Sony Ericsson reports third quarter 2011 results

TOKYO--(BUSINESS WIRE)--

OCTOBER 14, 2011

Sony Ericsson reports third quarter 2011 results

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 2010		Q2 2011		Q3 2011
Number of units shipped (million) Average selling price (Euro)	10.4 154		7.6 156		9.5 166
Sales (Euro m.)	1,603		1,193		1,586
Gross margin (%)	30	%	31	%	27	%
Operating income (Euro m.)	63		-37		38
Operating margin (%)	4	%	-3	%	2	%
Restructuring charges (Euro m.)	4		-		-
Operating income excl. restructuring charges (Euro m.)	67		-37		38
Operating margin excl. restructuring charges (%)	4	%	-3	%	2	%
Income before taxes (IBT) (Euro m.)	62		-42		31
IBT excl. restructuring charges (Euro m.)	66		-42		31
Net income (Euro m.)	49		-50		0

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.

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 operations 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
Stefan Jelvin (Stockholm) [phone]

Sony investor relations
Yoshinori Hashitani (Tokyo) [phone]
Yas Hasegawa (London) [phone]

Press / Media
Sony Ericsson global communications and PR
Cathy Davies (London) [phone]
Holly Rossetti (London) + 44 208 762 5851
Gustaf Brusewitz (London) [phone]

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

	Jul-Sep						Jan-Sep
EUR million	2010		2011		Change		2010		2011		Change
Net sales	1,603		1,586		-1	%	4,765		3,924		-18	%
Cost of sales	-1,130		-1,159		3	%	-3,371		-2,750		-18	%
Gross profit	473		427		-10	%	1,394		1,174		-16	%
Gross margin %	30	%	27	%	-3	pp	29	%	30	%	1	pp
Research and development expenses	-179		-190		6	%	-555		-547		-1	%
Selling and administrative expenses	-241		-207		-14	%	-750		-630		-16	%
Operating expenses	-420		-397		-5	%	-1,305		-1,177		-10	%
Other operating income, net	10		8		-20	%	31		24		-23	%
Operating income	63		38		-40	%	120		21		-83	%
Operating margin %	4	%	2	%	-2	pp	3	%	1	%	-2	pp
Financial income	7		7		0	%	16		15		-6	%
Financial expenses	-8		-14		75	%	-24		-32		33	%
Income before taxes	62		31		-50	%	112		4		-96	%
Taxes	-12		-17		42	%	-21		-26		24	%
Minority interest	-2		-14		600	%	-8		-18		125	%
Net income	49		0		-100	%	82		-40
Number of units shipped (million)	10.4		9.5		-9	%	31.9		25.3		-21	%
ASP (EUR)	154		166		8	%	150		155		3	%
EUR million	Jul-Sep						Jan-Sep
Restructuring charges	2010		2011				2010		2011
Cost of sales	-3		-				-34		-
Research and development expenses	5		-				2		-
Selling and administrative expenses	-6		-				-7		-
Total	-4		-				-39		-

* 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		Q2		Q3
Net sales	1,405		1,757		1,603		1,528		1,145		1,193		1,586
Cost of sales	-975		-1,266		-1,130		-1,069		-763		-828		-1,159
Gross profit	429		492		473		459		382		365		427
Gross margin %	31	%	28	%	30	%	30	%	33	%	31	%	27	%
Research and development expenses	-185		-191		-179		-191		-173		-184		-190
Selling and administrative expenses	-238		-272		-241		-236		-199		-224		-207
Operating expenses	-423		-463		-420		-427		-372		-408		-397
Other operating income, net	14		7		10		7		10		6		8
Operating income	20		36		63		39		19		-37		38
Operating margin %	1	%	2	%	4	%	3	%	2	%	-3	%	2	%
Financial income	7		2		7		2		3		5		7
Financial expenses	-9		-7		-8		-6		-8		-10		-14
Income before taxes	18		31		62		35		15		-42		31
Taxes	6		-16		-12		-27		-5		-3		-17
Minority interest	-3		-4		-2		0		1		-5		-14
Net income	21		12		49		8		11		-50		0
Number of units shipped (million)	10.5		11.0		10.4		11.2		8.1		7.6		9.5
ASP (EUR)	134		160		154		136		141		156		166
EUR million	2010								2011
Restructuring charges	Q1		Q2		Q3		Q4		Q1		Q2		Q3
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

	Sep 30	Dec 31	Jun 30	Sep 30
EUR million	2010	2010	2011	2011
ASSETS
Total fixed and financial assets	813	803	819	890
Current assets
Inventories	457	460	570	656
Accounts receivable	986	836	872	1,090
Other assets	328	295	330	408
Other short-term cash investments	440	276	329	301
Cash and bank	482	329	188	165
Total current assets	2,692	2,196	2,289	2,620
Total assets	3,505	2,999	3,108	3,510
SHAREHOLDERS' EQUITY AND LIABILITIES
Shareholders' equity	480	532	451	507
Minority interest	62	42	43	60
Total equity	541	574	494	567
Borrowing, Non Current	100	100	0	0
Other long-term liabilities	30	32	31	40
Total long-term liabilities	130	132	31	40
Accounts payable	922	769	716	1,050
Borrowing, Current	284	130	769	718
Other current liabilities	1,628	1,394	1,098	1,135
Total current liabilities	2,834	2,293	2,583	2,903
Total shareholders' equity and liabilities	3,505	2,999	3,108	3,510
Net cash*	538	375	-252	-252

* Net cash is defined as cash and bank deposit plus short-term cash investments less interest-bearing liabilities.

