Sony Corp Ord (SNE)

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Sony Corporation (SNE)

Q1 2010 Earnings Call Transcript

April 16, 2010 8:00 am ET

Executives

Aldo Liguori – Head of Global Communications & PR, Sony Ericsson

Bert Nordberg – President, Sony Ericsson

Ulf Lilja – Outgoing CFO, Sony Ericsson

Rikko Sakaguchi – Chief Creation Officer, Sony Ericsson

Kristian Tear – EVP & Head of Sales and Marketing, Sony Ericsson

Analysts

Matthew Hoffman – Cowen & Company

Edward Snyder – Charter Equity Research

Richard Kramer – Arete Research

Jeff Kvaal – Barclays

Daniel Djurberg – Nordea

Shahid Hussain – Citigroup

Mark Sue – RBC Capital Markets

Mats Nystrom – SEB

Mark McKechnie – Broadpoint Security

Phil Cusick – Macquarie

Thomas Langer – WestLB

Ashwin [ph] – JP Morgan

Presentation

Operator

Welcome to Sony Ericsson’s Media and Analyst Conference Call. Should you be late for this call, please log on to www.sonyericsson.com/press or www.ericsson.com/investor or www.sony.net/ir. (Operator instructions) As a reminder, replay will be available one hour after today’s conference.

Aldo Liguori, Head of Global Communications and PR for Sony Ericsson will now open the call.

Aldo Liguori

Thank you operator. Hello everyone, good morning, good afternoon and welcome to our first quarter 2010 financial results call. We will be making forward-looking statements during our call today. These statements are based on our current expectations and certain planning assumptions, which are subject to risks and uncertainties. The actual results may differ materially due to factors mentioned in today’s press release and discussed in this conference call.

We therefore encourage you to read about these risks and uncertainties in our report. I would now like to hand the call over to Bert Nordberg. Bert, please.

Bert Nordberg

Good morning everybody. We are stuck in New York, so it’s good morning for us and good afternoon to many of you people, and welcome to our first quarter business update presentation. I am extremely pleased to be able to announce that Sony Ericsson returned to profitability in the first quarter. This was a direct result of the transformation program, which we are working through for the past two years and a positive reception of course of our new products Xperia X10 and Vivaz.

ASP rose to 134 Euros during the quarter, because both the new products and also strong sell-through of the existing portfolio, especially Satio line. Foreign exchange fluctuation did possibly impact ASP, however the majority of the rise was due to the existing and new products performing well. The improved cost structure created by the transformation activities have had a positive effect on both gross and operating margin. We still have way to go before we have our operating margin where we need to be, but today’s results shows that we are on the right track and the restructuring program is beginning to bear fruit.

There are now signs of positive momentum in the global handsets market. We believe the inventories are now clear, so the market conditions are much more favorable than a year ago. However, we continue to see uncertainties in the market. Particularly in relation to the global macroeconomic environment and therefore we continue to focus the global handsets market, we would see a slight growth in 2010.

I would now like to update you on a couple of changes to the senior management team of Sony Ericsson. On today’s call, for the first time, we have our new Executive Vice President and Head of Sales and Marketing, Kristian Tear. Kris has now replaced Anders Runevad and will be joining me during the Q&A session, and answer your questions that are service-related. Try to be nice to him, it’s the first time please. And another change that was approved by the Board meeting yesterday is the appointment of the new CFO, William Glaser Jr., we call him Bill. Bill joined us from Sony Corporation and takes over officially today. Ulf Lilja, our outgoing CFO will remain in the company until July 31st, to ensure a smooth handover and has to see with implementation of the final stages of the transformation program.

It will be Ulf that runs through the numbers today, answer questions about the Q1 results. Bill will come back on the Q2 results. During the quarter, Sony Ericsson launched six new handsets including three new GreenHeart model, Aspen, Elm, and Hazel as well as the widely anticipated Xperia X10 and Vivaz, which both shipped toward the end of the quarter and have been well received by the operator. We also launched Urbano Barone with KDDI in Japan, a very user-friendly model with high graphic menus, phone choices to enable improved legibility, large easy-to-push buttons, which makes character input easier and a digital sound enhancement engine to improve voice audibility.

At the Mobile World Congress in February, we announced three compact powerful touch screen phones, Vivaz Pro, Xperia X10 Mini, and Xperia X10 Mini Pro. This was shipped to us at the end of the second quarter. And we also continued strategy of enhancing the appeal of the term portfolio to an existing range – to an existing range of accessories. In Q1, we announced a number of headsets plus the MS450 speaker that offer a rich on-the-go stereo experience.

I think Mobile World Congress will prove to be the turning point for Sony Ericsson. We held a very successful precedent on the Sunday evening, which many of you attended, announced a great portfolio for the first half of the year and carried out the momentum with a series of positive operative meetings. As promised, we started shipping both Xperia X10 and Vivaz to the end of the quarter and both phones contributed to the increased ASP and gross margin, which were very positive signs, all true all new touch screen phones have been well received by the operator customer, the initial consumer reaction has been positive. It’s too early to clearly see what future sell-through would be like in the weeks to come.

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