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Sony Corporation (NYSE: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

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.

As always, we are cautious of giving guidance for the future quarters, but we will work extremely hard to ensure that the company stays above breakeven point going forward. As I said, initial reaction of Xperia X10 has been good. There were fantastic scenes of people queuing around the block in both Japan and Sweden when the phone first went on sale there, and other markets also getting really positive boost from the launch of these flagship models. We have also seen a positive impact of the first quarter product announcement on existing model with Satio line particularly continuing to serve well through the quarter.

Earlier this week, we announced two new phones, Spiro with Walkman and Zylo with Walkman. That was kind of aimed to the mid and low end of the market, particularly in Latin America and parts of Asia Pacific, and in case of Zylo, it will help drive volume in Western Europe. This phone illustrates Sony Ericsson’s strategy of offering both richer consumer experience and unified design language in the 3DN Edge [ph] model at a lower price point.

During the first quarter, we also renewed our global sponsorship for Women’s Tennis Association, which we now run through the end of 2012. The recent Sony Ericsson Open in Miami which was the first tournament I ever attended illustrated a fantastic value this property can bring to build in the brand engagement at the local level and given the consumer make up to believe experience.

Looking forward, we are also gearing up overall as official handset sponsor of the FIFA World Cup, working closely with one our parent company, Sony. This activation would also give all of our markets the opportunity to engage with consumers to compelling content, great giveaways, and CRM tool to build continuous engagement and bring consumer closer to the brand. Although the company returned to profitability in the quarter, the transformation program will continue as planned. Operating margin of 1.4% is obviously not where we need to be to build sustainable profitability.

We will continue to work through the introduction as promised to the start of the program, so far total around of 3,150 employees have left the company, of the initial target of 4,000. We also continued to review our organization structure and delayed organization to build flatter, leaner, and more responsive company.

Looking forward, we will continue to focus on profitability, but as our financial recovery becomes more robust, we will also begin looking to capture value market share. We are committed to working through the transformation program to deliver the 8% [ph] cost of sales targets needed to ensure we deliver a healthy operating margin again. A focus on quality must underpin everything we do in the organization and I have seen positive sign of improvements since I have joined the company, but I am not yet satisfied. We will continue to develop Sony Ericsson’s user experience platform, our UXP, across the portfolio in order to bring a differentiated and appealing user experience to consumer.

And following the completion of the transformation program, we will create an organization that put tight financial management and operational excellence at the core of the business principle, so the mistakes of the past are not repeated. Underlying all these objectives is our core brand principle of making people smile. People when they pick up a Sony Ericsson phone must be entertained by it and it has to be – find their lives made easier. They must feel inspired to reach out and strive new experience to intuitive signature application and great user experience.

Fundamentally, our ability to deliver on these promises to keep the success of our business. I hope the news of our back to profitability has made you smile and I hope that our outgoing Chief Financial Officer, Ulf Lilja, will go through the numbers and that will make you smile even more.

Ulf Lilja

Good morning everyone. Let me go through some key financials for the first quarter 2010. Units shipped in the quarter were 10.5 million, a decrease of 28% compared to the same period last year, reflecting the streamlining of the portfolio over the past 12 months to focus on higher-end phones.

Sales for the quarter were 1,405 million Euros, a decrease of 19% year-on-year. Gross margin rose both year-on-year and sequentially, reflecting a more favorable product mix and the result of cost of sales improvements in the past year. The gross margin in the quarter also includes the resolution of certain royalty matters, the positive impact of which was basically offset by a variety of other items.

Income before taxes for the quarter excluding restructuring expenses was a positive 21 million Euros, illustrating the positive impact of the cost reduction programs. During the quarter, we booked some 3 million Euros restructuring expenses, bringing the total restructuring charges taken to date at 342 million Euros for the transformation programs started in mid 2008.

