Sony Ericsson sinks into red on falling sales and prices
Transition to smartphone-only strategy only partially successful, as it faces rising competition and shortage of new models
Published: 20 January, 2012
READ MORE: Financial | Sony Ericsson | Handset | Android
Sony Ericsson suffered another tough quarter, falling to a fourth quarter loss of €207m, reversing the year-ago profit of €8m, on a 15.6% year-on-year slide in revenues to €1.29bn. The company, which will soon become just 'Sony', Ericsson having sold out to its joint venture partner, also suffered a 20% decline in unit shipments, to 9m handsets.
The fall in volumes is not necessarily a bad sign, since SEMC has been refocusing on smartphones and away from low end, high volume devices. This multiyear process is nearing its end - the Xperia smartphone family accounted for 80% of sales in the quarter. But the company admitted the deliberate reduction of its featurephone activities were only being partially offset by smartphone growth.
And other factors were signs of systemic weakness, notably "intense competition and unfavourable macroeconomic conditions", plus the impact of the recent floods in Thailand on manufacturing. Rising competition and global recession are not unique to SEMC, of course, but it appears less able to combat them than rivals like the ascendant Samsung.
In addition, SEMC is struggling with falling average selling prices (ASPs) even as it seeks to push its revenue mix upmarket. It estimated that it took 10% of the Android market by volume in the quarter, but only 7% by value.
ASPs were also hit by the lack of new products in the holiday season - this was a mistake SEMC made in 2010 too, missing out on the most intense handset buying period as well as the consumer profile generated by a high profile launch. Instead it tends to save its big launches for the spring, with February's Mobile World Congress as its platform. Full ownership by Sony, and greater integration with the Japanese giant's broader consumer electronics ranges, could well change that Europe-focused schedule and tap more effectively into consumer buying patterns from this year.
SEMC launched a restructuring programme in December, which includes job cuts to "reduce costs and drive competitiveness". Charges associated with this were €93m for the quarter. The buyout of Ericsson by Sony should close during this quarter. Ericsson said the large quarterly loss will hit its own Q4 operating income to the tune of SEK1.1bn while Sony will take a Y33bn special loss on its holding.
"Our fourth quarter results reflected intense competition, unfavorable macroeconomic conditions and the effects of a natural disaster in Thailand this quarter," said CEO Bert Nordberg in a statement.
Alandsbanken analyst Lars Soderfjell told TotalTelecom: "One would have hoped for a better finale than this. One wonders how it could get this bad? It seems a case of 'my dog ate my homework'." However, this convinced fellow Ericsson watchers that the decision to exit the joint venture was a good one, since turnaround is still elusive, and is more likely to come with full convergence into the Sony strategy. Motorola Mobility and HTC have also warned of difficult results for Q411.
More FINANCIAL News
More SONY ERICSSON News
More HANDSET News
COMMENTS
Carrier Broadband Performance: Africa & Middle East
Carriers are using mobile broadband as their weapon of choice in the fight against the commoditization of voice and falling ARPU. This...
Voice over LTE: Market Analysis and Forecasts
VoLTE offer unique advantages in lowering a carrier's voice infrastructure economics and promises to improve voice quality, device...
Satellite Phones: Will Dual Mode Help the Phoenix Rise from the Ashes?
Satellite phones have followed an arduous path since their much-hyped launch more than a decade ago. The hype was followed by an e...
