Sony Ericsson blames poor Q2 results on Japan earthquake

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Earthquake further hits Sony Ericsson, with handset manufacturer reporting a loss of €42 million in the quarter with decreases in shipment volumes and sales also

Sony Ericsson has claimed that supply chain constraints from the Japan earthquake has significantly impacted its Q2 results, which saw decreases across most financial sectors.

Sony Ericsson shipped 7.6 million units in the three month period, a 31 per cent decrease year-on-year and a six per cent decrease sequentially, which it said was due to a decrease in volume caused by constrained supply of critical components and an anticipated decline in the number of feature phones shipped.

Sales for the quarter were €1.193 million, a 32 per cent decrease year-on-year and a four per cent decrease sequentially. Smartphones accounted for more than 70 per cent of total sales and volumes for its Android-based Xperia range were up 150 per cent year-on-year.

Losses before tax were €42 million, compared to an income before taxes of €31 million for the same quarter in the previous year, which Sony Ericsson said was due to lower volume. Income before taxes for the previous quarter was €15 million. The company said the sequential change was reflective of lower gross margin and higher operating expenses.

The quarter ended in a net loss of €50 million compared to a net income of €12 million in Q2 2010, and €11 million in the last quarter.

Average selling price for the quarter was €156, a three per cent decrease year-on-year but an 11 per cent increase sequentially. Sony Ericsson said the year-on-year decrease was due to product and geographical mix and price erosion with the sequential increase attributed to favorable product and geographical mix, more than offsetting price erosion and unfavourable foreign exchange rates.

The company estimated that its share in the global Android-based smartphone market during the quarter was around 11 per cent in volume and in value. It maintained its forecast for modest industry growth in total units in the global handset market for 2011.

Sony Ericsson president and CEO Bert Nordberg said: “Sony Ericsson’s second quarter profitability was affected by the March 11 earthquake in Japan.  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.

“Our shift to Android-based smartphones continues with smartphone sales accounting for more than 70 percent of our total sales during the quarter.  We have shipped more than 16 million Xperia smartphones to date. We have introduced eight new Xperia smartphones this year and we continue to see strong consumer and operator demand across the Xperia  smartphone portfolio.”

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