Sony Ericsson breaks even in Q3 financials, focusing on smartphones only in 2012

14 October 2011

Highlights:

Income before taxes was Euro 31 million

33 percent increase in sales quarter-on-quarter

Smartphones account for more than 80 percent of total sales

The consolidated financial summary for Sony Ericsson Mobile Communications AB (Sony Ericsson) for the third quarter ended September 30, 2011 is as follows:

 Q3 2010Q2 2011Q3 2011

Number of units shipped (million)

Average selling price (Euro)10.4

1547.6

1569.5

166

Sales Euro m.)1,6031,1931,586

Gross margin(%)30%31% 27%

Operating income (Euro m.)63-3738

Operating margin(%)4%-3%2%

Restructuring charges (Euro m.)4  --

Operating income excl. restructuring charges (Euro m.)67-3738

Operating margin excl. restructuring charges (%)4%   -3%2%

Income before taxes (IBT)(Euro m.)62-4231

IBT excl. restructuring charges (Euro m.)66-4231

Net income (Euro m.)49-500

Bert Nordberg, President and CEO of Sony Ericsson commented, “We delivered a solid 73 million Euro improvement in income before taxes as we rebounded from the previous quarter with a 33 percent increase in sales. Android-based Xperia™ smartphone sales now account for more than 80 percent of sales and we have shipped 22 million Xperia smartphones to date.  We will continue to invest in the smartphone market, shifting the entire portfolio to smartphones during 2012.”  

Units shipped during the quarter were 9.5 million, a 9% decrease year-on-year due to a decline in feature phone shipments, partially offset by an increase in smartphone shipments. The 25% quarter-on-quarter increase was due to the higher volume of smartphones shipped.

Average selling price (ASP) for the quarter was Euro 166, up 8% year-on-year and 6% sequentially. The year-on-year increase was due to the shift to smartphones and geographic mix despite a negative effect from foreign exchange rates. The sequential increase was due to product and geographic mix.

Sales for the quarter were approximately Euro 1.6 billion and essentially flat year-on-year.  

The gross margin percentage for the quarter was 27%, a decrease of 3 percentage points year-on-year and 4 percentage points from the previous quarter.  The year-on-year decrease in margin is attributed to product and geographic mix.  The sequential decrease in margin was due to inventory-related adjustments and product and geographic mix.  

Income before taxes for the quarter was Euro 31 million, compared to income before taxes of Euro 62 million for the same quarter in the previous year.  Loss before taxes for the previous quarter was Euro 42 million. The sequential improvement was reflective of higher sales and lower operating expenses, while the year-on-year decline was due to lower gross margin percentage offset by lower operating expenses.

Net income during the quarter improved by Euro 50 million sequentially, while net income decreased by Euro 49 million year-on-year. Income taxes recorded during the quarter reflect the distribution of profits and losses between various jurisdictions and tax adjustments. Minority interest reflects higher net income at a majority-owned joint venture company. 

Cash flow from operating activities during the quarter was Euro 53 million. External borrowings of Euro 51 million were repaid during the quarter, resulting in total borrowings of Euro 718 million at the end of the quarter. Total cash balances at September 30, 2011 amounted to Euro 466 million.  

Sony Ericsson estimates that its share of the global Android-based smartphone market during the quarter was approximately 12% in volume and 11% in value.

Sony Ericsson maintains its forecast for modest industry 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.