%		18	16	-12%
Financial expenses	-9	-8	-15%		-34	-24	-29%
Income after financial items	-199	62			-853	112
Taxes	42	-12			200	-21
Minority interest	-6	-2	-75%		-16	-8	-48%
Net income	-164	49			-669	82
Number of units shipped (million)	14.1	10.4	-26%		42.5	31.9	-25%
ASP (EUR)	114	154	34%		119	150	26%
EUR million	Jul-Sep				Jan-Sep
Restructuring charges	2009	2010			2009	2010
Cost of sales	0	3			-2	34
Research and development expenses	1	-10			12	-6
Sales and administrative expenses	1	11			4	12
Total	2	4			15	39

 

Sony Ericsson
CONSOLIDATED INCOME STATEMENT - ISOLATED QUARTERS

	2009					2010
EUR million	Q1	Q2	Q3	Q4		Q1	Q2	Q3
Net sales	1,736	1,684	1,619	1,750		1,405	1,757	1,603
Cost of sales	-1,591	-1,483	-1,367	-1,341		-975	-1,266	-1,130
Gross profit	145	200	252	409		429	492	473
Gross margin %	8.4%	11.9%	15.5%	23.4%		30.6%	28.0%	29.5%
Research and development expenses	-303	-245	-260	-299		-216	-218	-191
Selling and administrative expenses	-225	-235	-205	-299		-207	-245	-228
Operating expenses	-528	-480	-465	-599		-423	-463	-420
Other operating income, net	13	6	21	8		14	7	10
Operating income	-369	-274	-193	-181		20	36	63
Operating margin %	-21.3%	-16.3%	-11.9%	-10.4%		1.4%	2.1%	4.0%
Financial income	9	6	3	4		7	2	7
Financial expenses	-10	-15	-9	-12		-9	-7	-8
Income after financial items	-370	-283	-199	-190		18	31	62
Taxes	84	74	42	36		6	-16	-12
Minority interest	-6	-4	-6	-12		-3	-4	-2
Net income	-293	-213	-164	-167		21	12	49
Number of units shipped (million)	14.5	13.8	14.1	14.6		10.5	11.0	10.4
ASP (EUR)	120	122	114	120		134	160	154
EUR million	2009					2010
Restructuring charges	Q1	Q2	Q3	Q4		Q1	Q2	Q3
Cost of sales	7	-9	0	41		-2	33	3
Research and development expenses	2	9	1	72		2	1	-10
Sales and administrative expenses	3	1	1	37		3	-2	11
Total	12	1	2	150		3	32	4

 

Sony Ericsson
CONSOLIDATED BALANCE SHEET

		Sep 30		Dec 31		Jun 30		Sep 30
EUR million		2009		2009		2010		2010
ASSETS
Total fixed and financial assets		757		779		836		813
Current assets
Inventories		397		358		467		457
Accounts receivable		917		832		1,063		986
Other assets		416		415		412		328
Other short-term cash investments		464		489		477		440
Cash and bank		532		389		562		482
Total current assets		2,726		2,483		2,981		2,692
Total assets		3,482		3,262		3,817		3,505
SHAREHOLDERS' EQUITY AND LIABILITIES
Shareholders' equity		532		381		510		480
Minority interest		43		47		66		62
Total equity		575		428		575		541
Borrowing, Non Current		50		0		101		100
Other long-term liabilities		31		32		40		30
Total long-term liabilities		81		32		141		130
Accounts payable		1,019		852		973		922
Borrowing, Current		105		258		329		284
Other current liabilities		1,702		1,692		1,798		1,628
Total current liabilities		2,826		2,802		3,101		2,834
Total shareholders' equity and liabilities		3,482		3,262		3,817		3,505
Net cash*		841		620		609		538

