Sony Ericsson reports third quarter results (official report)
Q3 highlights:
- Break even results, excluding restructuring charges, as challenging business conditions continued
- C902 Cyber-shot(TM) camera phone is hit model of the quarter
- First Xperia(TM) branded multimedia phone X1 began shipping
- Expansion of music service offering with announcement of
PlayNow(TM) plus
The consolidated financial summary for Sony Ericsson Mobile Communications AB (Sony Ericsson) for the third quarter ended September 30, 2008 is as follows:
Q3 2008 Q2 2008 Q3 2007 Number of units shipped (million) 25.7 24.4 25.9 Sales (Euro m.) 2,808 2,820 3,108 Gross margin (%) 22% 23% 31% Operating income (Euro m.) -33 -2 393 Operating margin (%) -1% -0% 13% Restructuring charges (Euro m.) 35 11 0 Operating income excl. restructuring 2 8 393 charges (Euro m.) Operating margin excl. restructuring 0% 0% 13% charges (%) Income before taxes (IBT) (Euro m.) -23 8 384 IBT excl. restructuring charges 12 19 384 (Euro m.) Net income (Euro m.) -25 6 267 Average selling price (Euro) 109 116 120
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.
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%.
“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.”
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® 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.
Sony Ericsson also announced a number of new phones in the quarter, including three new Walkman® phones, its first UMA handset (G705u) and the first models with integrated You Tube(TM) connectivity (W595, W902, G705). In addition, Sony Ericsson started a major marketing initiative to launch its first multimedia convergence phone under the new sub-brand; Xperia(TM), and started shipping the phone, the Xperia(TM) X1, at the end of the quarter.
As communicated previously, Sony Ericsson paid a second dividend to the parent companies totalling Euro 300 million (Euro 150 million each) in the quarter based on 2007 earnings, and at the end of September 2008 Sony Ericsson had net cash of Euro 1.4 billion.
Sony Ericsson forecasts that the global handset market for 2008 will grow at a rate of around 10% from more than 1.1 billion units in 2007, while the industry ASP will continue to decline. The majority of this growth is expected to be in emerging markets where lower priced phones dominate.
Cyber-shot(TM) and WALKMAN® are trademarks of Sony Corporation. The Liquid Identity logo, Xperia(TM) and the Xperia(TM) logo and PlayNow(TM) are trademarks or registered trademarks of Sony Ericsson Mobile Communications AB. Sony is a trademark or registered trademark of Sony Corporation. Ericsson is the trademark or registered trademark of Telefonaktiebolaget LM Ericsson. Other product and company names mentioned herein may be the trademarks of their respective owners. Any rights not expressly granted herein are reserved. Subject to change without prior notice.
EDITOR’S NOTES:
Financial statements and additional information:
Financial statements:
Consolidated income statement (2) Consolidated income statement - isolated quarters Consolidated balance sheet Consolidated statement of cash flows (2) Consolidated statement of cash flows - isolated quarters
Additional information:
Net sales by market area by quarter
- ENDS -
Sony Ericsson is a top, global industry player with sales of over 100 million phones in 2007. Diversity is one of the core strengths of the company, with operations in over 80 countries including manufacturing in China and R&D sites in China, Europe, India, Japan and North America. Sony Ericsson was established as a 50:50 joint venture by Sony and Ericsson in October 2001, with global corporate functions located in London. For more information about Sony Ericsson please visit www.sonyericsson.com
CONTACTS: Investors / Analysts Ericsson Investor Relations Gary Pinkham (Stockholm) +46 8 719 0858 Susanne Andersson (Stockholm) + 46 8 719 4631 Sony Investor Relations Shinji Tomita (London) +44 20 7426 8696 Gen Tsuchikawa (Tokyo) +81 3 6748 2180 Press / Media Sony Ericsson Global Communications and PR Aldo Liguori (London) +44 20 8762 5860 Merran Wrigley (London) +44 20 8762 5862 Simone Bresi-Ando (London) +44 20 8762 5863
