Q3 highlights:
. Decline in global handset market slowing down
. Positive trend from continuing transformation programme
. External financing arranged
. Refreshed brand in time for Aino™ and Satio™ launch in Q4
The consolidated financial summary for Sony Ericsson Mobile Communications AB (Sony Ericsson) for the third quarter ended September 30, 2009 is as follows:
Q3 2008 Q2 2009 Q3 2009
Number of units shipped (million) 25.7 13.8 14.1
Sales (Euro m.) 2,808 1,684 1,619
Gross margin (%) 22% 12% 16%
Operating income (Euro m.) -33 -274 -193
Operating margin (%) -1% -16% -12%
Restructuring charges (Euro m.) 35 1 2
Operating income excl. restructuring charges (Euro m.) 2 -274 -191
Operating margin excl. restructuring charges (%) 0% -16% -12%
Income before taxes (IBT) (Euro m.) -23 -283 -199
IBT excl. restructuring charges (Euro m.) 12 -283 -198
Net income (Euro m.) -25 -213 -164
Average selling price (Euro) 109 122 114

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 ASP (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.

“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,” said Dick Komiyama, outgoing President, Sony Ericsson. “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 September 30, 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 utilized. 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 October 15, 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.

The liquid identity is a registered trademark of Sony Ericsson Mobile Communications AB.
Satio™ and Aino™ are trademarks or registered trademarks of Sony Ericsson Mobile Communications AB.
WALKMAN® is a trademark of Sony Corporation.
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. Subject to change without prior notice.