18 October 2008

Sony Ericsson Reports 3rd Quarter Results
Loss Less Than Expected?!?

Swedish-Japanese mobile device maker Sony Ericsson Mobile Communications reported a net loss in its third quarter, reflecting restructuring charges and ongoing difficult business conditions. The company posted a 10% fall in top line, but said it expects about 10% increase in global handset market for fiscal 2008.

"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."

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%.

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.

Q3 Highlights:

• Break even results, excluding restructuring charges, as challenging business conditions continued
• C902 Cyber-shot™ camera phone is hit model of the quarter
• First Xperia™ branded multimedia phone X1 began shipping
• Expansion of music service offering with announcement of PlayNow™ plus

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(R) 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.