January 19, 2012
Sony Corporation
Sony Ericsson Reports Fourth Quarter and Full Year 2011 Results
and U.S. GAAP Equity Method Results for Sony's Investment in Sony Ericsson Ar e Expected to Include
Valuation Allowance Against Certain Deferred Tax Assets
Today, Sony Ericsson Mobile Communications AB ("SEMC"), an affiliated company of Sony Corporation ("Sony") which Sony accounts for under the equity method, announced its financial results for the fourth quarter and the full year ended December 31, 2011 under accounting principles generally accepted in Sweden ("Swedish GAAP"), as attached.
At the same time, and as a result of Sony's obligation to account for SEMC's results under the equity method in accordance with generally accepted accounting principles in the United States ("US GAAP"), SEMC is recording a valuation allowance under US GAAP of approximately EUR 650 million (66 billion yen) against certain of its deferred tax assets. Under the equity method, in Sony's third quarter (October
- December) of the fiscal year ending March 31, 2012, Sony expects to reflect 50%, or approximately EUR 325 million (33 billion yen), of this valuation allowance in equity in net loss of affiliated companies in its consolidated financial results on a US GAAP basis.
As previously stated, Sony is currently reevaluating its forecast of consolidated financial results for the fiscal year ending March 31, 2012, taking into account the transaction in connection with S-LCD Corporation announced on December 26, 2011, this valuation allowance and other factors, including the impact of the October 2011 floods in Thailand, that might affect its consolidated financial results forecast for the full year ending March 31, 2012.
In October 2011 Sony and Telefonaktiebolaget LM Ericsson ("Ericsson") announced that Sony will acquire Ericsson's stake in SEMC and that SEMC will become a wholly-owned subsidiary of Sony. The transaction is expected to close in late January to February, subject to customary closing conditions, including regulatory approvals.
(For reference)Sony's consolidated financial forecast for the fiscal year ending March 31, 2012, which was disclosed on November 2, 2011 and its consolidated financial results for the fiscal year
ended March 31, 2011
(Yen in billions)
Sales and operating revenue | Operating income | Income before income tax | Net income (loss) attributable to Sony Corporation's stockholders | |
Consolidated financial forecast for the fiscal year ending March 31, 2012 | 6,500 | 20 | 10 | (90) |
Consolidated financial results for the fiscal year ended March 31, 2011 | 7,181.3 | 199.8 | 205.0 | (259.6) |
• Q4 loss reflects intense competition, price erosion and restructuring charges
• 65% year-on-year increase in Android-based XperiaTM smartphone quarterly sales• 28 million Xperia smartphones shipped to date
The consolidated financial summary for Sony Ericsson Mobile
Communications AB (Sony Ericsson)
for the fourth quarter and full year ended December 31, 2011
is as follows*:
Average selling price (Euro)
136
166
143
146
152
*All amounts are according to Swedish GAAP.
Bert Nordberg, President and CEO of Sony Ericsson commented:
"Our fourth quarter results reflected intense competition,
unfavorable macroeconomic conditions and the effects of a
natural disaster in Thailand this quarter. We are aligning
our business to drive profitability and to meet customer
needs. In spite of these challenges, throughout 2011 we've
shifted our business from feature phones to smartphones, and
our Android-based smartphone sales in the quarter increased
by 65% year-on-year. The Xperia portfolio, including the
recently announced Xperia NXT series, will serve as a
cornerstone of our smartphone lineup in 2012."
Units shipped during the quarter were 9 million, a 20%
decrease year-on-year and a 5% decrease compared to last
quarter. The year-on-year and sequential declines reflect a
significantly lower number of feature phones shipped,
partially offset by an increase in smartphone shipments. Sony
Ericsson has shipped 28 million Xperia smartphones to
date.
Average selling price (ASP) for the quarter was Euro 143, up
5% year-on-year but down 14% sequentially. The year-on-year
increase is due to the shift to smartphones and geographic
mix. The sequential decrease in ASP is attributed to
geographic and product mix, including declining prices of
products launched earlier in the year, and the absence of new
products introduced in the fourth quarter.
Sales for the quarter were approximately Euro 1.3 billion,
down 16% year-on-year and 19% quarter over quarter. The
year-on-year decline reflects the decrease of feature phone
sales which was only partially offset by an increase in
smartphone sales. The sequential decline is due to geographic
and product mix, resulting in lower sales of both smartphones
and feature phones. Fourth quarter sales were negatively
impacted by macroeconomic challenges in advanced economies
contributing to weaker holiday sales, and certain component
shortages from the flooding in Thailand in late October and
early November 2011. Xperia smartphones accounted for
approximately 80% of total sales in the fourth quarter.