As of March 31st, 2010, Sony Ericsson retained a net cash position of 563 million Euros, this compared to $620 million Euros at the end of 2009. Lastly, during the first quarter of 2010, Sony Ericsson obtained additional external funding of 150 million Euros, guaranteed by the parent companies on a 50/50 basis.

That concludes my comments, and I will now hand back to Aldo.

Aldo Liguori

Thank you Ulf. Operator, we are ready to open the Q&A session.

Question-and-Answer Session

Operator

(Operator instructions) We will take our first question today which comes from Matthew Hoffman from Cowen & Company. Please go ahead.

Matthew Hoffman – Cowen & Company

First off, good luck in your future endeavors. Bert highlighted the late quarter launch of a couple of models, including the X10, is that part of what was behind the AR increase in the quarter? And also, I noticed that inventory was up a little bit, is that more of a bullish sign that you are willing to start stocking work in progress or finish goods that about to ship? Thanks.

Bert Nordberg

Yes, first of all, thank you for your kind remarks. And yes, I think it’s basically yes to both your questions, and also extend through up the receivables in March, but also the Vivaz product was well received and a few other products. On the inventory side, yes, we have been ramping up the production level for quarter two during the quarter one. That has increased inventories, but despite that, I was very happy to note that our efficiency indicators, things like DSO, inventory days actually improved quite a bit during the quarter, helping offset them the fact that we needed some increased working capital. So, on a general note, I think actually we closed the quarter, with another quarter doing well in working capital management from my point of view.

Matthew Hoffman – Cowen & Company

So, you expect that OCF trend to reverse in 2Q perhaps?

Bert Nordberg

Well, I think in January, I was a bit cautious about if we could keep the very good level from December through to March and we even improved up on them, but now we are down to very, very world-class competitive levels. So, this time I think we should really expect that we needed to see some of the ratios turn a little bit. So, I don’t think we should expect a big improvement on that side in quarter two.

Matthew Hoffman – Cowen & Company

Excellent, thank you.

Operator

Thank you. We will now take our next question today, which comes from Edward Snyder from Charter Equity Research. Please go ahead.

Edward Snyder – Charter Equity Research

Thank you very much. First, a housekeeping question, can you list how many Walkman phones were sold in the period, how many Cybershot phones? And then, to your market share, you saw very steep decline in Europe or in the European market, can you just highlight a couple of factors of why you think this is the case, was it economic, was it decline in future forms as you ramp smart phones, more competition, just can you help us get a feel around that, and do you think it will persist and if not, and do you think that’s going to turn around and what will drive it? Thanks.

Bert Nordberg

Lilja?

Ulf Lilja

Yes, so during the first quarter, we sold 5.4 million walkman phones, and we sold almost 1 million Cybershot phones.

Bert Nordberg

Maybe this is about, maybe I should comment on the market share situation. As I have said constantly since I started that, we had, had a focus on profitability before market share to ensure that we come on a stable ground. That has worked. We have also closed on a number of phones, which wasn’t contributing to the profit, which means that we expect that we are a little bit more on stable ground now. And during the second half of the year, we launched a number of phones on price levels where the volumes are higher.

Edward Snyder – Charter Equity Research

But most of you exit from some of the lower cost future phones that weren’t as profitable, as you transition to more of smart phone rich portfolio?

Bert Nordberg

Yes, we have said that we hunt the value market share, but we have never said we will exclude the lower-end markets especially when it comes to 3D and Edge phones.

Edward Snyder – Charter Equity Research

Great, thank you very much.

Bert Nordberg

Thank you.

Operator

Thank you. We will now move to our next question today, which comes from Richard Kramer from Arete Research. Please go ahead.

