Sony Ericsson: most metrics down, job cuts ahead

Nokia Corp. set the bar for its competitors yesterday – growth is possible under current market conditions.
But Sony Ericsson Mobile Communications could not perform a chin-up.
The Japanese-Swedish joint venture reported today that key metrics were down across the board and its forecast for the third quarter called for more pain.
The first to feel that pain likely will be the company’s own employees. The company followed its earnings report with news, reported by the Associated Press, that it would slash 2,000 jobs across the world during the coming year.
Revenue slipped 9% from the year-ago quarter, net income was down 97%, shipment volumes were down 2% and average selling prices slipped by 7%. The metrics were roughly in line with a mid-quarter warning from the company.
The company estimated its global market share at 8%, well below its more than 9% share in the year-ago quarter. In the first quarter, according to Gartner, Sony Ericsson slipped to fifth place among global handset vendors.
Perhaps most ominously, Sony Ericsson said that it expected the handset industry’s volumes to grow by “around 10%” this year compared to last, but the majority of that growth would be in emerging markets “where lower-price phones dominate” – an area in which Sony Ericsson is notably weak and Nokia is particularly strong. Nokia yesterday forecast upside to its 10% estimate for this year’s growth in global handset shipments.
The company also cited increased price competition in the market for mid- and high-end phones where it earns most profits and an unfavorable portfolio mix, particularly in Europe, a former stronghold.
“Challenging market conditions,” Sony Ericsson said in a release today, “are expected to prevail for Sony Ericsson for at least the rest of 2008, in particular, the third quarter.”
The company’s results appeared to reflect that Sony Ericsson’s differentiated offerings – an advantage until the past year – of voice-plus-music (Walkman-branded handsets) and voice-plus-imaging (Cybershot-branded handsets) must evolve to meet the competition. Without a strong position in low-end handsets in emerging markets, the company is particularly vulnerable to macro-economic conditions.
“We are aligning our operations and resources worldwide to meet an increasingly competitive business environment and to help restore our capability for profitable growth,” said Dick Komiyama, president of Sony Ericsson. “Our target is to achieve a reduction in operating expenses of [$476 million] annually, with the full effect expected to appear within a year.”
The company shipped 24.4 million units in the second quarter, down a half-million from the year-ago quarter and ASPs continued their decline to $184, down from $198 in the year-ago quarter.