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Sony Ericsson Loses €187 million in Q4

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sony_ericsson_1minSony Ericsson posted losses in the Q4 of 2008, sales dropped and jobs were cut generating more costs to this mobile phone joint-venture.

The fourth-quarter loss was over €187m, compared with a profit of €373m in 2007. Sales fell 23% to €2914m. Sony Ericsson had costs of €129m which were used to trim part of  the workforce.

Analysts predicted a €95m net loss on sales of €2.9bn, based on 26 estimates. The results were indeed much more lower than the estimated predictions.

It is really difficult to have some kind of notion of which will influence the results in a year of crisis like 2008. The sales were however, over the expectations and that might be what is supporting the stocks of Sony Corp. ADR right now in  the NYSE, because they opened higher than yesterday’s close, but turned down closing the gap, as you can see in the image.

In the long term, having  technical analysis in mind, the stocks should remain in the sideways. Having fundamentals in mind investors can only wait to see how stocks react to Xperia X1 and Sony C905 sales.

Press release after the break.

Sony Ericsson reports results for fourth quarter and full year 2008

16 January 2009Highlights:

  • 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:

Q4 2008

Q3 2008

Q4 2007

FY 2008

FY 2007

Number of units shipped (million)

24.2

25.7

30.8

96.6

103.4

Sales (Euro m.)

2,914

2,808

3,771

11,244

12,916

Gross margin (%)

15%

22%

32%

22%

31%

Operating income (Euro m.)

-262

-33

489

-113

1,544

Operating margin (%)

-9%

-1%

13%

-1%

12%

Restructuring charges (Euro m.)

129

35

175

Operating income excl. restructuring charges (Euro m.)

-133

2

489

61

1,544

Operating margin excl. restructuring charges (%)

-5%

0%

13%

1%

12%

Income before taxes (IBT) (Euro m.)

-261

-23

501

-83

1,574

IBT excl. restructuring charges (Euro m.)

-133

12

501

92

1,574

Net income (Euro m.)

-187

-25

373

-73

1,114

Average selling price (Euro)

121

109

123

116

125

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.

Have you Checked Symbian Life Blog? No? Check this post about the E-Series Firmware updates

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By , Financial Director and Correspondent on Jan 16th, 2009 GMT +2

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