Sony Ericsson reports second quarter results
18 July 2008Q2 Highlights:
- Break even results amid challenging market conditions and increased competition
- Announcement of Open Mobile Software platform and Symbian Foundation
- R&D investment continues
- Alignment of operations to help restore profitable growth
London, UK - The consolidated financial summary for Sony Ericsson Mobile Communications AB (Sony Ericsson) for the second quarter ended June 30, 2008 is as follows:
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| Q2 2007 | Q1 2008 | Q2 2008 |
| Number of units shipped (million) | 24.9 | 22.3 | 24.4 |
| Sales (Euro m.) | 3,112 | 2,702 | 2,820 |
| Gross margin (%) | 29.6% | 29.2% | 23.1% |
| Operating income (Euro m.) | 315 | 184 | -2 |
| Operating margin (%) | 10.1% | 6.8% | -0.1% |
| Income before taxes (Euro m.) | 327 | 193 | 8 |
| Net income (Euro m.) | 220 | 133 | 6 |
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| Average selling price (Euro) | 125 | 121 | 116 |
Units shipped in the quarter were 24.4 million, in line with our June 27, 2008 interim announcement of 24 million units. Sales for the quarter were Euro 2,820 million, a decrease of 9% compared to the second quarter of 2007 due to unfavourable exchange rate fluctuation, continued slowing market growth in mid- to high-end phones and increased competition. Gross margin also decreased compared with a year ago reflecting a less favourable product mix, with particular impact in Europe, and increased price competition in general. Income before taxes for the quarter decreased compared to the second quarter of 2007 for the same reasons, as well as due to higher R&D investments as a percentage of sales.
Average selling price (ASP) for Sony Ericsson decreased both sequentially and year-on-year due to the impact of a greater proportion of lower priced phones in the product portfolio, as well as increased price competition in the market for mid- to high-end phones. Market share for the second quarter is estimated to be around 8%.
During the second quarter Sony Ericsson announced seven new phones, including its first 8 Megapixel Cyber-shot™ model, the C905. In addition the company started shipping 12 new phones, including a number of mid- to high-end Cyber-shot™ and Walkman™ models toward the end of the quarter.
“We are aligning our operations and resources worldwide to meet an increasingly competitive business environment and to help restore our capability for profitable growth. The measures we are taking are aimed at becoming a faster, more agile and more cost efficient organisation that can continue to create innovative products that excite consumers,” said Dick Komiyama, President, Sony Ericsson. “Our target is to achieve a reduction in operating expenses of Euro 300 million annually, with the full effect expected to appear within a year. We estimate that our restructuring charges will be of the same magnitude as our reduction in operating expenses, and we will incur such charges as our measures are implemented.”
Sony Ericsson joined leading phone manufacturers, operators and vendors in announcing its support for the establishment of the Symbian Foundation, an initiative that will enable all members of the foundation to use the Symbian operating software platform, royalty-free. The Symbian Foundation is planned to be operational by the end of 2008.
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, with continued decline in industry ASP. The majority of this growth is expected to be in emerging markets where lower priced phones dominate.
Challenging market conditions are expected to prevail for Sony Ericsson for at least the rest of 2008, and in particular for the third quarter.
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