The gross margin for the quarter was 24%, a decrease of 6
percentage points year-on-year and 3 percentage points from
the previous quarter. The year-on-year and sequential
decreases are attributed to product and geographic mix.
Fourth quarter gross margin was also adversely affected by
intense smartphone price competition which more than offset
the benefit of royalty and other items.
Loss before taxes, excluding restructuring charges, was Euro
154 million for the quarter, compared to income of Euro 39
million for the same quarter last year and of Euro 31 million
in the previous quarter. The year-on-year and sequential
declines are due to lower gross margin and increased
operational expenses, including higher development and
selling expenses.
In December 2011, Sony Ericsson launched a restructuring
program including global workforce reductions to reduce costs
and drive competitiveness. Restructuring charges for the
quarter are Euro 93 million and the program is estimated to
be completed by the end of 2012.
The quarter ended in a net loss of Euro 207 million, compared
to a net income of Euro 8 million in the same quarter of the
previous year, and essentially a break even result in the
previous quarter.
Cash flow from operating activities during the quarter was
negative Euro 26 million. External borrowings were Euro 19
million during the quarter. Total borrowings were Euro 742
million at the end of the quarter. Total cash balances at
December 31, 2011 were Euro 442 million.
Sony Ericsson estimates that its share of the global
Android-based smartphone market was 10% in volume and 7% in
value during the quarter and 10% in volume and 10% in value
for the full year.
Sony Ericsson estimates that the global smartphone market for
the full year 2011 increased by 60%
in volume to 463 million units. Sony Ericsson estimates
strong growth in the smartphone market in
2012.
In October 2011 Sony Corporation ("Sony") and
Telefonaktiebolaget LM Ericsson ("Ericsson") announced that
Sony will acquire Ericsson's stake in Sony Ericsson and that
Sony Ericsson will become a wholly-owned subsidiary of Sony.
The transaction is expected to close in late January to
February, subject to customary closing conditions, including
regulatory approvals.
The liquid identity is a registered trademark of Sony Ericsson Mobile Communications AB. Xperia™ is a trademark of Sony Ericsson Mobile Communications AB. 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 and subject to change without prior notice.
EDITOR'S NOTES:
Financial statements: Consolidated income statement
Consolidated income statement - isolated quarters
Consolidated balance sheet
Consolidated statement of cash flows
Consolidated statement of cash flows - isolated quarters
Net sales by market area by quarter
Sony Ericsson is a 50:50 joint venture between Sony
Corporation ("Sony") and Telefonaktiebolaget LM Ericsson
("Ericsson"). In October 2011 it was announced by Sony and
Ericsson that Sony will acquire Ericsson's stake in the
company and that Sony Ericsson will become a wholly-owned
subsidiary of Sony. The transaction is expected to close in
late January to February, subject to customary closing
conditions, including regulatory approvals. Over the years
Sony Ericsson has brought together the best communication
technologies with superior entertainment user experiences to
create its Xperia™ line of the 'most entertaining
smartphones' in the mobile handset industry.
With its global corporate functions in London, Sony Ericsson
has sales and marketing operations in all major regions of
the world, as well as manufacturing in China, and product
development sites in China, Japan, Sweden and Silicon Valley,
California. For more information, please visit: www.sonyericsson.com/press.
- ENDS -
Stefan Jelvin (Stockholm) +46 10 714 2039
Sony investor relations
Yoshinori Hashitani (Tokyo) +81 3 6748 2111
Yas Hasegawa (London) +44 20 7426 8696
Press / Media
Sony Ericsson global communications and PR
Cathy Davies (London) +44 208 762 5879
Holly Rossetti (London) + 44 208 762 5851
Gustaf Brusewitz (London) +44 208 762 5805
This press release contains forward-looking statements that involve inherent risks and uncertainties. Sony Ericsson has 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.
