Sony Ericsson starts 2007 with strong first quarter

23.04.07

Q1 Highlights:
• Year-on-year volume & sales growth of 63% and 47% respectively
• Income before tax rose 139% year-on-year to €362 million
• W880 further strengthens Walkman® phone sales
• Low and mid-tier products generating market share gains year-on-year



The consolidated financial summary for Sony Ericsson Mobile Communications AB (Sony Ericsson) for the first quarter ended March 31, 2007 is as follows:



Q1 2006
Q4 2006


Q1 2007

Number of units shipped (million)
13.3
26.0
21.8

Sales (Euro m.)
1,992
3,782
2,925

Gross Margin %
26.3%
29.0%
30.3%

Operating Income (Euro m.)
143
484
346

Operating Margin %
7.2%
12.8%
11.8%

Income Before Taxes (Euro m.)
151
502
362

Net income (Euro m.)
109
447
254

Average Sales Price (Euro)
149
146
134



Beginning this quarter Sony Ericsson is expanding its financial disclosure. More information can be found at the end of this report. This decision was made as a result of the company’s continuing growth and in consultation with the parent companies.

Units shipped in the quarter reached 21.8 million, a 63% increase compared to the same period last year, generating significant year-on-year market share gains and continuing the momentum of 2006. Sales for the quarter were Euro 2,925 million, representing a year-on-year increase of 47%. Income before taxes for the quarter was Euro 362 million representing a year-on-year increase of 139%. Net income for the quarter was Euro 254 million. ASP decreased to Euro 134 as we continue to expand our product portfolio successfully with mid-tier and with more competitively priced phones.

“Sony Ericsson has made a very positive start to the year selling 63% more phones in the first quarter than a year ago. The strong sales and solid financial performance demonstrate a continuation of the momentum we established last year,” said Miles Flint, President of Sony Ericsson. “We have announced a number of exciting new products during the quarter many of which are already shipping and have been well received by consumers. The company continues to develop hit model products with a clear consumer proposition that appeals to operators, and then rapidly ramp-up volume to meet market demand,” he added.
Sony Ericsson continued to build on the success of 2006 with strong growth in Asia Pacific, Latin America and Europe. The company captured market share in these markets through low and mid-tier products such as the W300 and W200 Walkman® phones and the K310 camera phone without undermining profitability. Margins improved year-on-year despite the increased proportion of mid and low tier products in the line-up illustrating management’s focus on controlling cost and maintaining margins while expanding Sony Ericsson’s appeal to a wider market.
Sony Ericsson also announced a number of attractive new products during the quarter, including two new Cyber-shot™ phones, five additional Walkman® models across a variety of price points to further strengthen its unique music offering, and its first HSDPA handset aimed primarily at the North American market.
In February in Japan Sony Ericsson started shipping the SO703i, a mobile phone with selectable Style-Up panels that include a scented sheet to match the panel’s design, for NTT DoCoMo, and the W51S, a new clam-shell phone with illuminated icons, for au (KDDI). Both phones were well received by consumers.
During the quarter Sony Ericsson made a number of strategic announcements:
Following the rapid growth in sales in the Asia Pacific region, the company announced plans to start manufacturing phones in India through its global manufacturing partners, Flextronics and Foxconn.
In February Sony Ericsson announced it had completed the acquisition of the Swedish software company UIQ Technology AB, and established a separate holding company, UIQ Holdings, to manage the business.
In March Sony Ericsson signed licensing and development agreements concerning entry-level GSM, GPRS and EDGE mobile phones with Sagem Communication (SAFRAN Group). Through this co-operation, Sony Ericsson will be able to strengthen its position in the entry level area of the market.
Sony Ericsson forecasts that the 2007 global handset market will be above 1.1 billion units. The company believes that in Q1 2007 it grew market share around 2 percentage points compared with the same period last year to over 8%.
Sony Ericsson will make a total payment of Euro 848 million to its parent companies in 2007 in the form of dividends, or both a dividend and a capital redemption.
WALKMAN® and Cyber-shot™ are trademarks or registered trademarks of Sony Corporation.

Style-Up is a trademark or a registered trademark of Sony Ericsson Mobile Communications AB.