Sony Ericsson Latest Android Backer to Feel Pinch of Competition
Sony Ericsson lost about $319 million in the fourth quarter of 2011, during which it shipped 9 million phones-a 20 percent drop from sales just a year ago. Like its Android-focused competitors Motorola and HTC, which likewise posted worrisome fourth-quarter results, Sony Ericsson officials pointed to the effects of the recent flooding in Thailand-an area responsible for critical components-price erosion and "intense competition" in the Android phone market.
That competition has fueled questions among analysts about the sustainability of Google's Android model and the need for a third mobile platform-such as Microsoft's Windows Phone-to stand alongside Android and Apple's iOS. Samsung, with its Android-based Galaxy smartphones, is an exception to what is happening in the space.
Sony Ericsson's Android-based Xperia smartphone line accounted for about 80 percent of its fourth-quarter sales, though in the process of restructuring to reduce costs and increase competitiveness, the company introduced no new smartphones during the quarter.
Still, the issue plaguing Android device manufacturers, Sony Ericsson officials said, is competition, which is heightened as never before, with phone sales continuing to pitch upward and more consumers making the switch from feature phones to smartphones. According to Nielsen, of the consumers who purchased devices during the last three months of 2011, 60 percent bought a smartphone, bringing the nation's smartphone users to 46 percent.
While fourth quarters tend to be holiday-fortified, HTC's revenue fell 2.5 percent year over year, it announced Jan. 6. Bloomberg, in a Jan. 9 report on the HTC results, noted that "shipments and sales may fall further this quarter as competition from Apple Inc. and Samsung Electronics Co. dent demand for its handsets."
Motorola shipped 10.6 million mobile devices during its fourth quarter, which was down from 11.6 million the quarter before. CEO Sanjay Jha, speaking to The Verge earlier this month, said that in an effort to make better use of marketing dollars, the company "wants to make fewer phones."
He added that "Verizon and AT&T don't want seven stock [Android Ice Cream Sandwich] devices on their shelves," suggesting some motivation behind the numbers of Android devices released each quarter, compared to the single new smartphone that Apple issues each year.
CCS Insight analyst Geoff Blaber, in a Jan. 12 blog post from the Consumer Electronics Show (CES), described Android in its current form as "unsustainable," in part because of the control Google leverages.
"Scope for differentiation is limited and essentially disappearing as a combination of the pressure to get products on the market and Google's need for control restricts manufacturers' ability to set their products apart from other Android-powered devices," wrote Blaber. "The economics don't add up for the majority of companies using Android. Few are competing profitably. ... Add to this Android's accessibility and the burgeoning number of licensees, and falling prices become inevitable. Good for Google, but bad for manufacturers."
It was little surprise then, he added, to see HTC CEO Peter Chou standing alongside Microsoft's Steve Ballmer at CES, during the introduction of the Titan 2.
One could also point to Samsung's recent announcement that it's teaming its Bada mobile platform with Intel's Tizen, in a move said to help reduce its reliance on Android.
Blaber doesn't expect Android to see a dramatic shift in market share anytime soon, but he added, "It's hard to see how it can continue to accommodate such a vast number of manufacturers when the economics favor a precious few. There are of course few alternatives, but the scenario certainly validates [Nokia CEO] Stephen Elop's case for a 'third ecosystem.'"