Richard Kramer – Arete Research

Yes, Bert, I guess I would like to follow-on to that question just asked, how important is it longer term for Sony Ericsson to get scaled, and even since you have come onboard, you have been talking about getting Sony more involved in the business and we are waiting to see some signs of that, when might we see that by the end of the year? And I guess one other question about the management team and with Ulf departing, how do you regard the building of a sustainable business when it seems that every two or three years, you have executives rotating either in or out that to the parent companies, and at what point do you think you would start to build a management team that wouldn’t either be drawn from the parents or go back to the parents and be Sony Ericsson’s own management team?

Bert Nordberg

We wish to alter the question on – you answered the question yourself regarding the products cooperating with Sony. As I said during the year and I confirm that, that will happen, and then regarding the management team, sort of, there is – let’s say there has been sort of a rotation strategy where people go in and out because we are seen by our parents as a normal division in their company. But if you look at the management team now, I think my Chief Creation Officer, Rikko Sakaguchi, has been in the company since we started. Kristian Tear has been in the company for five-and-a-half years. So, I agree with you. It is beneficial to have a stable management team, and I am aiming to get that.

Richard Kramer – Arete Research

And can you give us any detail on what sort of Sony-related products we might be able to see by the end of the year?

Bert Nordberg

No, not for the moment. You will get it soon.

Richard Kramer – Arete Research

Okay, thanks.

Bert Nordberg

Thanks.

Operator

Thank you. We will now move to our next question today, which comes from Jeff Kvaal from Barclays. Please go ahead.

Jeff Kvaal – Barclays

Yes, thank you very much. I was wondering if you wouldn’t mind commenting on a little bit more detail about your margin targets, obviously an impressive return to back this quarter, wondering now where you would like to take the gross margin if we should expect that to hit higher as the mix improves, and what your intermediate term targets are for the operating margin as well? Thank you.

Ulf Lilja

Yes, maybe, Ulf here. Yes, we talked a little bit about that with some of you in the last call that the levels we sort of came into during 2009 flew us 8% in Q1, then we ended the year with 27% excluding restructuring and now 30%. We then discussed that we saw it difficult to model a company that could make money to income of 25%. As we can see in our income statement, we are still working on the OpEx targets coming down. So, even if you are 30%, we have this 1% to 2% [ph] operating margin, but the answer I mean, is about a 25, and this company was some time ago before, when we operated about 30. So, I think that will give you maybe some indication where we think we should be. Yes, I think that’s also your question right.

Bert Nordberg

I think also that we have never made it a secret that we think that this company should operate at, at least 10% margin, operating margin going forward. That is what we aim for.

Jeff Kvaal – Barclays

Okay. And it sounds though the bulk of that then from here comes from reducing the OpEx as a percentage of sales, the operating margin is, you know, above 30 now and reasonably is that a fair assessment?

Bert Nordberg

No, no. I think that you will see us moving towards selling a little bit more also.

Jeff Kvaal – Barclays

Okay. Great. So, some higher gross margins to come?

Bert Nordberg

Yes.

Jeff Kvaal – Barclays

Great, thank you very much.

Operator

Thank you. We will now move to our next question today, which comes from Daniel Djurberg from Nordea. Please go ahead.

Daniel Djurberg – Nordea

Thank you very much and good morning. Congratulations to the profitable quarter. I have a question to Ulf on the cash flow where one item reconcile net income to cash a negative Euro 44 million. Can you explain this, what’s in the quarter?

Ulf Lilja

Yes, it’s mainly related to our tax accounts that sort of have this non-cash effect.

Daniel Djurberg – Nordea

So, it was a one-time issue?

Ulf Lilja

Maybe a bit too much to say that, but it happened to be the specific impact here, quite a non-cash effect. So, probably that will not hit us high in the future, but you know, these tax accounts have quite some tax assets and the movements on them. So, that’s the best guidance I can give that I think.

Daniel Djurberg – Nordea

Yes. And a follow-up on the cash flow exchanges and operating net asset was a 72 million in payout. Ulf, how much was coming from previous restructuring charges, and how much is left to pay out from the restructuring charges down?

