Sony Ericsson sees small profit in Q4; shipments decline

Things have been rough for Sony Ericsson over the past couple of years. Intriguing new gear is on the way from this once-great Swedish joint venture, with a few sexy smartphones like the Xperia arc in the pipeline and the highly anticipated PlayStation Phone, the Xperia Play, finally about to become a reality. Unfortunately, however, none of the company’s forthcoming products could possibly have an impact on Sony Ericsson’s numbers in the fourth quarter of 2010. The company did manage to eek a pre-tax profit of €39 million, up significantly from the €181 million loss it reported the year prior. Profit was down €24 million compared to the third quarter of this year however, which is rough news for the holiday quarter. Shipments were down 23% year-over-year, dropping from 14.6 million in the fourth quarter of 2009 to 11.2 million in the final quarter of 2010. Full year shipments were down by almost a quarter compared to 2009, dropping from 57.1 million units to 43.1 million. On the bright side, Sony Ericsson has now reported four straight quarters in the black, and total shipments of its Android-powered Xperia line now sit at 9 million globally — not too shabby. Hit the jump for Sony Ericsson’s full press release.

Sony Ericsson reports fourth quarter and full year 2010 results

20 January 2011

Highlights:

  • Four consecutive quarters of profitability during 2010
  • Improvement of Euro 1.1 billion of income before taxes, excluding restructuring charges, for the full year
  • Over 9 million Android-based Xperia™ phones shipped since launch

The consolidated financial summary for Sony Ericsson Mobile Communications AB (Sony Ericsson) for the fourth quarter and full year ended December 31, 2010 is as follows:

Q4 2009 Q3 2010 Q4 2010 FY 2009 FY 2010
Number of units shipped (million) 14.6 10.4 11.2 57.1 43.1
Sales (Euro m.) 1,750 1,603 1,528 6,788 6,294
Gross margin (%) 23% 30% 30% 15% 29%
Operating income (Euro m.) -181 63 39 -1,018 159
Operating margin (%) -10% 4% 3% -15% 3%
Restructuring charges (Euro m.) -150 -4 -3 -164 -42
Operating income excl. restructuring charges (Euro m.) -32 67 43 -854 202
Operating margin excl. restructuring charges (%) -2% 4% 3% -13% 3%
Income before taxes (IBT) (Euro m.) -190 62 35 -1,043 147
IBT excl. restructuring charges (Euro m.) -40 66 39 -878 189
Net income (Euro m.) -167 49 8 -836 90
Average selling price (Euro) 120 154 136 119 146

Bert Nordberg, President & CEO of Sony Ericsson commented, “2010 was a turnaround year for Sony Ericsson. Our four consecutive quarters of profit reflect the success of our shift towards an Android-based smartphone portfolio. We will celebrate the 10th anniversary of the creation of Sony Ericsson in 2011, and as shown by the recently announced Xperia™ arc, we will continue to focus on delivering the most entertaining smartphones worldwide.”

Income before taxes, excluding restructuring charges, was Euro 189 million for the full year 2010, compared with a loss of Euro 878 million in 2009. The improvement of approximately Euro 1.1 billion was driven by the success of a streamlined product portfolio focused on higher-end smartphones and an improved cost structure. Sales for the full year 2010 were Euro 6,294 million, a decrease of 7% from 2009, while gross margin improved from 15% in 2009 to 29%, in 2010.

During 2010 Sony Ericsson completed its company-wide transformation programme, improving its cost of sales ratio, reducing its global workforce by approximately 4,000 people in total, consolidating its facilities worldwide and decreasing annual operating expenses by more than Euro 880 million. The total restructuring charges for the transformation programme were Euro 381 million.

Units shipped during the fourth quarter were 11.2 million, a year-on-year decrease of 23%, consistent with the streamlining of the portfolio to focus on higher-end smartphones. The sequential increase of 8%, related to seasonal factors, was somewhat constrained by a lack of new product launches during the quarter. Average selling price (ASP) for the quarter was Euro 136, a 13% increase year-on-year. ASP decreased 12% sequentially, mainly due to price erosion, foreign exchange and product mix. Sales for the quarter were Euro 1,528 million, a decrease of 13% year-on-year and a decrease of 5% sequentially.

The gross margin for the fourth quarter was 30%, an increase of 7 percentage points year-on-year and essentially flat sequentially, including the benefit of some one-time items, relating to certain royalty matters and warranty estimates.

Income before taxes for the fourth quarter, excluding restructuring charges, was a profit of Euro 39 million, an increase of Euro 79 million year-on-year and a decrease of Euro 27 million sequentially, mainly due to lower sales.

Sony Ericsson’s net cash position as of December 31, 2010 was Euro 375 million. The negative cash flow from operating activities for the quarter was Euro 128 million, mainly due to increases in inventory due to seasonal factors as well as payments related to the transformation programme.

During the quarter term loan facilities of Euro 150 million matured and were repaid in full.

Sony Ericsson estimates that the global handset market for the full year 2010 increased slightly in volume to almost 1.2 billion units. The company estimates that the global handset market for the fourth quarter was essentially flat year-on-year and its market share for the fourth quarter was approximately 3% in units and approximately 5% in value. Sony Ericsson estimates that its market share for the full year 2010 was approximately 4% in units and approximately 6% in value.

Sony Ericsson forecasts modest growth in 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.

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