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Sony Ericsson Reports 48% Drop In Net Income

Stockholm, Sweden — Sony Ericsson Mobile Communications reported higher sales but a 48 percent drop in net income for the first quarter, ended March 31.

Net income for the quarter was $211.9 million, down 48 percent from $404.6 billion in last year’s opening quarter. Operating income was down to $288.3 from the previous year’s $551.2 million. Gross margin was down 1.1 percent, to 29.2 percent, due to “a less favorable product mix,” according to the company, while the average selling price was $192.76, down from the prior year’s $213.47.

However, sales increased during the quarter to $6 billion, up from $4.65 billion in last year’s first quarter. Units shipped in the quarter were 22.3 million, a 2 percent increase compared with the same period last year of 21.8 million.

Income before taxes for the quarter was $307.5 million, down from the previous year’s $576.7 million. This represented a decrease of 47 percent compared with a year ago, due to higher R&D investments as a percentage of sales, and reflecting that last year’s first quarter was “a particularly strong first quarter for the company,” Sony Ericsson said.

“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 multimedia 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 Cyber-shot range with models such as the C702 and C902.

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