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On January 18, 2006, Sony Ericsson Mobile Communications AB (Sony Ericsson)
announced that its pre-tax profit in the last quarter of 2005 (Oct '05 - Dec '05) was 206
million euros with total revenues of 2.31 billion euros. The key driver for this strong
performance was the worldwide success of its Walkman4 branded mobile phones
(Walkman phones), launched in the third quarter of 2005. The success of the Walkman
phones series on Sony Ericsson's profit and revenues was significant. The company
shipped an overall 16.1 million mobile phone units for the last quarter of 2005.


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Sony Ericsson was established in 2001 as a joint venture between Telefonaktiebolaget

LM Ericsson (Ericsson), Sweden, and Sony Corporation (Sony), Japan, with both
partners having 50% ownership in the company. Ericsson, a leading provider of
telecommunications equipment and related services to mobile and fixed network
operators globally, was established in 1876 and its headquarters were in Stockholm,
Sweden.

The company was present in 140 countries and it was estimated that 40 percent of all
mobile calls were made through systems supplied by Ericsson. Sony was established in
1946 in Tokyo, Japan, by Masaru Ibuka and Akio Morita.

sony ericsson faced problems during the initial period and posted a loss of US 136
million dollars in last quarter of 2001 and continued to make losses in 2002 and 2003.
The loss has so much impact that even Ericsson¶s officials threatened to defer
payments of the promised investment of US 500 million dollars for 2002.

In 2003 company showed turn aroun and EBIT of 39 million euros for third quarter of
2003 which is mainly due to introducton of new handsets models especially the lower
end models.

In 2004 company introduced digital camera phones having 1.3 megapixel camera
integrated with phone,which become success and the Sony Ericsson V800 was voted
the best 3g handset for 2004.

On dec 13,2005 the company raised its stake in Bejing Suohong Electronics Co Ltd.
From 10% to 74.5%. which helped them to consolidate its position in China,one of the
high growth mobile phone market in the world.
In February 2005, the company announced its 'mobile music strategy' at the 3GSM
World Congress, Cannes, France. The focus of the strategy was to integrate of high
quality digital music players into stylish mobile phones under Sony's world famous
Walkman brand.

The music phones were integrated with advanced feature that not only satisfy consumer
needs but also offered great oppurtunities for network operator to develop new and
exiting services.

W800 handset which was introduced in March 2005 enabled the user to listen to music
,handle phone calls and take great pictures and videos. It was the first product to
combine a mobile phone ,a music player and 2 mega pixel camera.

Sony Ericsson W800 and K750 become a success.

World wide phone market share in 2005.(in %)

Company Q4 Q3 Q2 Q1
NOKIA 35 33 32.5 30.7
MOTOROLA 17.7 16.3 17.7 15.4
SAMSUNG 12.1 12.2 12.7 12.6
SONY 6.9 6.3 6.3 6.2
ERICSSON

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The success of the Walkman phones was also seen as a major boost for Sony's
Walkman branded music players. Ever since the iPod was launched by Apple Computer
Inc. (Apple) in 2001, the Walkman had been steadily losing market share and popularity
in the music player market.

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The consolidated financial summary for Sony Ericsson Mobile Communications AB
(Sony Ericsson) for the fourth quarter and full year ended December 31, 2010 is as
follows:
 Q4 2009 Q3 2010 Q4 2010 FY 2009 FY 2010
Number of units shipped (million) 14.6 10.4 11.2 57.1 43.1
Sales (Euro m.) 1,750 1,603 1,528 6,788 6,294
Gross margin (%) 23% 30% 30% 15% 29%
Operating income (Euro m.) -181 63 39 -1,018 159
Operating margin (%) -10% 4% 3% -15% 3%
Restructuring charges (Euro m.) -150 -4 -3 -164 -42
Operating income excl. restructuring -32 67 43 -854 202
charges (Euro m.)
Operating margin excl. restructuring -2% 4% 3% -13% 3%
charges (%)
Income before taxes (IBT) (Euro m.) -190 62 35 -1,043 147
IBT excl. restructuring charges (Euro -40 66 39 -878 189
m.)
Net income (Euro m.) -167 49 8 -836 90

Average selling price (Euro) 120 154 136 119 146

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During 2010 Sony Ericsson completed its company-wide transformation programme,

improving its cost of sales ratio, reducing its global workforce by approximately 4,000
people in total, consolidating its facilities worldwide and decreasing annual operating
expenses by more than Euro 880 million. The total restructuring charges for the
transformation programme were Euro 381 million.
Units shipped during the fourth quarter were 11.2 million, a year-on-year decrease of
23%, consistent with the streamlining of the portfolio to focus on higher-end
smartphones. The sequential increase of 8%, related to seasonal factors, was
somewhat constrained by a lack of new product launches during the quarter. Average
selling price (ASP) for the quarter was Euro 136, a 13% increase year-on-year. ASP
decreased 12% sequentially, mainly due to price erosion, foreign exchange and product
mix. Sales for the quarter were Euro 1,528 million, a decrease of 13% year-on-year and
a decrease of 5% sequentially.
The gross margin for the fourth quarter was 30%, an increase of 7 percentage points
year-on-year and essentially flat sequentially, including the benefit of some one-time
items, relating to certain royalty matters and warranty estimates.
Income before taxes for the fourth quarter, excluding restructuring charges, was a profit
of Euro 39 million, an increase of Euro 79 million year-on-year and a decrease of Euro
27 million sequentially, mainly due to lower sales.
Sony Ericsson¶s net cash position as of December 31, 2010 was Euro 375 million. The
negative cash flow from operating activities for the quarter was Euro 128 million, mainly
due to cc#cccc cas well as payments related to
the transformation programme.
During the quarter term loan facilities of Euro 150 million matured and were repaid in
full.
Sony Ericsson estimates that the global handset market for the full year 2010 increased
slightly in volume to almost 1.2 billion units. The company estimates that the global
handset market for the fourth quarter was essentially flat year-on-year and its market
share for the fourth quarter was approximately 3% in units and approximately 5% in
value. Sony Ericsson estimates that its market share for the full year 2010 was
approximately 4% in units and approximately 6% in value.

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Sony-Ericsson is moving into the high-end segment of the cell phone market but it is
also losing total share because it just wants higher margins. That's not a longer-term
winning strategy. By focusing on the high-end alone, Sony-Ericsson is forcing
telecommunication companies to view it as a source that does not have a complete line-
up. It obviously won't be the first choice of the telecom companies looking for a wide
range of products. That's the first problem with its strategy. The second problem is even
more daunting. Even with its focus on the high-end market, Sony-Ericsson does not
have a product anyone can remember instantly, like Apple's iPhone. By the way, the
iPhone is all high-end and the volume is going up. c
Sony is still a big name in Asia, particularly in the developing countries. One thing they
can do easily to get back to the high end market is adopt Google's Android OS(very
small cost) and invest some money to create some decent apps. Then they can put the
new high-end phone in, let's say, China. If everything works out including they can make
good partnership with major wireless carriers, Sony can make good profit.c