Sony Ericsson continues profitable growth and market share gains

13.07.07

Q2 Highlights:
Continued strong year-on-year volume growth of 59%
Income before tax grew 55% year-on-year to €327 million
Walkman® phone sales of 9 million in quarter sustain leadership in music phones
Expanded portfolio continues to generate market share gains

The consolidated financial summary for Sony Ericsson Mobile Communications AB (Sony Ericsson) for the second quarter ended June 30, 2007 is as follows:



Q2 2006
Q1 2007
Q2 2007

Number of units shipped (million)
15.7
21.8
24.9

Sales (Euro m.)
2,272
2,925
3,112

Gross Margin %
28.5%
30.3%
29.6%

Operating Income (Euro m.)
203
346
315

Operating Margin %
8.9%
11.8%
10.1%

Income Before Taxes (Euro m.)
211
362
327

Net income (Euro m.)
143
254
220

Average Sales Price (Euro)
145
134
125



Units shipped in the quarter reached 24.9 million, a 59% increase compared to the same period last year, generating both year-on-year and sequential market share gains. Sales for the quarter were Euro 3,112 million, representing a year-on-year increase of 37%. Income before taxes for the quarter was Euro 327 million, representing a year-on-year increase of 55%. Net income for the quarter was Euro 220 million. In line with Sony Ericsson expectations, the increase in Q2 in low and mid-tier priced phones in the product portfolio resulted in a decline in ASP to Euro 125.


“Sony Ericsson has continued to capture market share in a more competitive market place with a product offering that addresses a wider consumer audience than ever before. Our financial results for Q2 2007 reflect our direction to build our brand in key imaging, music and multimedia categories with a portfolio that includes more competitively priced phones,” said Miles Flint, President of Sony Ericsson. “We expect the market in 2007 to remain competitive, but with recently announced products such as the flag-ship Walkman® and Cyber-shot™ models we aim to continue to grow faster than the market.”


During the quarter Sony Ericsson continued to capture market share in Latin America, Western Europe and CEEMEA (Central and Eastern Europe, Middle East, Africa) due to low and mid-tier feature phones such as the W300 and W200 Walkman® phones and the K310 and Z310 phones. At the same time, the company continued to strengthen its product line up by announcing a large number of new products across a variety of price points, including the K850, an HSDPA, 5 mega-pixel flag-ship Cyber-shot™ phone, and the W960, a high-end Walkman® phone with 8GB of on-board storage.


Following an announcement in January that Sony Ericsson would start the local manufacture of phones in India through its global manufacturing partners Flextronics and Foxconn, in Q2 the company extended its commitment to this important and rapidly growing market by announcing plans to establish its own research and development unit in Chennai later in the year.


In Q2 new trademark royalty fees were agreed with the parent companies, and these additional expenses were recorded for the first time in the second quarter.
Sony Ericsson forecasts that the 2007 global handset market will be above 1.1 billion units. The company grew market share in Q2 2007 around 3 percentage points to well over 9% compared with the same period last year.


WALKMAN® and Cyber-shot™ are trademarks or registered trademarks of Sony Corporation.