* Shift to Android-based smartphone portfolio drives profitability
* Smartphone share of total sales more than doubled year-on-year
* Xperia™ arc, Xperia™ PLAY and Xperia™ neo began shipping towards the end of the quarter
* Some supply chain disruption due to the Japan earthquake
Bert Nordberg, President & CEO of Sony Ericsson commented, "Sony Ericsson's profitability continues as we accelerate our shift towards an Android- based smartphone portfolio, with smartphones comprising over 60% of our total sales during the quarter. Towards the end of the quarter we introduced the highly anticipated Xperia™ arc and Xperia™ PLAY, which have been well received by both operators and consumers around the world. However, the Japan earthquake made it a challenging quarter operationally and we are experiencing some disruptions to our supply chain. We will continue to evaluate the situation."
Units shipped during the quarter were 8.1 million, a 23% decrease year- on-year and a 28% decrease sequentially, due to a decline in the number of feature phones shipped, introduction of new products towards the end of the quarter and seasonality.
Average selling price (ASP) for the quarter was Euro 141, a 5% increase year-on- year and a 4% increase sequentially, as a result of product and geographical mix more than offsetting price erosion.
Sales for the quarter were Euro 1,145 million, a 19% decrease year-on- year and 25% decrease sequentially.
The gross margin for the quarter was 33%, an increase of 2 percentage points year-on-year and an increase of 3 percentage points sequentially, which includes the impact from higher ASP and benefit of some larger than normal items relating to royalty matters and warranty estimates.
Income before taxes for the quarter was a profit of Euro 15 million, a decrease of Euro 3 million year-on-year and a decrease of Euro 20 million sequentially, with the impact of lower sales offset by higher gross margin percentage and lower operating expenses.
Net income for the quarter was Euro 11 million, a decrease of Euro 10 million compared to the same period previous year which included a tax benefit. Net income increased Euro 3 million sequentially, despite a decline in income before taxes of Euro 20 million, reflective of a lower effective tax rate.
Cash flow from operating activities during the quarter was negative Euro 353 million, mainly due to inventory investments, non cash items in the income statement and seasonality. New external borrowings of Euro 375 million were made during the quarter to enhance liquidity and growth, resulting in total borrowings of Euro 604 million at the end of the quarter. Total cash balances at March 31, 2011 amounted to Euro 599 million.
Sony Ericsson estimates that its market share for smartphones during the quarter was approximately 5% in units and approximately 3% in value.
Sony Ericsson forecasts modest growth in total units in the global handset market for 2011.