Sony Ericsson Slumps To Q2 Loss: Down, But Not Out!

by Gaurav Kheterpal on July 15, 2011

It’s often said that ‘Quakes are like rain’ in Tokyo but it’s hard to forget the disaster that stuck Japan in March. The country’s economy had a greater hit from the latest earthquake than anticipated, as production was hampered across all industries and the central bank slashed its growth forecast.

Sony Ericsson is one of the companies still reeling under the after effects of the Japan quake. The company slumped to a second-quarter net loss of euro50 million ($71 million) as its supply chain was badly affected by the Japanese earthquake in March.

Sony Ericsson Chief Executive Bert Nordberg admits that the second quarter “was lost” but remains optimistic that his company may be down, but it’s not out yet.

The Swedish-Japanese joint venture sold just 7.6 million phones in the quarter, falling well short of optimistic forecasts which hovered around the 11 million mark. Interestingly, most analysts had high hopes of Sony Ericsson’s profitability and it was believed that company’s quarterly profit would be around 4.9 million. Sales for the quarter were nearly euro1.2 billion ($1.7 billion), a 32 percent decrease year-on-year. Loss before taxes for the quarter was euro42 million ($59 million), compared to an income before taxes of euro31 million ($43.7 million) for the same quarter in the previous year, due to lower volume.

“We estimate that the impact of earthquake-related supply chain constraints on our portfolio was close to 1.5 million units, with most of the effect in the early part of the quarter,” Chief Executive Bert Nordberg said in a statement.

Despite the quarterly loss, Sony Ericsson remains a formidable force among Android manufacturers. In fact, smartphone sales featuring mostly Android-based smartphones accounted for more than 70 percent of the company’s total sales during the quarter. Its Xperia offering has proven to be a blockbuster hit and the company has sold more than 16 million Xperia smartphones to date. As a result of the strong demand, Sony Ericsson launched as many as eight new Xperia smartphones this year.

In April, the company launched its dedicated channel in the Android Market. The dedicated channel replaced the “My Apps” option in Android Market with an exclusive content zone to enhance Sony Ericsson’s ‘most entertaining’ experience.

However, it’s not been smooth sailing for Sony Ericsson in the last couple of years. The company has been forced to cut costs -including cutting around 4,000 jobs and shift its focus from the mid-range segment to high-end smartphones. However, Nordberg remains optimistic that the company would return to profitability in third quarter this year.  The company maintains its forecast for modest growth in units for the global handset industry this year.

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Written by: Gaurav Kheterpal. www.digitcom.ca. Follow TheTelecomBlog.comby: RSS,TwitterFacebook, or YouTube.

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