Sony Ericsson warns of soft markets: Handset maker to ship below estimates in Q1

Sony Ericsson Mobile Communications warned yesterday that its first quarter results, due April 23, will reflect weaker than anticipated handset volumes, leading to lower revenue and flat gross margins.
The company said it would ship about 22 million units for the quarter, well under the Wall Street consensus of 26 million.
The company blamed weak demand for mid- and high-tier handsets in Europe and component shortages for the dampened outlook.
While the first quarter typically reflects a dip in demand after the holiday-spending fourth quarter, SEMC’s dip is clearly greater than expected and analysts pounced on the warning as a possible sign of softening demand, at least in Europe. The vendor had posted solid results in the fourth quarter.
According to analyst Ittai Kidron at Oppenheimer, however, SEMC’s weakness in Europe was due to more compelling product rollouts from Samsung Electronics Co. Ltd. and LG Electronics Co. Ltd. Nokia Corp.’s strength in the Asia-Pacific region also was cited by analysts.
“This (effect) is magnified by a somewhat weak product portfolio and component shortages,” Kidron wrote in a research note.
Kidron said that some weakness in the European market would likely also affect Nokia’s results.
Analyst Maynard Um at UBS Equity Research offered a slightly different explanation: SEMC’s Euro-centric weakness may be caused by iPhone sales. The analyst also blamed delays in new product launches and LCD display shortages. Um said these issues could affect SEMC into the second quarter “and possibly beyond.”