Sony Ericsson continues to invest for future growth

Q1 Highlights:
• Year-on-year volume growth of 2%
• Income before tax at higher end of forecast
• R&D investment continues to expand portfolio and addressable market
• New sub-brand XPERIA™ added to portfolio

The consolidated financial summary for Sony Ericsson Mobile Communications AB (Sony Ericsson) for the first quarter ended March 31, 2008 is as follows:

  Q1 2007 Q4 2007 Q1 2008
Number of units shipped (million) 21.8 30.8 22.3
Sales (Euro m.) 2,925 3,771 2,702
Gross Margin % 30.3% 31.8% 29.2%
Operating Income (Euro m.) 346 489 181
Operating Income (%) 11.8% 13.0% 6.7%
Income Before Taxes (Euro m.) 362 501 193
Net income (Euro m.) 254 373 133
Average Sales Price (Euro) 134 123 121

Units shipped in the quarter were 22.3 million, a 2% increase compared to the same period last year and in line with our March 19, 2008 interim announcement of 22 million units. Sales for the quarter were Euro 2,702 million, a decrease of 8% on a year ago due to slowing market growth in mid-to-high end phones in markets where Sony Ericsson has a strong presence. Gross margin was one percentage point lower than Q1 2007, reflecting a less favourable product mix. Income before taxes for the quarter was Euro 193 million, which was at the high-end of the range (Euro 150-200 million) we announced on March 19, 2008. This represented a decrease of 47% compared with a year ago, due to higher R&D investments as a percentage of sales, and reflecting that Q1 2007 was a particularly strong first quarter for the company. Net income for the quarter was 48% lower, at Euro 133 million.

“Sony Ericsson continues to invest in expanding its product portfolio to appeal to a wider variety of consumers in both new and existing markets,” said Dick Komiyama, President, Sony Ericsson. “Our product announcements during the first quarter have been well received by the industry, and we expect to see a positive effect from these announcements during the second half of 2008.”

During the quarter, Sony Ericsson added a new sub-brand to its product portfolio with the announcement of the XPERIA™ X1, a high-end multi-media convergence phone based on Windows Mobile®, which will launch in the second half of the year. In addition, the company announced a number of new phones during the quarter to increase the appeal of its brand to a broader audience. These included new high-end Walkman® and HSDPA web phones, such as the W980, W760, Z770 models and also added to its cutting-edge Cyber-shot™ range with models such as the C702 and C902.

Average selling price (ASP) decreased both sequentially and year-on-year due to the impact of softer sales of high-to-mid end models in key markets. Market share for the quarter is estimated to be around 8%, down one percentage point sequentially.
Sony Ericsson made a dividend payment of Euro 470 million during the quarter to the parent companies. A second dividend payment will be made this year.

Sony Ericsson forecasts that the global handset market for 2008 will grow at a rate of around 10% from more than 1.1 billion units in 2007. The majority of this growth will be in emerging markets.

EDITOR’S NOTES:

Financial statements and additional information:

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

Additional information:

Net sales by market area by quarter

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