Sony Ericsson’s results in line with expectations

Gartner research has stated that Sony Ericsson’s results were in line with its expectations.

Units shipped in the quarter were 14.1 million, an increase of 2% quarter on quarter and a decrease of 45% year on year. Sales for the quarter were Euro 1,619 million, a sequential decrease of 4% and a year on year decrease of 42%. The sequential decline in Average Selling Price was due to product mix and continued challenging market conditions.

Gross margin improved sequentially but dropped year on year due to lower sales and foreign exchange fluctuations. The sequential improvement was seen in both percentage rate and volume, driven by cost savings actions and successful sales of the W995 Walkman phone.
Income before taxes for the quarter, excluding restructuring charges, was a loss of Euro 198 million compared to a loss of Euro 283 million from the previous quarter. The reduced loss was due to better gross margin, as well as reduced operating expenses.

With the new product line up selling in Q4, Gartner said it knew that the third quarter was going to be a challenge for the handset manufacturer.

Carolina Milanesi, research director for mobile devices, at Gartner, stated that the new products at Sony Ericsson – the Satio Aino and Yari – are a step in the right direction, but Sony Ericsson needs to make sure it will be in the channel in as many countries as possible in time for Christmas.

“With consumer confidence growing, Christmas sales this year will be better than last year and Sony Ericsson needs to be able to take advantage of that. Secondly, Sony Ericsson needs to add more products to its portfolio that bring the Satio key traits to a more mass market price point,” said Milanesi.

“QWERTY is also a form factor that is selling very well today and that Sony Ericsson has not addressed yet. Shame that it was one of the first vendors to address that with the Pseries, and now that the market is asking for this form factor, Sony Ericsson has no product available apart from the Experia line,” she added.

Said Dick Komiyama, outgoing President, Sony Ericsson: “Our business in the third quarter started to show the effects of our ongoing transformation programme. Having refreshed our brand we are now better positioned to support the launch of new products such as Aino and Satio in Q4 2009. We have cleared channel inventories, and have continued to realign internal resources and improve efficiency. We have also arranged external financing to strengthen the company’s financial position. Transforming the business for future growth and returning Sony Ericsson to profitability is the focus of the senior management team and will continue under the new leadership.”

As of 30 September 2009, Sony Ericsson had a net cash position of Euro 841 million.

Since the beginning of the quarter, facilities of Euro 455 million were signed to strengthen the balance sheet and improve liquidity. Euro 155 million were drawn by the end of September and Euro 100 million were drawn in the beginning of October. In addition, a two year committed back-up facility of Euro 200 million is available but has not been utilised. The parent companies have guaranteed Euro 350 million of these facilities on a 50/50 basis.

Programmes started since mid 2008 to reduce annual operating expenses by Euro 880 million are continuing, with the full benefit expected during the second half of 2010. The total restructuring charges for these programmes are estimated to be well within the previously announced Euro 500 million.

As of 15 October 2009; Sir Howard Stringer, Chairman, CEO and President of Sony Corporation and a member of the Sony Ericsson board, became Chairman of the Sony Ericsson board succeeding Carl-Henric Svanberg. At the same time, Bert Nordberg became President of Sony Ericsson succeeding Dick Komiyama, who remains as Executive Advisor until the end of 2009.

Sony Ericsson forecasts that the global handset market for 2009 will contract by approximately 10% from around 1,190 million units in 2008. Sony Ericsson estimates that its market share in units was about 5% in the third quarter.

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