Sony Ericsson Swings into Loss on Lower Handset Sales/Margins

Sony Ericsson has swung into a loss for the fourth quarter - citing lower handset sales and profit margins. The company lost €187 million (US$245 million) in the quarter, compared to a profit of €373 million a year ago. The firm also reported a full year loss of €73 million (US$96 million) - compared to a profit of €1.1 billion (US$1.45 billion) a year ago.

Sales for the fourth quarter came in at €2.9 billion (US$3.8 billion) - a decline of 23% on the €3.8 billion a year ago.

Gross profit margins slumped from 31% in 2007 to 22% in 2008 - and the firm recorded a margin of just 15% in the fourth quarter of 2008.

Units shipped in the quarter were 24.2 million, a sequential decrease of 6% and a year-on-year decrease of 21%.

The average selling price (ASP) for Sony Ericsson in Q4 2008 was €121 (US$159), an increase sequentially but a decrease year-on-year. The sequential increase of ASP was due to a positive impact of foreign exchange rate fluctuations and to the sale of a higher proportion of high-end models.

Sony Ericsson's estimated market share for Q4 2008 is maintained at around 8%.

"In economic terms, 2008 has been a tumultuous year with world markets experiencing a serious downturn. The mobile phone market has been greatly affected by this and as expected, the fourth quarter continued to be very challenging for Sony Ericsson. Our business alignment is progressing as planned, with the full effect of annual savings of around Euro 300 million expected by the second half of 2009. We foresee a continued deterioration in the market place in 2009, particularly in the first half," said Dick Komiyama, President, Sony Ericsson.

The additional cost saving measures initiated by Sony Ericsson are aimed at reducing operating expenses by a further €180 million (US$237 million) annually, with the full effect expected at the end of 2009. Sony Ericsson currently estimates that the cost for the additional restructuring activities will be covered by the previously announced €300 million (US$395 million) restructuring charges.

Sony Ericsson estimates the 2008 global handset market as being around 1,190 million units or around 6% growth from 2007, compared to the company's previous forecast of around 10%. Sony Ericsson forecasts that the global handset market will contract in 2009 and that the industry ASP will continue to decline.

Posted to the site on 16th January 2009