Mobile phone maker Sony Ericsson warned today that first-quarter earnings could fall by more than half, adding to growing gloom in the handset sector and dealing co-parent Ericsson a fresh blow.
A global economic slowdown is starting to crimp consumer spending, hurting the whole sector. 'The market is proving to be challenging,' said Sony Ericsson President Dick Komiyama, who took the job late last year.
Net income before tax at the joint venture, owned by Ericsson and Sony Corporation, is set to be €150-200m. That compared with €362m the same time the previous year, although Sony Ericsson said its gross margin would remain the same on the year-ago level, which was 30.3%.
The world's number four mobile phone maker, which trails Nokia, Samsung and Motorola, had been making steady progress and threatening to vault into the number three 3 slot.
In the fourth quarter it beat profit forecasts and gained market share. But Sony Ericsson said the market for more expensive phones had weakened.
'Slowing market growth of mid-to-high end phones in markets where Sony Ericsson has a strong presence is affecting sales,' the firm said, adding the effect was visible mostly in Europe.
'In addition, certain component shortages for popular mid-priced phones have contributed to modest unit sales growth in the first quarter,' it added.
Last week, chip maker Texas Instruments cut its first quarter forecasts, citing weaker demand for chips used in higher priced 3G phones, and hitting mobile industry stocks in Europe.
Sony Ericsson said it now plans to ship approximately 22 million phones during the first quarter of 2008 with an average selling price at around €120.
