Hard times for Sony Ericsson


Things are not looking rosy for handset manufacturer Sony Ericsson.

Sales fell 6.6 per cent on 2007, and operating profits have plummeted from €1.5 billion in 2007 to a loss of €113 million in 2008.

In September, it announced it was to make 2,000 staff redundant from across its operations.

None of the incumbent handset makers are enjoying particularly happy financial reports at present, as the global economic downturn hits manufacturing in general.

But uncertainty has surrounded the Sony Ericsson joint venture for some time, really following its steady decline after a stonking 2007.

The current economic crisis has just intensified speculation its Japanese and Swedish constituents will go their separate ways.

Mobile World Congress in Barcelona last month did nothing to halt speculation.

There was no sign its R&D facility is ready to unleash a turnaround device – just another Walkman phone,  a new ‘entertainment unlimited’ sub brand and a monster cameraphone that won’t see the light of day for at least another six months.

But Sony Ericsson, of course, vehemently denies its financial troubles extend to its parentage, maintaining the partnership is strong despite the whispering campaign.

“Until recently the partnership has been very profitable,” says Sony Ericsson UK and Ireland senior marketing manager Richard Dorman.

“Any talk of a split hasn’t come from Sony, Ericsson, or Sony Ericsson. We are focused on getting back on track and delivering handsets that consumers really want. It’s full steam ahead.”

But while the downturn hasn’t done any manufacturer any favours, the timing appears to be particularly damaging to a Sony Ericsson already in decline.

“Its main task is to return to profitability. But 2009 is going to be a difficult year to do that,” says Ovum principal analyst Adam Leach.

“If it doesn’t manage it then perhaps we can expect the companies to take a different approach to the venture. Parent companies will inevitably consider their ventures if they are loss making.”

At present, financial losses by incumbent handset brands are hardly inconspicuous. New entrants like Apple and Research in Motion have almost single-handedly created niches in the market for touchscreen and email devices, and managed good growth to boot.

But traditional vendors have struggled.

Motorola has practically vanished. Nokia appears to have thrown the proverbial kitchen sink at reiventing itself as a services business. Korean rivals Samsung and LG have been unfussy, focussing on the basics and turning out efficient feature-packed devices that are underpinned by prominent marketing campaigns.

Sony Ericsson, by comparison, has gone backwards. Its declining sales pre-date the worst of the economic troubles. It has demonstrated little in the way of innovation, and it has got its product build and selection wrong.

Full article in Mobile News issue 434 (March 9, 2009).

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