Sony Ericsson reports first quarter 2011 results

April 19, 2011 Highlights: * Shift to Android-based smartphone portfolio drives profitability * Smartphone share of total sales more than doubled year-on-year * Xperia(TM) arc, Xperia(TM) PLAY and Xperia(TM) 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) 10.5 11.2 8.1 Average selling price (Euro) 134 136 141 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 23 43 19 m.)    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(TM) arc and Xperia(TM) 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(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 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(TM) 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.sonyericsson.com/press. - ENDS - 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 Cathy Davies (London) +44 208 762 5879 Holly Rossetti (London) + 44 208 762 5851 Gustaf Brusewitz (London) +44 208 762 5805 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   Jan-Mar ------------------------------ EUR million 2010 2011 Change --------------------------------------------------------------------- Net sales 1,405 1,145 -19% Cost of sales -975 -763 -22% --------------------- Gross profit 429 382 -11% Gross margin % 31% 33% 2% Research and development expenses -185 -173 -6% Selling and administrative expenses -238 -199 -16% --------------------- Operating expenses* -423 -372 -12% Other operating income, net 14 10 -29% --------------------- Operating income 20 19 -5% Operating margin % 1% 2% 1% Financial income 7 3 -57% Financial expenses -9 -8 -11% --------------------- Income before taxes 18 15 -17% Taxes 6 -5 Minority interest -3 1 --------------------- Net income 21 11 -48% ( ) ( ) ( ) ( ) ------------------------------------------------------------ Number of units shipped (million) 10.5 8.1 -23% ASP (EUR) 134 141 5% ------------------------------------------------------------ EUR million Jan-Mar Jan-Mar ------------------------------------------------------------ Restructuring charges 2010 2011 ------------------------------------------------------------   Cost of sales 2 -   Research and development expenses -2 -   Selling and administrative expenses -3 - ------------------------------------------------------------ Total -3 - * Operating expenses in 2010 have been restated to reflect certain organizational changes. Sony Ericsson CONSOLIDATED INCOME STATEMENT - ISOLATED QUARTERS   2010   2011 ---------------------------- ------- EUR million Q1 Q2 Q3 Q4   Q1 ----------------------------------------------------------------- ------- Net sales 1,405 1,757 1,603 1,528   1,145 Cost of sales -975 -1,266 -1,130 -1,069   -763 ---------------------------- ------- Gross profit 429 492 473 459   382 Gross margin % 31% 28% 30% 30%   33% Research and development expenses -185 -191 -179 -191   -173 Selling and administrative expenses -238 -272 -241 -236   -199 ---------------------------- ------- Operating expenses* -423 -463 -420 -427   -372 Other operating income, net 14 7 10 7   10 ---------------------------- ------- Operating income 20 36 63 39   19 Operating margin % 1% 2% 4% 3%   2% Financial income 7 2 7 2   3 Financial expenses -9 -7 -8 -6   -8 ---------------------------- ------- Income before taxes 18 31 62 35   15 Taxes 6 -16 -12 -27   -5 Minority interest -3 -4 -2 0   1 ---------------------------- ------- Net income 21 12 49 8   11 ----------------------------------------------------------------- --------- Number of units shipped (million) 10.5 11.0 10.4 11.2   8.1 ASP (EUR) 134 160 154 136   141 ----------------------------------------------------------------- --------- EUR million 2010   2011 ----------------------------------------------------------------- ------- Restructuring charges Q1 Q2 Q3 Q4   Q1 ----------------------------------------------------------------- -------   Cost of sales 2 -33 -3 2   -   Research and development expenses -2 -1 5 0   -   Selling and administrative expenses -3 2 -6 -5   - ----------------------------------------------------------------- ------- Total -3 -32 -4 -3   - * Operating expenses in 2010 have been restated to reflect certain organizational changes. Sony Ericsson CONSOLIDATED BALANCE SHEET     Mar 31   Dec 31   Mar 31 EUR million   2010   2010   2011 --------------------------------------------------------------------- ASSETS Total fixed and financial assets   791   803   791 Current assets Inventories   384   460   510 Accounts receivable   849   836   755 Other assets   369   295   304 Other short-term cash investments   537   276   417 Cash and bank   443   329   182 -------- -------- ------- Total current assets   2,582   2,196   2,168 --------------------------------------------------------------------- Total assets   3,373   2,999   2,959 --------------------------------------------------------------------- SHAREHOLDERS' EQUITY AND LIABILITIES Shareholders' equity   438   532   496 Minority interest   54   42   38 -------- -------- ------- Total equity   492   574   534 Borrowing, Non Current   100   100   0 Other long-term liabilities   37   32   30 -------- -------- ------- Total long-term liabilities   137   132   30 Accounts payable   829   769   701 Borrowing, Current   316   130   604 Other current liabilities   1,599   1,394   1,090 -------- -------- ------- Total current liabilities   2,744   2,293   2,394 --------------------------------------------------------------------- Total shareholders' equity and liabilities   3,373   2,999   2,959 --------------------------------------------------------------------- Net cash*   563   375   -5 * Net cash is defined as cash and bank plus short-term cash investments less interest-bearing liabilities. Sony Ericsson CONSOLIDATED STATEMENT OF CASH FLOWS   Jan-Mar -------------- EUR million 2010 2011 ----------------------------------------------------------- OPERATING Net income 21 11 Adjustments to reconcile net income to cash -44 -137 --------------   -23 -127 Changes in operating net assets -72 -226 -------------- Cash flow from operating activities -94 -353 INVESTING Investing activities 27 -14 -------------- Cash flow from investing activities 27 -14 FINANCING Financing activities  150  375 -------------- Cash flow from financing activities 150 375 Net change in cash 83 8 Cash, beginning of period 878 605 Translation difference in Cash 19 -14 -------------- Cash, end of period 980 599 Sony Ericsson CONSOLIDATED STATEMENT OF CASH FLOWS - ISOLATED QUARTERS   2010   2011 ------------------------ ----- EUR million Q1 Q2 Q3 Q4   Q1 ------------------------------------------------------------------- ----- OPERATING Net income 21 12 49 8   11 Adjustments to reconcile net income to cash -44 4 -66 -50   -137 ------------------------ -----   -23 16 -17 -42   -127 Changes in operating net assets -72 13 -38 -86   -226 ------------------------ ----- Cash flow from operating activities -94 29 -54 -128   -353 INVESTING Investing activities 27 -15 2 -18   -14 ------------------------ ----- Cash flow from investing activities 27 -15 2 -18   -14 FINANCING Financing activities  150  0 - 32 - 178    375 ------------------------ ----- Cash flow from financing activities 150 0 -32 -178   375 Net change in cash 83 15 -85 -324   8 Cash, beginning of period 878 980 1,039 921   605 Translation difference in Cash 19 45 -33 7   -14 ------------------------ ----- Cash, end of period 980 1,039 921 605   599 Sony Ericsson NET SALES BY MARKET AREA BY QUARTER EUR million   2010   2011 --------------------------------- -------- Isolated quarters   Q1 Q2 Q3 Q4   Q1 -------------------------------------------------------------------------------- Europe, Middle East & Africa *   711 876 837 795   485 Americas   201 223 222 205   151 Asia    493 659 544 528   509 -------------------------------------------------------------------------------- Total   1,405 1,757 1,603 1,528   1,145 -------------------------------------------------------------------------------- * of which Western Europe   525 668 632 569   307     2010   2011 --------------------------------- -------- Sequential change (%)   Q1 Q2 Q3 Q4   Q1 -------------------------------------------------------------------------------- Europe, Middle East & Africa *   -26% 23% -4% -5%   -39% Americas   -9% 11% 0% -8%   -26% Asia    -12% 34% -17% -3%   -4% -------------------------------------------------------------------------------- Total   -20% 25% -9% -5%   -25% -------------------------------------------------------------------------------- * of which Western Europe   -23% 27% -5% -10%   -46%     2010   2011 --------------------------------- -------- Year over year change (%)   Q1 Q2 Q3 Q4   Q1 -------------------------------------------------------------------------------- Europe, Middle East & Africa *   -27% -6% -4% -18%   -32% Americas   1% 14% -4% -8%   -25% Asia    -12% 17% 6% -6%   3% -------------------------------------------------------------------------------- Total   -19% 4% -1% -13%   -19% -------------------------------------------------------------------------------- * of which Western Europe   -27% -1% -1% -16%   -42%     2010   2011 --------------------------------- -------- Year to date   1003 1006 1009 1012   1103 -------------------------------------------------------------------------------- Europe, Middle East & Africa *   711 1,587 2,424 3,219   485 Americas   201 424 646 851   151 Asia    493 1,152 1,695 2,224   509 -------------------------------------------------------------------------------- Total   1,405 3,162 4,765 6,294   1,145 -------------------------------------------------------------------------------- * of which Western Europe   525 1,193 1,825 2,393   307     2010   2011 --------------------------------- -------- YTD year over year change (%)   1003 1006 1009 1012   1103 -------------------------------------------------------------------------------- Europe, Middle East & Africa *   -27% -17% -13% -14%   -32% Americas   1% 7% 3% 0%   -25% Asia    -12% 3% 4% 1%   3% -------------------------------------------------------------------------------- Total   -19% -8% -5% -7%   -19% -------------------------------------------------------------------------------- * of which Western Europe   -27% -15% -10% -12%   -42% The full report (including tables) can be downloaded from the following link: First quarter report 2011: http://hugin.info/133603/R/1507525/442427.pdf This announcement is distributed by Thomson Reuters on behalf of Thomson Reuters clients. The owner of this announcement warrants that: (i) the releases contained herein are protected by copyright and other applicable laws; and (ii) they are solely responsible for the content, accuracy and originality of the information contained therein. Source: Sony Ericsson via Thomson Reuters ONE [HUG#1507525]