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25 April 2024

Sony Ericsson Q4 losses bigger than expected

By Reuters

World number three mobile phone maker Sony Ericsson posted a much bigger than expected quarterly loss and announced plans for further cost cuts, including jobs, as it braced for even weaker demand.

President Dick Komiyama forecast global demand would shrink at least five per cent this year, and said market share was less of a priority than preserving profitability. While Sony Ericsson was the first of the big handset makers to release fourth-quarter earnings, it was only the third of the top four to react to crumbling sales in the past few days, after Motorola and Samsung.

The number one mobile phone maker, Nokia, will report on Thursday.

Sony Ericsson made a €261 million (Dh1.26 billion) pretax loss in the three months to end-December, versus a mean forecast in a Reuters poll for a 77 million loss. A year earlier, the Ericsson and Sony venture made a €501m profit.

Sales rose to €2.91bn from €2.81bn but gross margin halved to 15 per cent from 32 per cent due to impact from exchange rate fluctuations, restructuring charges and writeoffs. The firm said it was on track to deliver €300m in annual savings, and had initiated more measures aimed at saving another €180m from end-2009.

"We cannot exclude that it will also influence headcount at the company. But we have to come back to the details of that programme, probably at the next report," Global Sales Chief Anders Runevad told Reuters in an interview.

Asked in a conference call about the prospects for profitability in 2009, Komiyama said: "Overall, it still probably will be (on the) negative side, but we plan to be positive in the second half."

Sony Ericsson said it expected the market to worsen further in 2009, particularly in the first half.

It estimated that, in 2008, the global handset market grew about six percent to 1.19 billion units, versus a previous outlook of the industry for about 10 per cent growth.

Sony Ericsson's market share in the fourth quarter remained at about eight percent, it estimated.

The average selling price (ASP) for Sony Ericsson's handsets in the quarter was 121 euros, versus a year-earlier 123 euros.

Sony Ericsson sees the global handset market shrinking and the industry ASP declining in this year, it said.

"We believe the global market will contract more than five percent in 2009," Komiyama said.

"Business conditions will continue to be extremely challenging over the next 12 months." The group, which in recent months has signalled a renewed focus on the high end of the market, issued two profit warnings last year as consumers scaled back on phone purchases.