Friday, March 20, 2009

Sony Ericsson Sees First-Quarter Loss as Sales Drop

Sony Ericsson Mobile Communications Ltd., the mobile-phone venture of Sony Corp. and Ericsson AB, said it will report a pretax loss of as much as 390 million euros ($534 million) in the first quarter as handset sales fall.

The loss excludes restructuring charges of 10 million euros to 20 million euros, the London-based company said in a statement today. The company said its gross margin in the quarter will fall from the preceding three months and the year- earlier period.

“Net sales and net income before taxes in the first quarter of 2009 continue to be negatively affected by weak consumer demand as well as de-stocking in the retail and distribution channels,” the company said in the release.

Sony Ericsson is cutting at least 2,000 jobs as demand for its handsets shrinks, joining industry leader Nokia Oyj, which announced 1,700 additional job cuts this week. Sony Ericsson, formerly among the biggest profit contributors for its parents, has racked up three consecutive quarterly losses, and the company said today the global handset market may contract at least 10 percent this year, twice as much as previously estimated.

Ericsson declined as much as 5.1 kronor, or 6.7 percent, to 70.7 kronor, and traded at 70.90 kronor as of 9:35 a.m. in Stockholm. Nokia fell as much as 5.3 percent in Helsinki. Sony didn’t trade as Japanese markets are shut today for a holiday.

Phone Shipments

Sony Ericsson plans to ship about 14 million phones in the first quarter, at an average selling price of 120 euros. In the fourth quarter, the venture shipped 24.2 million phones, at an average price of 121 euros.

In the fourth quarter, the gross margin, or sales minus manufacturing costs, fell by more than half to 15 percent. The company plans to release its full earnings for the first quarter on April 17, it said today.

Chief Executive Officer Dick Komiyama, who turned around Sony’s laptop division in the U.S., said Jan. 16 that the company aims to return to profit in the second half of the year, helped by cost cuts and a focus on more expensive phones.

Ericsson CEO Carl-Henric Svanberg, who is chairman of Sony Ericsson, said in an interview March 4 that Ericsson is committed to the business and won’t change its stance based on the division’s performance over a single quarter.

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