Sony Ericsson reports results for fourth quarter and full year 2008

Highlights:

• Global economic slowdown leads to contracting consumer demand
• Previously announced annual Euro 300 million cost savings on track
  Initiated additional Euro 180 million annual cost savings
• Joined the Open Handset Alliance and developing new phone using Android Open Source software
• Successful rollout of Xperia™ X1, Cyber-shot™C905 phones and PlayNow™ plus music service

London, UK - The consolidated financial summary for Sony Ericsson Mobile Communications AB (Sony Ericsson) for the fourth quarter and full year ended December 31, 2008 is as follows:

Units shipped in the quarter were 24.2 million, a sequential decrease of 6% and a year-on-year decrease of 21%. Sales for the quarter were Euro 2,914 million, an increase of 4% sequentially due to a positive impact of currency fluctuations, and a decrease of 23% compared to Q4 2007.  The decline in sales year-on-year was driven by lower volumes, due to the global economic slowdown that resulted in contracting consumer demand and decreased availability of credit.  

Gross margin became 15% due to negative impact from exchange rate fluctuations, restructuring charges and material write-offs.   

Foreign exchange fluctuations had a positive impact on sales in total, but a large negative impact on costs of goods sold (ie. costs increased) sequentially, as well as year-on-year.

Income before taxes for the quarter was Euro -133 million, excluding restructuring charges of Euro 129 million, compared to the profit of Euro 501 million in Q4 2007.  Despite a negative result in the quarter, Sony Ericsson maintained a healthy balance sheet with a strong, net cash position of Euro 1,072 million.

The average selling price (ASP) for Sony Ericsson in Q4 2008 was Euro 121, an increase sequentially but a decrease year-on-year.  The sequential increase of ASP was due to a positive impact of foreign exchange rate fluctuations and to the sale of a higher proportion of high-end models.  Estimated market share for Q4 2008 is maintained at around 8%.

“In economic terms, 2008 has been a tumultuous year with world markets experiencing a serious downturn.  The mobile phone market has been greatly affected by this and as expected, the fourth quarter continued to be very challenging for Sony Ericsson.  Our business alignment is progressing as planned, with the full effect of annual savings of around Euro 300 million expected by the second half of 2009. We foresee a continued deterioration in the market place in 2009, particularly in the first half,” said Dick Komiyama, President, Sony Ericsson.

The additional cost saving measures initiated by Sony Ericsson are aimed at reducing operating expenses by a further Euro 180 million annually, with the full effect expected at the end of 2009. Sony Ericsson currently estimates that the cost for the additional restructuring activities will be covered by the previously announced Euro 300 million restructuring charges.

In Q4 2008, the successful roll out of the Xperia™ X1 and Cyber-shot™C905; Sony Ericsson’s first eight mega pixel phone as well as the PlayNow™ plus music service positively impacted the business.  In the same quarter, Sony Ericsson announced that it joined the Open Handset Alliance and is currently developing a new phone that uses the Android Open Source software.
Earlier in 2008, Sony Ericsson announced that it became a founding member of the Symbian Foundation; an initiative will create an open mobile software platform based on Symbian OS.
Sony Ericsson estimates the 2008 global handset market as being around 1,190 million units or around 6% growth from 2007, compared to the company’s previous forecast of around 10%. Sony Ericsson forecasts that the global handset market will contract in 2009 and that the industry ASP will continue to decline.

Cyber-shot™ is a trademark of the Sony Corporation.
The Liquid Identity logo, Xperia™ and the Xperia™ logo and PlayNow™plus are trademarks or registered trademarks of Sony Ericsson Mobile Communications AB.
Sony is a trademark or registered trademark of Sony Corporation.  Ericsson is the trademark or registered trademark of Telefonaktiebolaget LM Ericsson.
Other product and company names mentioned herein may be the trademarks of their respective owners. Any rights not expressly granted herein are reserved. Subject to change without prior notice.

EDITOR’S NOTES:
Financial statements:
Consolidated income statement
Consolidated income statement full year
Consolidated income statement isolated quarters
Consolidated balance sheet
Consolidated statement of cash flows
Consolidated statement of cash flows full year
Consolidated statement of cash flows isolated quarters

Additional information:
Net sales by market area, by quarter

Sony Ericsson is a top, global industry player with sales of around 97 million phones in 2008.  Diversity is one of the core strengths of the company, with operations in over 80 countries including manufacturing in China and R&D sites in China, Europe, India, Japan and North America.  Sony Ericsson was established as a 50:50 joint venture by Sony and Ericsson in October 2001, with global corporate functions located in London.

This press release contains forward-looking statements that involve inherent risks and uncertainties.  We have identified certain important factors that may cause actual results to differ materially from those contained in such forward-looking statements. For a detailed description of risk factors,see Sony's and Ericsson's filings with the US Securities and Exchange Commission, particularly each company's latest published Annual Report on Form 20-F