16 April 2010

Sony Ericsson Reports 1st Quarter
Company Finally Returns To Profitability!

Struggling mobile device maker Sony Ericsson, today reported a net profit for the first quarter, boosted by product launches as well as company cost savings.

Friday's report showed an unexpected gain for the first three months of 2010, with net profits reaching 21€ million ($29 million), up from a previous loss of 293€ million in the same quarter a year ago.

Although sales dipped in the period, to (EURO)1.4 billion from (EURO)1.74 billion, the gross margin of the LM Ericsson and Sony Corp. joint venture jumped to 30.6 percent from a previous 8.4 percent.

The consolidated financial summary for Sony Ericsson Mobile Communications AB (Sony Ericsson) for Bert Nordberg, President, Sony Ericsson commented, “We are pleased to see the positive impact of both the launch of new products and the business transformation programme improving the company’s results. The Xperia™ X10, our first android-based Communication Entertainment device featuring signature Sony Ericsson applications Timescape and Mediascape™, and Vivaz™, a beautifully designed, touch-screen Symbian phone started shipping towards the end of the quarter. Both models have been well received by global customers.” He added, “Increases in both gross and operating margins show that we are on the right track to build the correct cost structure for our business organization and strategy. We will continue to work through the transformation programme to ensure that we are competitive.”

Units shipped in the quarter were 10.5 million, a decrease of 28% compared to the same period last year, reflecting the streamlining of the portfolio over the past 12 months to focus on higher-end phones. Sales for the quarter were Euro 1,405 million, a decrease of 19% year on year. Average selling price (ASP) increased 12% both sequentially and year-on-year to Euro 134 during the quarter due to good sell through of existing models, new flagship phones starting to ship at the end of the quarter and a positive currency effect.

Gross margin rose both sequentially and year-on-year, reflecting a more favourable product mix and the benefit of cost of sales improvements in the past year, including the resolution of certain royalty matters during the quarter.

Income before taxes for the quarter excluding restructuring was a profit of Euro 21 million, illustrating the positive impact of the cost reduction programme.

The transformation programme, which started in mid-2008, with the aim of reducing annual operating expenses by Euro 880 million is continuing with the full benefit expected during the second half of 2010. Since the start of the programme, Sony Ericsson has reduced its global workforce by approximately 3,150 people to reach a total of 8,450 by March 31, 2010. The total restructuring charges taken to date are Euro 342 million.

As of March 31, 2010, Sony Ericsson retained a net cash position of Euro 563 million.

During the first quarter of 2010, Sony Ericsson obtained additional external funding of Euro 150 million. The funding was guaranteed by the parent companies on a 50/50 basis.

Market share in unit base for the quarter decreased by one percentage point sequentially and is now estimated to be around 4%.

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