* 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			Jan-Sep
EUR million	2009	2010		2009	2010
OPERATING
Net income	-164	49		-669	82
Adjustments to reconcile net income to cash	20	-66		87	-105
	-143	-17		-583	-23
Changes in operating net assets	49	-38		431	-96
Cash flow from operating activities	-94	-54		-152	-119
INVESTING
Investing activities	-42	2		-74	14
Cash flow from investing activities	-42	2		-74	14
FINANCING
Financing activities	159	- 32		106	118
Cash flow from financing activities	159	-32		106	118
Net change in cash	22	-85		-120	12
Cash, beginning of period	965	1,039		1,125	878
Translation difference in Cash	9	-33		-9	31
Cash, end of period	996	921		996	921

 

Sony Ericsson
CONSOLIDATED STATEMENT OF CASH FLOWS - ISOLATED QUARTERS

	2009					2010
EUR million	Q1	Q2	Q3	Q4		Q1	Q2	Q3
OPERATING
Net income	-293	-213	-164	-167		21	12	49
Adjustments to reconcile net income to cash	29	37	20	48		-44	4	-66
	-263	-176	-143	-119		-23	16	-17
Changes in operating net assets	321	60	49	-97		-72	13	-38
Cash flow from operating activities	58	-115	-94	-216		-94	29	-54
INVESTING
Investing activities	-19	-13	-42	-10		27	-15	2
Cash flow from investing activities	-19	-13	-42	-10		27	-15	2
FINANCING
Financing activities	- 53	0	159	100		150	0	- 32
Cash flow from financing activities	-53	0	159	100		150	0	-32
Net change in cash	-14	-128	22	-126		83	15	-85
Cash, beginning of period	1,125	1,116	965	996		878	980	1,039
Translation difference in Cash	5	-23	9	8		19	45	-33
Cash, end of period	1,116	965	996	878		980	1,039	921

 

Sony Ericsson
NET SALES BY MARKET AREA BY QUARTER

EUR million
		2009					2010
Isolated quarters		Q1	Q2	Q3	Q4		Q1	Q2	Q3
Europe, Middle East & Africa *		977	927	875	966		711	876	837
Americas		200	195	232	222		201	223	222
Asia		559	562	512	562		493	659	544
Total		1,736	1,684	1,619	1,750		1,405	1,757	1,603
* of which Western Europe		721	678	636	678		525	668	632
		2009					2010
Sequential change (%)		Q1	Q2	Q3	Q4		Q1	Q2	Q3
Europe, Middle East & Africa *		-40%	-5%	-6%	10%		-26%	23%	-4%
Americas		-69%	-3%	19%	-4%		-10%	11%	0%
Asia		-12%	1%	-9%	10%		-12%	34%	-18%
Total		-40%	-3%	-4%	8%		-20%	25%	-9%
* of which Western Europe		-35%	-6%	-6%	7%		-23%	27%	-5%
		2009					2010
Year over year change (%)		Q1	Q2	Q3	Q4		Q1	Q2	Q3
Europe, Middle East & Africa *		-35%	-33%	-39%	-41%		-27%	-5%	-4%
Americas		-59%	-74%	-67%	-65%		1%	14%	-4%
Asia		-23%	-19%	-25%	-12%		-12%	17%	6%
Total		-36%	-40%	-42%	-40%		-19%	4%	-1%
* of which Western Europe		-26%	-25%	-33%	-39%		-27%	-2%	-1%
		2009					2010
Year to date		0903	0906	0909	0912		1003	1006	1009
Europe, Middle East & Africa *		977	1,903	2,778	3,744		711	1,587	2,424
Americas		200	395	627	850		201	424	646
Asia		559	1,121	1,633	2,194		493	1,152	1,695
Total		1,736	3,419	5,038	6,788		1,405	3,162	4,765
* of which Western Europe		721	1,400	2,036	2,714		525	1,193	1,825
		2009					2010
YTD year over year change (%)		0903	0906	0909	0912		1003	1006	1009
Europe, Middle East & Africa *		-35%	-34%	-35%	-37%		-27%	-17%	-13%
Americas		-59%	-68%	-67%	-67%		1%	7%	3%
Asia		-23%	-21%	-22%	-20%		-12%	3%	4%
Total		-36%	-38%	-40%	-40%		-19%	-8%	-5%
* of which Western Europe		-26%	-26%	-28%	-31%		-27%	-15%	-10%

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