Natural disaster hits mobile phone maker's earnings more than expected
Mobile phone maker Sony Ericsson swung to a second-quarter loss after the 11 March earthquake and tsunami in Japan weighed on its earnings more than expected.
Chief executive Bert Nordberg said on Friday most of the hit was felt in the early part of the quarter and the effect would be tiny in the third quarter. "There might be some minor spillover. In our planning this is behind us," he told Reuters.
Sony Ericsson sold 7.6m phones in the quarter, compared with forecasts for 8-11m, as earthquake-related supply chain constraints cut sales by 1.5m phones.
Nordberg said demand for smartphones, whose prices have started to fall to below €200, remained healthy and was hitting the sale of mid-range feature phones, a market he said he was "nearly willing to call ... collapsing".
Sony Ericsson, owned 50-50 by Swedish company Ericsson (ERICb.ST) and Japanese group Sony, made a pretax loss of €42m.
The firm, formed in 2001, thrived after its breakthrough with Walkman music phones and Cybershot camera phones before losing out to leaner rivals at the cheaper end. Its share of handset sales dropped below 3% from more than 9% at its height.
Sony Ericsson has slashed costs, including cutting about 4,000 jobs, and refocused on higher-margin smartphones that link to social networking sites such as Facebook. The share of smartphones in its sales rose to more than 70% from 40% at the end of 2010.
"Smartphone volume was reassuring but Sony Ericsson still faces a considerable task in rebuilding and sustaining profit margins. Sony Ericsson is not alone in finding the smartphone transition a challenging one," said CCS Insight analyst Geoff Blaber.
Motorola Mobility has shifted its focus to smartphones, while Sony Ericsson's bigger rivals Nokia and LG Electronics could both report second-quarter losses due to their slow move into the high-end of the market.
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Source: http://www.guardian.co.uk/business/2011/jul/15/sony-ericsson-second-quarter-japan-earthquake
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