Ulf Lilja

On the first question, there was some 20 million impact from the restructuring charges, and we estimate, it’s hard to say what really the cash outflow will become of these expenses, but I think at least another 180 million to go in cash outflow, but maybe spread out not only under 2010, because of some leases etcetera, but over 10 and 11 I would estimate.

Daniel Djurberg – Nordea

Okay, thank you very much. I will try a follow-up question later. Thanks.

Ulf Lilja

Thank you.

Operator

Thank you. We now move to our next question today, which comes from Shahid Hussain from Citigroup. Please go ahead.

Shahid Hussain – Citigroup

Yes, hi. Thanks for taking my question. I just wanted to ask a little bit more on your operating system going forward. You're obviously still supporting quite a few, given your unit number. I think, in terms of sort of things, you are going to be losing more share going forward. I just wondered if you've got any more ideas and can give us a bit more color on this. Thanks.

Bert Nordberg

Yes, this is Bert. As I said, we have lost some share during this quarter when we focused on our value strategy in going up there, and we have no intention of going further down.

Shahid Hussain – Citigroup

Yes, and in terms of supporting all platforms, are you going to continue to do that, or are you going to make a choice sometime during this year?

Bert Nordberg

I think we have been quite clear on the main operating system we have. It is of course Android, but we look at sounds, we look at the total experience and the total ecosystem and operating system is becoming a less important part of that. And it isn’t as the financial markets try to believe, it isn’t that expensive to keep operating system up and running according to my view. So, we have no change to the strategy, but the main operating system we are working with is Android.

Shahid Hussain – Citigroup

Okay, thank you very much.

Bert Nordberg

Rikko, do you want to comment?

Rikko Sakaguchi

Yes, exactly. We continued to have Android and Symbian. And we have number of products in Windows Mobile, because there are demands. And as Bert said, our primary focus is on our user experience platform, which works with all this open system and it’s really the ecosystem, a leverage that we are really looking at, and then we combine our signature applications, grid designs, service plug-ins, ease of use and there are a number of things that sit on an open OS, and we are very confident that we can manage this in a very cost-efficient manner.

Bert Nordberg

Okay, thanks Hussain.

Operator

Thank you. We now move to our next question today, which comes from Mark Sue. Please go ahead.

Mark Sue – RBC Capital Markets

Thank you. Recognizing you will have value growth this year, should we also plan on year-over-year unit growth for Sony Ericsson? With most of the major restructuring behind us, does it get compressible harder to reach your new operating margin objectives, is 10% a reasonable target for operating launches, and if so, by when?

Aldo Liguori

I am sorry, this is Aldo Liguori here. Could you please repeat the question. We could not hear it almost at all. Please repeat the question.

Mark Sue – RBC Capital Markets

Sorry about that. Recognizing that we will have balanced growth –

Aldo Liguori

I am sorry, I am sorry we cannot hear you.

Mark Sue – RBC Capital Markets

Unit growth.

Operator

Thank you. We will now move to our next question. We will now take a question from Mats Nystrom from SEB. Please go ahead.

Mats Nystrom – SEB

Yes. Hello and congratulations, a good quarter. You gave us a few data points in terms of Cybershot and Walkman phone volumes, could you confirm that smart phone shipments were more than 2 million units in the quarter? And secondly, looking into Q2, how optimal would you say the product portfolio will be at that time? Is it virtually optimal, or is it more to do in terms of improving mix later during the year? Thank you.

Kristian Tear

Yes, this is Kristian Tear here. As I said, we have been focusing on higher handsets and mid phones, and our best sell is during the quarter were (inaudible). And I will not disclose how much was smart phone out of that, but we are focusing obviously on the high and mid segment going forward, and we have made several announcements on quarter two with X10 Mini and X10 Mini Pro, and Vivaz Pro that we will be starting shipping at the end of quarter two.

