Sony Ericsson losses set a ‘worrying precedent’

Sony Ericsson losses set a ‘worrying precedent’

Sony Ericsson’s full-year net loss of €247m could be the first in a series of disappointing results for manufacturers, analysts have warned.

The manufacturer posted the surprise results last week, with sales of €5.21bn, down 17.1% on 2010. Sony Ericsson was hit by a particularly poor fourth quarter, posting an operating loss of €227m (£189.4m), compared to operating income of €39m (£32.5m) for Q4 2010. Sales were also down in its fourth quarter to €1.29bn (£1.08bn) in 2011, from €1.53bn (£1.28bn) in 2010.

CCS Insight analyst Geoff Blaber said: ‘The extent of the losses was a surprise. Sony Ericsson made considerable progress through the year, in particular during the third quarter, when it bounced back from the effects of the Japanese earthquake. The results underline the challenges facing Android manufacturers.’

Motorola, Nokia, LG and HTC are among the companies set to post their results during the coming weeks. IDC research manager Francisco Jeronimo said: ‘Only Apple and Samsung are outperforming the market, which shows that despite the tough conditions, the right products at the right prices continue to boost consumer confidence and consumers’ willingness to spend their cash on the latest handsets – but only when they overexceed their expectations.’

Blaber added: ‘The reality is the gulf between the winners and losers is widening. In Android, we are struggling to see how momentum is sustainable. Very few players are making money.’

Jeronimo claimed that differentiation was a problem for Sony Ericsson, along with its lack of strong devices with competitive price points. He said its business strategy will completely change during 2012. Sony is set to complete its acquisition of Ericsson’s share of the joint venture within the next month.

Jeronimo said: ‘The mobile business comes to Sony at the right time. Sony needs to close the product portfolio by integrating all products and services together. The handset business was the missing part and will drive this integration. Sony needs to deliver an integrated portfolio that locks consumers into a single and unique experience and set of services.’

Blaber added: ‘Sony Ericsson was late to the smartphone market and it’s a question now of how quickly Sony can integrate Ericsson into the business and how quickly it can change it.’

Sony Ericsson president and CEO Bert Nordberg blamed the results on ‘intense competition, price erosion and restructuring charges’. He said: ‘Our fourth quarter results reflected intense competition, unfavourable macroeconomic conditions and the effects of a natural disaster in Thailand this quarter. We are aligning our business to drive profitability and to meet customer needs.’

The company also revealed it shipped 34.4 million phones in 2011, down 20.2% from 2010. Its average selling price for devices increased from €146 (£121.81) in 2010 to €152 (£126.83) last year, reflecting the increasing focus on smartphones.

Written by Mobile Today
Mobile Today

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