Sony Ericsson sticks to profit target despite wider Q1 loss
April 25, 2003
Reuters
Mobile phone maker Sony Ericsson reported wider first quarter losses due to weaker sales and falling handset prices, and analysts said its goal of turning profitable this year looked difficult.
Sony said in its fiscal year-end report on Thursday its joint venture with telecoms equipment maker Ericsson made a 113 million euro ($125 million) pre-tax loss in the January-March period.
The result compares with a 77 million euro pre-tax loss in the last quarter of 2002 and break-even in the year-ago quarter.
"The goal of becoming profitable for the full year 2003 still stands," Sony Ericsson spokeswoman Nina Eldh told Reuters.
"The first quarter result is weaker due to seasonality and higher-than-normal price pressure. We expect volumes to increase in the second quarter," Eldh said, echoing recent comments from Nokia.
"Profitability will gradually increase too, together with the introduction of new products."
Nokia, the world’s biggest handset maker, said last week it expects second quarter sales of mobile phones to rise four to 12%.
January-March sales for Sony Ericsson, the only loss-making top-five handset maker, dropped 28% year-on-year to 806 million euros. "The result was worse than expected. It is positive that they are reiterating the profitability outlook, but it seems quite tough," said Mikael Lasen, analyst at JP Nordiska.
"Their product mix in the first quarter was not too favorable and prices of older models fell, depressing the average selling price."
Sony Ericsson shipped 5.4 million handsets, 400,000 fewer than in the first quarter of 2002 and down from 7.1 million in the fourth quarter of 2002.
Siemens, the fourth biggest phone maker, also sold fewer handsets in the quarter, but turned a two million euro profit on sales of 983 million euros.
Nokia, on the other hand, increased the number of phones sold in the first quarter by 13% and second biggest Motorola of the United States shipped 18% more.
Sony Ericsson, created in October 2001 from the loss-making mobile phone units of Sony and Ericsson, has said that it would become profitable with a market share of seven to 10%.
But in the first quarter it was at around 6%, Eldh said, flat from the end of 2002. Nokia's market share is 38% -- twice as much as Motorola's.
Sony Ericsson stood by its forecast of global mobile phone sales of 435 million units this year, the lower end of industry forecasts of a 10% growth to 435-445 million handsets.
The Sony Ericsson joint venture received 300 million euros in the first quarter from its parent companies to keep it going as some of its recent phones were warmly received by consumers.
Sony Ericsson has previously said it aims to become the world's leading mobile phone maker by 2006, but admitted in February the goal could be too optimistic.