Mats Nystrom – SEB

And the second question – how, in terms of kind of optimal product portfolio, will there be further improvements in product mix, i.e., towards smart phone during the second half versus Q2 do you think?

Bert Nordberg

I think that the product portfolio improves next quarter, especially at the end of the quarter, but I don’t think we will ever say that we have an optimal portfolio, that will take a while till we get those to say that.

Mats Nystrom – SEB

Right, I see. Thank you guys.

Bert Nordberg

Thank you.

Operator

Thank you. We now move to our next question today, which comes from Mark McKechnie from Broadpoint Security. Please go ahead.

Mark McKechnie – Broadpoint Security

Great. Thanks much. Two questions. One is, on the call, I joined a little late, but you said something about funding from your parent company is 150 million Euros. Maybe you could talk about that if you, you know, when you plan to draw that down or why you thought you needed to do that. And then second, I kind of heard Mark Sue's question on the operating margin. Do you still – or when you think you can hit the 10% operating margin level? Thanks.

Ulf Lilja

Yes, on the funding issue, yes, we decided to sign up two more facilities in the first quarter, a little bit with the backlog that we have a mixed maturity on the existing portfolio of funding, and we thought we could get some reasonably good terms there in the year. So, we decided to do that, although it raised our funding capability then to 626 [ph] facilities, and I think 416 [ph] of them, and these two of them, they were term loans. For the rest of the year, given of course that we, as Bert mentioned, plan to operate above breakeven. I think that we are now very well settled with our balance sheet, both on the general note equity ratios of liquidity. So, the rest of the year, we will now more manage the expiration of various maturities and optimize our funding. And I think we needed some parental support for these two also in light of the terms, but of course, that’s not the purpose of the funding gain. We will see how that one plays out also during this year when we optimize the funding.

Mark McKechnie – Broadpoint Security

Great, thanks. And then on the operating margin, do you have any targets for getting back to double digits or are there any goals that you are looking at?

Ulf Lilja

Well, of course, we plan to do this as soon as we possibly can, but as Bert said, we take one step at a time, and we at least plan to enjoy a few days the fact that we have reached a profitable quarter, and we are cautious to see how we can take that to further heights.

Mark McKechnie – Broadpoint Security

Great, thank you.

Operator

Thank you. We will now move to the next question today, which comes from Phil Cusick from Macquarie. Please go ahead.

Phil Cusick – Macquarie

Hi, thanks for taking my call. First of all, there was a smart phone question a few minutes ago. Can you give us an actual smart phone count in the quarter? And then, second, just a housekeeping question – you mentioned that gross margins benefited from a royalty agreement decision. Can you talk about how that affects the gross margins? And then, as you think about sort of the real question here, as we think about the mix going forward in units, we've been paring back on unprofitable devices for about a year now. And is this about done in terms of the paring back on profitable devices and the business starts to scale up from here, or are we still moving through this process where we think sort of the unit shipments continue to go down going forward? Thanks a lot.

Ulf Lilja

Let me start with the royalty comment, in the release, as I said in my comments here, on a bottom line perspective, this is offset by several other items, but on a gross margin level, without sort of going to shoot specific numbers there, we are talking about 1 million Euros levels that percent low digit numbers – low double digit numbers. That’s what the difficult term, sorry. And then you can do the math and that’s the comment I would like to give on that one.

Phil Cusick – Macquarie

Thanks.

Bert Nordberg

We can’t comment on the smart phone, we decided not to do that now. We will see next quarter how we are. We have an operating model where we better now control the product and the product profitability. There is no aim from the management of the company of not growing. The aim was of course that we prioritize profitability and come back to a level where you start to pick out your own destiny a little bit. But now, when we have worked hard to get on just head above the waterline as we say, we of course look at the portfolio and look of growing the portfolio in the segment where we think it’s profitable to grow the portfolio. We don’t have any aim of decreasing the volume going forward.

