Sony Ericsson has posted a Q2 profit of just EUR6 million (US$9.48 million) compared to a profit of EUR315 million (US$499 million) a year ago, and a profit of EUR184 million (US$291 million) in Q1. Sales fell from EUR3.112 billion (US$4.93 billion) a year ago to EUR2.82 billion (US$4.47 billion) in the most recent quarter although handsets sales volume were almost unchanged.
The company also said that it expects "challenging market conditions" for the remainder of the year and issued a specific warning about the third quarter.
Mobile phones shipped in the quarter were 24.4 million, in line with the company's warning last month of 24 million units. Gross margin also decreased compared with a year ago reflecting a less favourable product mix, with particular impact in Europe, and increased price competition in general. Income before taxes for the quarter decreased compared to the second quarter of 2007 for the same reasons, as well as due to higher R&D investments as a percentage of sales.
Average selling price (ASP) for Sony Ericsson decreased both sequentially and year-on-year due to the impact of a greater proportion of lower priced phones in the product portfolio, as well as increased price competition in the market for mid- to high-end phones. Market share for the second quarter is estimated to be around 8%.
"We are aligning our operations and resources worldwide to meet an increasingly competitive business environment and to help restore our capability for profitable growth. The measures we are taking are aimed at becoming a faster, more agile and more cost efficient organisation that can continue to create innovative products that excite consumers," said Dick Komiyama, President, Sony Ericsson. "Our target is to achieve a reduction in operating expenses of Euro 300 million annually, with the full effect expected to appear within a year. We estimate that our restructuring charges will be of the same magnitude as our reduction in operating expenses, and we will incur such charges as our measures are implemented."
Sony Ericsson forecasts that the global handset market for 2008 will grow at a rate of around 10% from more than 1.1 billion units in 2007, with continued decline in industry ASP. The majority of this growth is expected to be in emerging markets where lower priced phones dominate.
Posted to the site on 18th July 2008
Posted to: www.cellular-news.com/story/32498.php