Sony Ericsson CONSOLIDATED INCOME STATEMENT*Oct-Dec Jan-Dec
EUR million 2010 2011 Change 2010 2011 Change
Net sales 1 528 1 288 | -16% | 6 294 5 212 | -17% | |||
Cost of sales -1 069 -985 | -8% | -4 440 -3 735 | -16% | |||
Gross profit | 459 | 303 | -34% | 1 853 | 1 477 | -20% |
Gross margin % | 30% | 24% | -6pp | 29% | 28% | -1pp |
Research and development expenses | -191 | -268 | 40% | -746 | -815 | 9% |
Selling and administrative expenses | -236 -270 | 14% | -986 -900 | -9% | ||
Operating expenses** | -427 -538 | 26% | -1 732 -1 715 | -1% |
Other operating income, net 7 8 14% 38 32 -16%
Operating income | 39 | -227 | -682% | 159 | -206 | -230% |
Operating margin % | 3% | -18% | -21pp | 3% | -4% | -7pp |
Financial income | 2 | 4 | 100% | 18 | 19 | 6% |
Financial expenses -6 -24 Income before taxes 35 -247 | 300% -806% | -30 -56 147 -243 | 87% -265% |
Taxes
Minority interest 0 -6 - -9 -23 156%
Net income 8 -207 -2688% 90 -247 -374%
Number of units shipped (million) 11,2 9,0 -20% 43,1 34,4 -20%
ASP (EUR) 136 143 5% 146 152 4%
EUR million Oct-Dec Jan-Dec
Restructuring charges 2010 2011 2010 2011
Cost of sales 2 0 -32 0
Research and development expenses 0 -55 7 -55
Selling and administrative expenses -5 -38 -17 -38
Total -3 -93 -42 -93
* All amounts are according to Swedish GAAP
**Operating expenses in 2010 have been restated to reflect certain organizational changes.
Sony Ericsson CONSOLIDATED INCOME STATEMENT - ISOLATED QUARTERS*2010 2011
EUR million Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Net sales 1 ,405 1 ,757 1 ,603 1 ,528 1, 145 1, 193 1, 586 1 ,288
Cost of sales -975 -1,266 -1,130 -1,069 -763 -828 -1,159 -985
Gross profit 429 492 473 459 382 365 427 303
Gross margin % 31% 28% 30% 30% 33% 31% 27% 24%
Research and development
expenses -185 -191 -179 -191 -173 -184 -190 -268
Selling and administrative
expenses -238 -272 -241 -236 -199 -224 -207 -270
Operating expenses** | -423 | -463 | -420 | -427 | -372 | -408 | -397 | -538 |
Other operating income, net 14 7 10 7 10 6 8 8
Operating income 20 36 63 39 19 -37 38 -227
Operating margin % 1% 2% 4% 3% 2% -3% 2% -18%
Financial income 7 2 7 2 3 5 7 4
Financial expenses -9 -7 -8 -6 -8 -10 -14 -24
Income before taxes 18 31 62 35 15 -42 31 -247
Taxes 6 -16 -12 -27 -5 -3 -17 46
Minority interest -3 -4 -2 0 1 -5 -14 -6
Net income 21 12 49 8 11 -50 0 -207
Number of units shipped
(million) 10.5 11.0 10.4 11.2 8.1 7.6 9.5 9.0
ASP (EUR) 134 160 154 136 141 156 166 143
EUR million 2010 2011
Restructuring charges Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Cost of sales | 2 | -33 | -3 | 2 | - - - 0 |
Research and development expenses Selling and administrative | -2 | -1 | 5 | 0 | - - - -55 |
expenses -3 2 -6 -5 - - - -38
Total -3 -32 -4 -3 - - - -93
* All amounts are according to Swedish GAAP.
** Operating expenses in 2010 have been restated to reflect certain organizational changes.
Sony Ericsson CONSOLIDATED BALANCE SHEET*Dec 31 Jun 30 Sep 30 Dec 31
EUR million 2010 2011 2011 2011
ASSETS
Total fixed and financial assets 803 819 890 1,122
Current assets
Inventories 460 570 656 447
Accounts receivable 836 872 1,090 692
Other assets 295 330 408 380
Other short-term cash investments 276 329 301 270
Cash and bank 329 188 165 172
Total current assets 2,196 2, 289 2,620 1,961
Total assets 2,999 3 ,108 3,510 3,083
SHAREHOLDERS' EQUITY AND LIABILITIES
Shareholders' equity 532 451 507 309
Minority interest 42 43 60 58
Total equity 574 494 567 367
Borrowing, Non Current 100 0 0 0
Other long-term liabilities 32 31 40 44
Total long-term liabilities 132 31 40 44
Accounts payable 769 716 1 050 676
Borrowing, Current 130 769 718 742
Other current liabilities 1, 394 1,098 1,135 1,254
Total current liabilities 2 ,293 2,583 2,903 2,672
Total shareholders' equity and liabilities 2, 999 3,108 3, 510 3 ,083
Net cash** 375 -252 -252 -300
* All amounts are according to Swedish GAAP.