Phil Cusick – Macquarie

So, as we think about the 1Q shipments, how much of those are still sort of legacy unprofitable shipments? Can you give us any sort of – quantify that at all?

Bert Nordberg

No, but I would tell you when they are all gone someday.

Phil Cusick – Macquarie

Okay. Thanks for your time.

Operator

Thank you. Thomas Langer from WestLB have our next question. Please go ahead.

Thomas Langer – WestLB

Yes, thanks for taking my questions. I actually have question number one, it is more kind of a clarification. I didn't quite get your comments on the negative entry in the cash flow statement. I think you said something about taxes, but it seems like an unusually high amount, given the number in the income statement. So, would you just reconfirm that your gross margin was not mutually impacted by a one-off non-cash positive item in the P&L? And then secondly, I have a question on your distribution strategy of existing and maybe new products for the North American market. Maybe you can update us on what you see, how your talks with operators are progressing and what the chances are that more consumers in the US can get hold of Sony Ericsson devices?

Ulf Lilja

I will start with the financially related questions there. Yes, I think we it is a bit higher number in reconciliation to cash at least negative than we typically have, but it is related to our deferred tax assets and there are movements basically nothing else. And on the royalty, it’s low-double digit number in 1 million Euros that I would like to mention as to the impact on the margins.

Bert Nordberg

Kristian?

Kristian Tear

Yes, so with the distribution strategy for the US, we do work with operators around the globe and we also do work with them closely in the US and we continue to work with operators in the US. We have lot of discussions with agency on the new portfolio already and we are also working with non-operator distributors in the US mainly Best Buy. So, that will be our strategy also going forward.

Thomas Langer – WestLB

So if I might, add maybe just one quick question here. Have you made any noticeable progress in the US, or is it kind of you know, work-in-progress with Nokia [ph] results on the horizon as of today compared to maybe three months ago?

Bert Nordberg

Yes, we are making progress in the US. The new products have not yet been launched in the US, so we are in cooperation with the operators of getting them to the market, and we expect them of course to be successful in the US.

Thomas Langer – WestLB

Thank you.

Aldo Liguori

Operator, I think we are ready to take a final question, please.

Operator

Thank you sir. We will now take our last question which comes from Rod Hall from JP Morgan. Please go ahead.

Ashwin – JP Morgan

Yes, hi. Can you hear me?

Bert Nordberg

Yes.

Ashwin – JP Morgan

Yes, hi, this is Ashwin [ph] speaking on behalf of Rod Hall. I was just wondering if you could give us more detail on the FX impact on ASP. I mean, we are kind of interested to know the uplift in ASP due to FX?

Ulf Lilja

Yes, Ulf here. We estimate that the impact sequentially from positive 5 Euros on ASPs. When we look forward, of course, we don’t know where the rates will go. So, it isn’t good for me to speculate on that. And second question from you, sorry? Maybe that was about the future ASP on there, sorry?

Ashwin – JP Morgan

I mean, yes, I was interested in knowing the FX impact on ASP in this quarter as well?

Ulf Lilja

You mean on, sorry, on ASP or –?

Ashwin – JP Morgan

Yes.

Ulf Lilja

5 Euro [ph] quarter-on-quarter positive, year-on-year negative 2 [ph].

Ashwin – JP Morgan

Okay.

Ulf Lilja

Best estimate.

Ashwin – JP Morgan

Yes, thank you.

Aldo Liguori

Operator, I believe that concludes the call.

Operator

That concludes today’s conference call. Should you have any additional questions, please contact our PR and IR team. I now hand it back over to our Chairman for any additional remarks.

Bert Nordberg

Thank you very much, operator. Ladies and gentlemen, thank you for joining the call. Our respective PR and IR teams at Sony Ericsson and Sony Ericsson are available to help clarify any additional points. Thank you very much.

Operator

That will conclude today’s conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.

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Source: Sony Corporation Q1 2010 Earnings Call Transcript
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