This press release contains forward-looking statements that involve inherent risks and uncertainties. We have 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
EUR million 2008 2007 Change
Net sales 2,808 3,108 -10%
Cost of sales -2,192 -2,154 2%
Gross profit 616 954 -35%
Gross margin % 21.9% 30.7% -9%
Research and development expenses -337 -280 20%
Selling and administrative expenses -303 -280 8%
Operating expenses -640 -560 14%
Other operating income, net -8 -1 -586%
Operating income -33 393 -108%
Operating margin % -1.2% 12.7% -14%
Financial income 25 7 274%
Financial expenses -15 -16 -11%
Income after financial items -23 384 -106%
Taxes 6 -109 -106%
Minority interest -8 -8 1%
Net income -25 267 -109%
Number of units shipped (million) 25.7 25.9 -1%
ASP (EUR) 109 120 -9%
EUR million Jul-Sep
Restructuring charges 2008
Cost of sales 0
Research and development expenses 26
Sales and administrative expenses 3
Other operating income, net 6
Total 35
Sony Ericsson
CONSOLIDATED INCOME STATEMENT
Jan-Sep
EUR million 2008 2007 Change
Net sales 8,330 9,145 -9%
Cost of sales -6,274 -6,384 -2%
Gross profit 2,056 2,760 -26%
Gross margin % 24.7% 30.2% -6%
Research and development expenses -1,020 -824 24%
Selling and administrative expenses -883 -885 0%
Operating expenses -1,903 -1,709 11%
Other operating income, net -3 2 -239%
Operating income 149 1,055 -86%
Operating margin % 1.8% 11.5% -10%
Financial income 73 43 72%
Financial expenses -44 -25 76%
Income after financial items 179 1,073 -83%
Taxes -50 -306 -84%
Minority interest -14 -27 -47%
Net income 114 741 -85%
Number of units shipped (million) 72.5 72.6 0%
ASP (EUR) 115 126 -9%
EUR million Jan-Sep
Restructuring charges 2008
Cost of sales 8
Research and development expenses 28
Sales and administrative expenses 4
Other operating income, net 6
Total 46
Sony Ericsson
CONSOLIDATED INCOME STATEMENT - ISOLATED QUARTERS
2008 2007
EUR million Q3 Q2 Q1 Q4 Q3 Q2 Q1
Net sales 2,808 2,820 2,702 3,771 3,108 3,112 2,925
Cost of sales -2,192 -2,168 -1,914 -2,573 -2,154 -2,192 -2,039
Gross profit 616 653 788 1,198 954 921 886
Gross margin % 21.9% 23.1% 29.2% 31.8% 30.7% 29.6% 30.3%
Research and
development
expenses -337 -344 -339 -349 -280 -283 -261
Selling and
administrative
expenses -303 -310 -270 -375 -280 -321 -284
Operating expenses -640 -653 -610 -724 -560 -604 -545
Other operating
income, net -8 -2 6 15 -1 -2 5
Operating income -33 -2 184 489 393 315 346
Operating margin % -1.2% -0.1% 6.8% 13.0% 12.7% 10.1% 11.8%
Financial income 25 25 24 19 7 18 18
Financial expenses -15 -14 -15 -7 -16 -6 -2
Income after
financial items -23 8 193 501 384 327 362
Taxes 6 0 -57 -118 -109 -97 -100
Minority interest -8 -3 -3 -10 -8 -10 -9
Net income -25 6 133 373 267 220 254
Number of units
shipped (million) 25.7 24.4 22.3 30.8 25.9 24.9 21.8
ASP (EUR) 109 116 121 123 120 125 134
EUR million 2008
Restructuring charges Q3 Q2
Cost of sales 0 8
Research and development expenses 26 2
Sales and administrative expenses 3 1
Other operating income, net 6 0
Total 35 11
Sony Ericsson
CONSOLIDATED BALANCE SHEET
Sep 30 Jun 30 Dec 31 Sep 30
EUR million 2008 2008 2007 2007
ASSETS
Total fixed and financial
assets 649 590 572 511
Current assets
Inventories 717 538 437 620
Accounts receivables 1,815 1,905 1,870 1,803
Other assets 527 511 345 544
Other short-term cash
investments 918 966 1,431 954
Cash and bank 555 624 724 804
Total current assets 4,532 4,544 4,808 4,725
Total assets 5,180 5,134 5,380 5,236
SHAREHOLDERS' EQUITY AND
LIABILITIES
Shareholders' equity 1,429 1,684 2,026 1,663
Minority interest 50 35 64 70
Total equity 1,480 1,719 2,090 1,733
Total long-term liabilities 39 25 26 22
Accounts payable 1,453 1,436 1,263 1,602
Other current liabilities 2,208 1,954 2,001 1,879
Total current liabilities 3,661 3,390 3,264 3,481
Total shareholders' equity and
liabilities 5,180 5,134 5,380 5,236
Net cash* 1,374 1,591 2,155 1,758
* Net cash is defined as cash and bank plus short-term cash
investments less interest bearing liabilities.