** Net cash is defined as cash and bank deposit plus short-term cash investments less interest-bearing liabilities.
Sony Ericsson CONSOLIDATED STATEMENT OF CASH FLOWS*Oct-Dec Jan-Dec
EUR million 2010 2011 2010 2011
OPERATING
Net income | 8 -207 | 90 -247 |
Adjustments to reconcile net income to cash | -50 112 -42 -95 | -156 -27 -65 -274 |
Changes in operating net assets -86 69 -183 -276
Cash flow from operating activities -128 -26 -248 -550
INVESTING
Investing activities -18 -19 -4 -113
Cash flow from investing activities -18 -19 -4 -113
FINANCING
Financing activities - 178 11 - 60 496
Cash flow from financing activities -178 11 -60 496
Net change in cash -324 -34 -312 -167
Cash, beginning of period 921 466 878 605
Translation difference in Cash 7 10 38 4
Cash, end of period 605 442 605 442
* All amounts are according to Swedish GAAP.
Sony Ericsson CONSOLIDATED STATEMENT OF CASH FLOWS - ISOLATED QUARTERS*2010 2011
EUR million Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
OPERATING
Net income 21 12 49 8 11 -50 0 -207
Adjustments to reconcile net income to
cash -44 4 -66 -50 -137 -29 27 112
-23 16 -17 -42 -127 -79 27 -95
Changes in operating net assets -72 13 -38 -86 -226 -145 26 69
Cash flow from operating activities -94 29 -54 -128 -353 -224 53 -26
INVESTING
Investing activities 27 -15 2 -18 -14 -21 -58 -19
Cash flow from investing activities 27 -15 2 -18 -14 -21 -58 -19
FINANCING
Financing activities 150 0 - 32 - 178 375 165 - 56 11
Cash flow from financing activities 150 0 -32 -178 375 165 -56 11
Net change in cash | 83 | 15 | -85 | -324 | 8 | -80 | -61 | -34 |
Cash, beginning of period | 878 | 980 | 1 039 | 921 | 605 | 599 | 516 | 466 |
Translation difference in Cash 19 45 -33 7 -14 -3 11 10
Cash, end of period 980 1, 039 921 605 599 516 466 442
* All amounts are according to Swedish GAAP.
Sony Ericsson NET SALES BY MARKET AREA BY QUARTER*EUR million 2010 2011
Isolated quarters Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Europe, Middle East & Africa ** | 711 | 876 | 837 | 795 | 485 | 435 | 480 | 571 |
Americas | 201 | 223 | 222 | 205 | 151 | 193 | 121 | 199 |
Asia 493 659 544 528 509 565 985 518
Total 1,405 1, 757 1, 603 1, 528 1, 145 1, 193 1,586 1, 288
** of which W estern Europe 525 668 632 569 307 323 313 355
2010 2011
Sequential change ( %) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Europe, Middle East & Africa ** -26% 23% -4% -5% -39% -10% 10% 19% Americas -9% 11% 0% -8% -26% 28% -37% 64%
Asia -12% 34% -17% -3% -4% 11% 74% -47%
Total -20 % 25 % -9% -5% -25 % 4% 33 % -19 %
** of which W estern Europe -23% 27% -5% -10% -46% 5% -3% 13%
2010 2011
Year over year change ( %) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Europe, Middle East & Africa ** -27% -6% -4% -18% -32% -50% -43% -28% Americas 1% 14% -4% -8% -25% -13% -45% -3%
Asia -12% 17% 6% -6% 3% -14% 81% -2%
Total -19 % 4% -1% -13 % -19 % -32 % -1% -16 %
** of which W estern Europe -27% -1% -1% -16% -42% -52% -50% -38%
2010 2011
Year to date 1003 1006 1009 1012 1103 1106 1109 1112
Europe, Middle East & Africa ** | 711 | 1 ,587 | 2 ,424 | 3 ,219 | 485 | 919 | 1, 399 | 1,970 |
Americas | 201 | 424 | 646 | 851 | 151 | 345 | 466 | 664 |
Asia 493 1, 152 1, 695 2, 224 509 1,075 2,060 2,577
Total 1 ,405 3 ,162 4, 765 6 ,294 1, 145 2 ,339 3 925 5, 211
** of which W estern Europe 525 1,193 1 ,825 2 ,393 307 630 944 1 ,298
2010 2011
YTD year over year change ( %) 1003 1006 1009 1012 1103 1106 1109 1112 Europe, Middle East & Africa ** -27% -17% -13% -14% -32% -42% -42% -39% Americas 1% 7% 3% 0% -25% -19% -28% -22%
Asia -12% 3% 4% 1% 3% -7% 22% 16%
Total -19 % -8% -5% -7% -19 % -26 % -18 % -17 %
** of which W estern Europe -27% -15% -10% -12% -42% -47% -48% -46%
*All amounts are according to Swedish GAAP.