Sony Corporation (SNE)
Q2 2010 Earnings Call Transcript
July 16, 2010 2:00 am ET
Aldo Liguori – VP & Head of Global Communications & Public Relations
Bert Nordberg – President
Bill Glaser – CFO
Rikko Sakaguchi – EVP and Chief Creation Officer
Kristian Tear – EVP and Head of Sales & Marketing
Mark Sue – RBC Capital Markets
Johannes Schaller [ph] – Deutsche Bank
Rod Hall – JPMorgan
Richard Kramer – Arete Research
Anuj Krishan – UBS
Patrick Standaert – Morgan Stanley
Janardan Menon – Liberum Capital
Mats Nystrom – SEB Enskilda
Kulbinder Garcha – Credit Suisse
Andrew Griffin – Bank of America/Merrill Lynch
Didier Scemama – RBS
Olof Swahnberg – Reuters
Zahid Hussein – Citigroup
Thomas Langer – WestLB Equity Securities
Nicolas von Stackelberg – Macquarie Research
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(Operator instructions) as a reminder, a replay will be available one hour after today's conference. Aldo Liguori, Corporate VP and Head of Global Communications and PR for Sony Ericsson will now open the call.
Hello, good morning, and welcome to our second quarter call today. With me here today are Bert Nordberg, President of Sony Ericsson, Kristian Tear, Executive Vice President, Rikko Sakaguchi, Chief Creation Officer, Bill Glaser, Chief Financial Officer and Ulf Lilja, our outgoing Chief Financial Officer. Today, we will be making forward-looking statements during the call.
These statements are based on our current expectations and certain planning assumptions, which are subject to risks and uncertainties. The actual results may differ due to factors mentioned in today’s press release and discussed in this call. We therefore encourage you to read about these risks and uncertainties in our press release. I would now like to hand the call over to Bert Nordberg.
Good morning and welcome to the Sony Ericsson business update for the second quarter. As you will have seen from our announcement this morning, it has been another good quarter for the company, continuing the positive momentum we saw in the first quarter, with income before taxes, excluding restructuring charges, increasing to EUR63 million.
We saw the company generate a positive cash flow from its operating activities; another key indicator that Sony Ericsson has turned the corner and is heading in the right direction. The good results were underpinned by a strong sales of our new, higher value Smartphone portfolio that saw an average selling price of EUR160 in the quarter. We believe that the challenging market condition will continue in the second half of the year, and see no evidence to make us revise our earlier market forecasts of a slight global volume growth in 2010.
However, we believe that the Smartphone sector of the market will grow more than 10% in volume this year and see a good business opportunity for Sony Ericsson to target this area of the market. Sony Ericsson’s primary focus has been to target the value sector of the market with a wide range of smartphones across a broad range of prices and product propositions.
This strategy is already beginning to bear results, and we now estimate that value share of the market to be double our volume share. And roughly 50% of the revenue this quarter is generated by Smartphone sales.
In the second quarter, we announced and launched a number of exciting products. The Xperia X10 launched in more markets, including South Korea, the Xperia X10 mini and mini pro started shipping and, in Japan, we launched two new products with KDDI.
We also announced five new handsets that we ship in the third quarter, all focused on the mid-tier of the market. This clearly illustrates that we are not solely focused on the high-end sector, but intend to maintain a broad portfolio that address different price points in the market. Three of the new phones announced in the second quarter were announced at the Communication and Telecoms Show in Singapore. These include the Xperia X8, the lower priced Android touch screen device that brings the unique X10 mini for – new user interface to a lower price point, and the first touch screen Walkman phone that brings touch screen functionality to our global recognized mobile phones – music phones, sorry.
At Communication, we also announced the Android upgrade schedule for Xperia X10, Xperia X10 mini and mini pro. This will not only upgrade the Android platform during the third quarter, it will also bring HD video to Xperia X10 in the third quarter and DLNA connectivity to the devices in the fourth quarter, further delivering in our promise to make it a most entertaining Smartphone.
The key element of the company is to return to profitability with the launch of our new Smartphone portfolio. This had been added with the announcement – added to with the announcement of the Xperia X8, and our portfolio now covers a range of platform, form factors, screens and product sizes, plus different product propositions.
In the second quarter, we launched the Xperia X10 mini and mini pro, which have been both well received by operators and consumers. Although the phones only came to market in the end of the quarter, the X10 mini is already the best initial launch Sony Ericsson phone ever had in the Nordics, and the number one Carphone, Warehouse Phones, phone. It’s early days still, but the initial media reviews and consumer – and customer responses have been very good.