Old handsets hit profits at Sony Ericsson

City A.M. Reporter
WORLD NUMBER five mobile phone maker Sony Ericsson posted lower than expected fourth-quarter pre-tax profit yesterday, and said it saw only modest growth in the handset market this year.

Sony Ericsson posted pre-tax profit of €35m (£29.7m) on sales of €1.53bn. Analysts had forecast a pre-tax profit of €79.7m and sales of €1.82bn.

Sony Ericsson is looking to a new line of smartphones to boost growth after a disappointing end to last year. The company last month launched the Xperia Arc and further launches are due next month based on Google’s Android software.

But the new models are not due to hit stores in time to boost first-quarter earnings, leaving the group with an awkward gap. It has already had to slash prices to attract Christmas shoppers to its aging handsets.

Its poor fourth-quarter performance contrasted sharply with iPhone maker Apple, whose results beat forecasts this week.

“It’s clear Sony Ericsson had to work hard to maintain profitability,” said Geoff Blaber, analyst at CCS Insight. “Prices came under substantial pressure due to both competition and a product mix lacking high-tier, higher margin offerings.”

Sony Ericsson chief executive Bert Nordberg admitted the company had underestimated the speed needed to launch new products, but said it would be quicker to the market this year.

“We expect a better year than last,” Nordberg said when asked about outlook for the venture’s sales and profits in 2011.

Gartner analyst Carolina Milanesi said: “The competition is so tough you cannot afford not to refresh your portfolio ... “They need to step up their pace of product introduction.”

Shipments in the quarter totalled 11.2m, up on the previous quarter but down 23 per cent on the same period in 2009.

Sony Ericsson said that it expects modest growth in the handset market, which has recovered from a slump in 2009, as a whole this year.