Sony Ericsson reports a Q2 operating loss of $3.1 million and calls the worldwide handset market a "challenge" as its smart phone sales slump. Sony Ericsson falls to No. 5 in worldwide unit sales behind leaders Nokia, Samsung, Motorola and LG Electronics.
Sony Ericsson will cut 2,000 jobs, it announced July 18, as the
company reports a second quarter operating loss of $3.17 million.
Sony Ericsson said it has been pinched by plummeting demand for its
high-end smart phones and inflation eating away at margins for
inexpensive cell phones.
The joint venture between Sony and Ericsson AB said to expect more
bad news in the third quarter. "Challenging market conditions are
expected to prevail this quarter," the company said in a statement.
The world's No. 5 handset maker reported net income fell from $347.6
million a year ago to $9.48 million while sales slumped 9.4 percent to
$4.4 billion. Unit sales in the quarter reached 24.4 million, down from
24.9 million units a year ago. The closely watched average selling
price per unit was $183. A year ago, Sony Ericsson's average price per
unit was $197.50.
The July 18 results marked the second consecutive quarter that Sony
Ericsson issued a profit warning before issuing quarterly results.
A little more than a year ago, Sony Ericsson was the No. 4 handset
maker that was pushing Motorola for the No. 3 spot. Since then, though,
the company has fallen to fifth while LG Electronics has taken over the
"We are aligning our operations and resources worldwide to meet an
increasingly competitive business environment and to help restore our
capability for profitable growth," Sony Ericsson CEO Dick Komiyama said
in the statement.
Komiyama said the 2,000 job cuts among the company's 11,900 employees will save Sony Ericsson $474 million annually.
Sony Ericsson is the second of the world's handset makers to
announce its quarterly results since research firm Gartner slashed its
forecast for the cell phone market to between 10 percent and 11 percent
growth from a May estimate of 10 percent and 15 percent. In 2007, cell
phone growth margins were 16 percent.
Finnish cell phone maker Nokia issued second quarter results July 17 that
were in line with analyst predictions. Despite a 61 percent plummet in
profits from a year ago (blamed on one-time charges), Nokia shipped 122
million handsets in the second quarter, beating predictions of 120
million sales. Nokia's second-quarter handset sales were 21 percent
higher than a year ago, representing a 6 percent increase over
first-quarter sales. The average selling price per unit fell from $124
in the first quarter to $116.
The world's No. 1 handset maker also slightly increased its forecast
for global handset market growth, predicting volume growth of a little
more than 10 percent. Sony Ericsson also predicts an approximate
10-percent growth in worldwide unit sales in 2008.
LG Electronics will announce its second quarter results July 21, followed by Samsung July 25 and Motorola July 31.
Also hamstrung by plummeting handset sales, Motorola predicted April 24 that second-quarter losses would be wider than originally projected.
Motorola said it shipped 27.4 million handsets in the first quarter,
a 40 percent decline from fourth-quarter sales of 40.9 million
handsets. Motorola hit its historic high in handset sales in late 2006
with 65.7 million units sold. Most of those sales came from the
then-widely popular RAZR line of phones.
Overall, the handset division, which Motorola is trying to spin off,
put up a first-quarter loss of $418 million, accounting for just 44
percent of sales for Motorola. Two years ago, handset sales accounted
for two-thirds of Motorola's revenue.