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Ericsson Q1 Phone Shipments Off 7%

Stockholm, Sweden – Ericsson, through its joint venture company Sony Ericsson Mobile Communications, shipped 5.4 million units during the first quarter, a 6.9 percent decline, compared with the first quarter in 2002.

Sony Ericsson Mobile Communications saw first quarter phone dollar sales drop 28 percent, to $885.6 million, compared with $1.2 billion in the year-earlier three months. First quarter phone sales dropped 35 percent, compared with the fourth quarter of 2002.

The company, which cited lower volume and pricing pressure for its poor results, said it lost $114 million in the three months, ended March 31, compared with a slight profit in the same quarter in 2002.

Ericsson’s 50 percent share of income before taxes, or adjusted operating income in the joint venture, was posted as a $60 million loss for the first quarter of 2003, down from a $159.8 million loss in the fourth quarter of 2002.

However, with the planned phase out of TDMA products, shipments of TDNA decreased more than 90 percent, compared with the first three months of last year. At the same time, GSM unit shipments increased 30 percent, bolstered by the introduction of new models. The planned product mix shift, along with increased price pressure, has led to lower average selling price.

Ericsson’s phone sales to Sony Ericsson Mobile Communications in the first quarter reached $69.1 million, down from $144.1 million in the first quarter of last year. Royalties from Sony Ericsson Mobile Communications hit $6.7 million in the first three months, off from the $10.4 million reported year-on year.

Ericsson said its number of mobile subscribers continues to grow at a pace to exceed 1.5 billion within three years. An estimated 98 million mobile phones were sold during the first quarter, and the company anticipates a 10 percent increase in unit volume, with over 430 million units expected to be shipped in 2003.

However, the joint venture has lost market share – falling to about 6 percent globally, from 9 percent – since Sony and Ericsson merged their struggling phone businesses at the end of 2001.

At the same time, Ericsson continues to deal with difficult company-wide financials of its own. Consolidated Ericsson sales in the first quarter dropped 30 percent, to $3.1 billion, down from $4.4 billion in the year-ago period. The company, which currently has 61,000 workers, plans to cut this number to 52,000 by the end of 2003 and 47,000 by the end of 2004.

The company widened its operating loss to $717.9 million, from $400.9 million in the same period in 2002. Its net loss climbed to $517.5 million in the first three months, up from a net loss of $356.2 million year over year.