14 DAY TRIAL // Sony Ericsson is going through a rough quarter of the year, having experienced a great loss in profit. Even if it has recently released several high-end and mid-end devices, the price for mobile phones has gone down considerably these days. This, in turn, means that in order to record profit, sales have to go up exponentially.
This quarter, the company shipped 25.7 million devices, but the sales summed up only 2,808 million Euros, having decreased by 10% if compared with the Q3 of 2007. Sony Ericsson says that the drop is reflecting the fact that the exchange rates are fluctuating, as well as the recent shift to more lower-priced phones.
Also, the gross margin has decreased on a year-to-year basis because of the price pressure. However, SE managed to moderate the losses by means of the introduction of products like the C902 Cyber-Shot, of which it says it's selling well.
The average selling price (ASP) for Sony Ericsson has also decreased, due to the selling of more lower-priced devices, and to the increase in competition in the mid to high-end phone market market.
“As expected the third quarter has continued to be challenging for Sony Ericsson. We have moved forward with our plans to align operations and resources with the consolidation of R&D facilities into a more agile and cost efficient organizational structure. As previously announced, our target remains to reduce operating expenses by Euro 300 million annually by the end of the second quarter 2009, with the full effects expected to appear in the second half of 2009.These plans are progressing in line with expectations,” said Sony Ericsson President, Dick Komiyama. “We are committed to executing our alignment plan as speedily as possible to ensure we have the right size and organisational structure to return the business to healthy profitability.”
The company forecasts that the global handset market for 2008 will experience a growth at a rate of about 10%, from more than 1.1 billion units sold in 2007, but the ASP will continue to decline. This is expected to happen in the emerging markets where the domination is exclusive to lower-priced phones.