Sony Ericsson sees moderate growth in Q1 mobile phones

Sony Ericsson Mobile Communications AB, the 50/50 joint venture between Ericsson and Sony Corporation, announced that the company sees moderating growth of mobile phone units with related effects on sales and profit in the first quarter 2008.
Sales are expected to decline slightly but net income before tax (NIBT) is estimated to be in the range of EUR 150-200 mln due to increased operating expenses as a percentage of sales compared with the same period of 2007.

In addition to the smaller contribution to Ericsson’s share in earnings of joint ventures and associated companies, sales and operating income of Ericsson Mobile Platforms, which is reported as part of Segment Multimedia, will be negatively affected by SEK 200-300 mln.

Slowing market growth of mid-to-high end phones in markets where Sony Ericsson has a strong presence is affecting sales. In addition, certain component shortages for popular mid-priced phones have contributed to modest unit sales growth in the first quarter.

“The market is proving to be challenging. This has been more pronounced in the mid-to-high end replacement sector of the market in Europe, where Sony Ericsson has stronger than average market share,” said Dick Komiyama, President of Sony Ericsson.

“For the last year, Sony Ericsson has been focused on expanding the breadth of its portfolio and developing its presence in new markets to lessen its historic reliance on the European high-end sector for growth. This strategy will continue, and our objective remains to become a top three player globally by 2011. As part of this strategy, we have announced fifteen new phones and introduced a new platform to the portfolio, Windows Mobile, this year. We expect to start seeing a positive effect from these announcements during the second half of 2008.”

Although final results may differ, Sony Ericsson now plans to ship 22 mln phones during the first quarter of 2008 with an estimated ASP (Average Selling Price) of EUR 120. This is expected to generate net sales lower than the first quarter of 2007, and NIBT is estimated to be in the range of EUR 150 – 200 mln due to increased R&D expenses as a percentage of sales.