Sony Ericsson
CONSOLIDATED STATEMENT OF CASH FLOWS

	Jul-Sep		Jan-Sep
EUR million	2010	2011	2010	2011
OPERATING
Net income	49	0	82	-40
Adjustments to reconcile net income to cash	-66	27	-105	-139
	-17	27	-23	-179
Changes in operating net assets	-38	26	-96	-345
Cash flow from operating activities	-54	53	-119	-524
INVESTING
Investing activities	2	-58	14	-94
Cash flow from investing activities	2	-58	14	-94
FINANCING
Financing activities	-32	-56	118	485
Cash flow from financing activities	-32	-56	118	485
Net change in cash	-85	-61	12	-133
Cash, beginning of period	1,039	516	878	605
Translation difference in Cash	-33	11	31	-6
Cash, end of period	921	466	921	466

Sony Ericsson
CONSOLIDATED STATEMENT OF CASH FLOWS - ISOLATED QUARTERS

	2010				2011
EUR million	Q1	Q2	Q3	Q4	Q1	Q2	Q3
OPERATING
Net income	21	12	49	8	11	-50	0
Adjustments to reconcile net income to cash	-44	4	-66	-50	-137	-29	27
	-23	16	-17	-42	-127	-79	27
Changes in operating net assets	-72	13	-38	-86	-226	-145	26
Cash flow from operating activities	-94	29	-54	-128	-353	-224	53
INVESTING
Investing activities	27	-15	2	-18	-14	-21	-58
Cash flow from investing activities	27	-15	2	-18	-14	-21	-58
FINANCING
Financing activities	150	0	-32	-178	375	165	-56
Cash flow from financing activities	150	0	-32	-178	375	165	-56
Net change in cash	83	15	-85	-324	8	-80	-61
Cash, beginning of period	878	980	1,039	921	605	599	516
Translation difference in Cash	19	45	-33	7	-14	-3	11
Cash, end of period	980	1,039	921	605	599	516	466

Sony Ericsson
NET SALES BY MARKET AREA BY QUARTER

EUR million	2010								2011
Isolated quarters	Q1		Q2		Q3		Q4		Q1		Q2		Q3
Europe, Middle East & Africa *	711		876		837		795		485		435		480
Americas	201		223		222		205		151		193		121
Asia	493		659		544		528		509		565		985
Total	1,405		1,757		1,603		1,528		1,145		1,193		1,586
* of which Western Europe	525		668		632		569		307		323		313
	2010								2011
Sequential change (%)	Q1		Q2		Q3		Q4		Q1		Q2		Q3
Europe, Middle East & Africa *	-26	%	23	%	-4	%	-5	%	-39	%	-10	%	10	%
Americas	-9	%	11	%	0	%	-8	%	-26	%	28	%	-37	%
Asia	-12	%	34	%	-17	%	-3	%	-4	%	11	%	74	%
Total	-20	%	25	%	-9	%	-5	%	-25	%	4	%	33	%
* of which Western Europe	-23	%	27	%	-5	%	-10	%	-46	%	5	%	-3	%
	2010								2011
Year over year change (%)	Q1		Q2		Q3		Q4		Q1		Q2		Q3
Europe, Middle East & Africa *	-27	%	-6	%	-4	%	-18	%	-32	%	-50	%	-43	%
Americas	1	%	14	%	-4	%	-8	%	-25	%	-13	%	-45	%
Asia	-12	%	17	%	6	%	-6	%	3	%	-14	%	81	%
Total	-19	%	4	%	-1	%	-13	%	-19	%	-32	%	-1	%
* of which Western Europe	-27	%	-1	%	-1	%	-16	%	-42	%	-52	%	-50	%
	2010								2011
Year to date	1003		1006		1009		1012		1103		1106		1109
Europe, Middle East & Africa *	711		1,587		2,424		3,219		485		919		1,399
Americas	201		424		646		851		151		345		466
Asia	493		1,152		1,695		2,224		509		1,075		2,060
Total	1,405		3,162		4,765		6,294		1,145		2,339		3,925
* of which Western Europe	525		1,193		1,825		2,393		307		630		943
	2010								2011
YTD year over year change (%)	1003		1006		1009		1012		1103		1106		1109
Europe, Middle East & Africa *	-27	%	-17	%	-13	%	-14	%	-32	%	-42	%	-42	%
Americas	1	%	7	%	3	%	0	%	-25	%	-19	%	-28	%
Asia	-12	%	3	%	4	%	1	%	3	%	-7	%	22	%
Total	-19	%	-8	%	-5	%	-7	%	-19	%	-26	%	-18	%
* of which Western Europe	-27	%	-15	%	-10	%	-12	%	-42	%	-47	%	-48	%

Category Code: QRT

Sequence Number: 294260

Time of Receipt (offset from UTC): 20111013T115326+0100