October 15, 2010 / 5:22 AM / in 8 years

Sony Ericsson blames Q3 sales fall on parts shortage

STOCKHOLM/HELSINKI (Reuters) - Mobile phone maker Sony Ericsson blamed component shortages for falling handset shipments and sales in the third quarter, which led to profit missing market expectations.

The world’s fifth-biggest handset maker has cut costs and revamped its portfolio, pulling itself back into the black this year after seven straight quarters of losses.

The firm has pinned its hopes for profit growth on a surging market for smartphones, like its Xperia X10, Vivaz, X10 mini and X10 mini pro, which offer PC-like functions and links to social networking sites.

However, sales in the third quarter were flat year-on-year at 1.6 billion euros, which missed an average estimate of 1.8 billion in a Reuters poll and was below 1.76 billion in the April-June period.

Sony Ericsson reported that its smartphones were doing well but the chief executive said the company had had to reduce its shipments because of supply shortages of LCD screens and printed circuit boards (PCBs) for the handsets.

“There are supply chain shortages on the market, and that has affected us,” Sony Ericsson Chief Executive Bert Nordberg told Reuters. “Our volume did not meet expectations. That is the one reason sticking out.”

Sony Ericsson shipped 10.4 million handsets in the period, missing all 27 analyst estimates in the Reuters poll. Their figures ranged from 10.5 million to 13.9 million.

The average forecast was for Sony Ericsson to ship 12 million phones during the July-September period compared to 11 million in the second quarter.

“It was clearly weaker than expected — 8 percent below my expectations on EBIT (earnings before interest and taxes) — and it is mainly lower volumes that explain it,” said Per Lindtorp, analyst at Eric Penser.

Pretax profit for the firm, owned by Ericsson and Sony Corp., was 62 million euros ($87.28 million), compared with a loss of 199 million a year ago and well below a mean forecast for a profit of 72 million in a Reuters poll.

SKYROCKETING DEMAND

Smartphone makers are benefiting from skyrocketing demand for the handsets. Global sales of smartphones are expected to grow more than 50 percent this year.

HTC and Research in Motion have both reported a strong increase in quarterly profits on rising demand.

Apple, No.6 in volume but the most profitable handset maker, will report on October 18. Nokia, the volume leader, will report on October 21, and No.7 Motorola on October 28.

Korean cellphone vendors Samsung and LG Electronics are due to report at the end of the month.

Chief Executive Bert Nordberg said Sony Ericsson’s overall performance was “stabilizing.”

“Our strategy to focus on the smartphone segment is succeeding and smartphones now comprise more than 50 percent of our total sales,” he said in a statement.

Sales of smartphones powered by Google’s hot Android operating system, helped support the average selling price of handsets, 154 euros against a forecast of 149 euros and 160 euros in the previous quarter.

While overall market growth is expected to be at around 11 percent this year, smartphone sales are expected to increase more than 50 percent.

With all the top mobile brands jostling for market share, though, competition is looking tough.

“Sony Ericsson has turned the ship around but will need to maintain a balanced portfolio, improve time to market and increase differentiation if it’s to avoid losing its way amidst a swathe of aggressively priced Android devices,” CCS Insight analyst Geoff Blaber said.

(Additional reporting by Victoria Klesty and Helena Soderpalm; Editing by Karen Foster)

$1=.7103 Euro

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