Sony Ericsson takes a profit hit, launches phones

Slowing market growth for mid-range and high-end phones has hit Sony Ericsson, which during the first quarter logged a net profit of €133 million (US$200 million), down from €254 million during the first quarter last year.

Sales were down by 8 percent, to €2.7 billion, compared to €2.9 billion last year. The bad news was expected, since the company issued a warning earlier this year.

The company said the slower growth for mid-range and high-end phones occurred in markets where it has a strong presence -- Western Europe. A decrease in average selling price didn't help either, as prices decreased sequentially and year-on-year. During the first quarter, customers paid an average of €121 per phone, while during the beginning of last year they paid €134.

Phone sales increased to 22.3 million units, a jump of 500,000 compared to a year ago. But that was not enough for Ericsson to remain the fourth largest phone vendor in the world.

"As LG announced 24.4 million (units) the other day we now know that it overtook Sony Ericsson, but I remain positive about Sony Ericsson's potential in the second half of 2008," said Gartner analyst Carolina Milanesi.

The company also expects to see better results.

"Our product announcements during the first quarter have been well received by the industry, and we expect to see a positive effect from these announcements during the second half of 2008," said Sony Ericsson President Dick Komiyama.

The company has especially high hopes for Xperia X1, its upcoming Windows Mobile phone and iPhone competitor, which will ship during the second half of 2008.

Sony Ericsson also said Wednesday it will launch two handsets. The Z780 and G502 will support mobile broadband using HSDPA (High Speed Downlink Packet Access) and ship during the second quarter.

The G502 will be Sony Ericsson's lowest-priced HSDPA phone yet -- although the company won't say how much it will cost. It will bring the Web to a mainstream audience, said Sony Ericsson.

The announcement follows Nokia's launch of a low-priced HSDPA phone Tuesday. The Nokia 5320 XpressMusic will be priced at €220, and ship during the third quarter.

The announcements are being made to please mobile carriers, according to Milanesi

"HSDPA is being deployed much faster than people anticipated, and both Nokia and Sony Ericsson are committed to drive it into their portfolio," said Milanesi.

Low-priced phones are also important to get emerging markets going.

"In emerging markets some operators are skipping WCDMA, and going straight to HSDPA so lower-priced devices will help cater for those markets too," Milanese said.