Sony Ericsson Expects Sharp Drop in Phone Sales

Sony Ericsson issued a profit warning on Friday, saying it will sell only about 14 million phones during the first quarter of 2009, down 8.3 million phones from the same period last year.

The company also expects to post a €340 million (US$460 million) to €390 million net loss before taxes, excluding €10 million to €20 million in restructuring charges. It will announce first quarter results on April 17.

For the first quarter of 2008, Sony Ericsson sold 22.3 million phones and made a €133 million net profit.

The drop in sales and increased net loss are the result of weak consumer demand and slowing retail orders for new stock, according to a company statement.

Last year, Sony Ericsson announced plans to cut costs by €300 million annually and lay off 2,000 people.

The news doesn't come as surprise to Gartner research director Carolina Milanesi. "The mobile phone market has picked up a little bit in the first quarter, but not in the markets Sony Ericsson is dependent on," she said.

Sony Ericsson sales have taken a toll because of the economic downturn, but it's also obvious that its portfolio doesn't stand out anymore, according to Milanesi.

Music players and cameras have become more widespread in competitors' portfolios, putting more pressure on Sony Ericsson, Milanesi said. Also, the company doesn't have a pure touchscreen phone on the market yet, she said.

In February Sony Ericsson announced the Idou, which is a pure touchscreen device with a 12.1-megapixel camera, Xenon flash and a 3.5-inch widescreen display. But it won't ship until the second half of 2009.

The profit warning also comes as Ericsson is reportedly looking to exit the joint venture with Sony, with Sony possibly taking over. However, a spokeswoman said Ericsson is still fully committed to the venture. A Sony spokesman said the company doesn't want to comment on the reports.

Gartner's Milanesi said it would make sense for Sony to take over the venture since Sony could integrate more of its technologies into mobile devices -- but Sony has complained the joint venture with Ericsson isn't making money, so it could dampen the company's enthusiam to take over.

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