Sony Ericsson
CONSOLIDATED STATEMENT OF CASH FLOWS
Jul-Sep
EUR million 2008 2007
OPERATIONS
Net income -25 267
Adjustments to reconcile net income to cash 39 32
15 299
Changes in operating net assets 88 88
Cash flow from operating activities 102 387
INVESTMENTS
Investing activities -55 -53
Cash flow from investing activities -55 -53
FINANCING
Financing activities - 238 - 300
Cash flow from financing activities -238 -300
Net change in cash -191 34
Cash, beginning of period 1,591 1,730
Translation difference in Cash 74 -6
Cash, end of period 1,473 1,758
Sony Ericsson
CONSOLIDATED STATEMENT OF CASH FLOWS
Jan-Sep
EUR million 2008 2007
OPERATIONS
Net income 114 741
Adjustments to reconcile net income to cash 109 90
223 831
Changes in operating net assets -155 -349
Cash flow from operating activities 68 482
INVESTMENTS
Investing activities -105 -138
Cash flow from investing activities -105 -138
FINANCING
Financing activities - 708 -849
Cash flow from financing activities -708 -849
Net change in cash -745 -504
Cash, beginning of period 2,155 2,273
Translation difference in Cash 62 -11
Cash, end of period 1,473 1,758
Sony Ericsson
CONSOLIDATED STATEMENT OF CASH FLOWS - ISOLATED QUARTERS
2008 2007
EUR million Jul-Sep Apr-Jun Jan-Mar Oct-Dec Jul-Sep Apr-Jun Jan-Mar
OPERATIONS
Net income -25 6 133 373 267 220 254
Adjustments
to reconcile
net income to
cash 39 40 31 17 32 30 28
15 46 164 390 299 250 282
Changes in
operating net
assets 88 -142 -101 44 88 16 -454
Cash flow
from
operating
activities 102 -96 64 434 387 266 -172
INVESTMENTS
Investing
activities -55 -29 -22 -27 -53 -31 -53
Cash flow
from
investing
activities -55 -29 -22 -27 -53 -31 -53
FINANCING
Financing
activities - 238 - 8 - 462 0 - 300 - 548 - 1
Cash flow
from
financing
activities -238 -8 -462 0 -300 -548 -1
Net change in
cash -191 -133 -421 408 34 -312 -226
Cash,
beginning of
period 1,591 1,711 2,155 1,758 1,730 2,045 2,273
Translation
difference in
Cash 74 13 -24 -10 -6 -3 -2
Cash, end of
period 1,473 1,591 1,711 2,155 1,758 1,730 2,045
Sony Ericsson
NET SALES BY MARKET AREA BY QUARTER
EUR million
2008 2007
Isolated quarters Q3 Q2 Q1 Q4 Q3 Q2 Q1
Europe, Middle East &
Africa * 1,427 1,386 1,494 2,251 1,715 1,729 1,598
Americas 703 740 486 636 573 499 365
Asia 678 694 722 884 820 885 961
Total 2,808 2,820 2,702 3,771 3,108 3,112 2,925
* of which Western
Europe 947 900 979 1,569 1,103 1,102 1,078
2008 2007
Sequential change (%) Q3 Q2 Q1 Q4 Q3 Q2 Q1
Europe, Middle East &
Africa * 3% -7% -34% 31% -1% 8% -26%
Americas -5% 52% -24% 11% 15% 37% -34%
Asia -2% -4% -18% 8% -7% -8% -11%
Total 0% 4% -28% 21% 0% 6% -23%
* of which Western
Europe 5% -8% -38% 42% 0% 2% -27%
2008 2007
Year over year change
(%) Q3 Q2 Q1 Q4 Q3 Q2 Q1
Europe, Middle East &
Africa * -17% -20% -7% 5% 7% 59% 55%
Americas 23% 48% 33% 15% 37% 52% 46%
Asia -17% -21% -25% -18% -8% 4% 35%
Total -10% -9% -8% 0% 7% 37% 47%
* of which Western
Europe -14% -18% -9% 6% -1% 47% 60%
2008 2007
Year to date 0809 0806 0803 0712 0709 0706 0703
Europe, Middle East &
Africa * 4,324 2,879 1,494 7,293 5,042 3,328 1,598
Americas 1,930 1,226 486 2,072 1,436 864 365
Asia 2,076 1,416 722 3,550 2,666 1,846 961
Total 8,330 5,522 2,702 12,916 9,145 6,037 2,925
* of which Western
Europe 2,826 1,879 979 4,852 3,283 2,179 1,078
2008 2007
YTD year over year
change (%) 0809 0806 0803 0712 0709 0706 0703
Europe, Middle East &
Africa * -14% -13% -7% 24% 36% 57% 55%
Americas 34% 42% 33% 34% 44% 49% 46%
Asia -22% -23% -25% 0% 8% 18% 35%
Total -9% -9% -8% 18% 27% 42% 47%
* of which Western
Europe -14% -14% -9% 21% 29% 53% 60%
The full report (including tables) can be downloaded from the following link: http://hugin.info/1061/R/1260503/275845.pdf
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