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Highlights:

  • Shift to Android-based smartphone portfolio drives profitability
  • Smartphone share of total sales more than doubled year-on-year
  • Xperia™ arc, Xperia™ PLAY and Xperia™ 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™ arc and Xperia™ 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™ 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™ 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.sonymobile.com/press.

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.