Sony Ericsson falls on its nose - Profit way down

By John Daly @ Friday, July 18, 2008 12:01 PM

Section - Telecoms/Mobile

Maker of Walkman and Cybershot branded mobiles Sony Ericsson today shyly stated it had earned a very tiny profit of 6 million Euros in its second quarter of fiscal year 2008, far, far, far and even further far away from the net income of 220 million Euros it raked in back in the same quarter last year. Sales shrivelled and shrunk year over year by 9% and fell from 3.11 billion to 2.82 billion Euros. The operating income even was 2 million Euros in the red, whilst being a far more healthy 315 million Euros in the black a year ago.

The viking-samurai joint venture blamed nasty competitors, detrimental exchange rates and debilitatingly slowing demanded for middle class and upper class mobiles. Sony Ericsson even admitted it had a 'less favourable' product mix which made itself felt in Olde Europe. The income before taxes was also hit because the company spent more on R&D, presumably to evoke a more favourable (and profitable) product mix.

Company president Dick Komiyama is going to do the stuff he learned at a business school, namely restructure and save operating expenses of 300 million Euros annually. He kindly said the company will incur charges for restructuring, meaning the company will have to pay out costly severance packages in the coming quarters to the people it's going to fire. Dick said the restructuring is supposed to make the company 'a faster, more agile and more cost efficient organisation that can continue to create innovative products that excite consumers.'

The innovative products will most likely be cheap, low-end phones, as Sony Ericsson sees lower average selling prices and an annual growth of 10%, fuelled mainly in emerging markets. So don't expect a Playstation branded phone. The mobile phone maker estimated it held a market share of around eight percent in the second quarter. X