Sony Ericsson hit by £173m loss in final quarter

Low feature-phone sales, flooding in Thailand and restructuring ahead of the buyout by Sony led the mobile device maker to a massive loss in its final quarter and year as a joint venture
Written by David Meyer, Contributor

Sony Ericsson's last financial results before the joint venture ends have shown massive losses in its last quarter, largely due to plummeting feature-phone sales.

Sony Xperia Play

Sony Ericsson lost €247m in 2011, although its Xperia line of smartphones saw a 65-percent year-on-year increase in sales. Photo credit: Stephen Shankland/CNET News

The London-based mobile device maker's results for the fourth quarter of 2011 and the full year, released on Thursday, revealed a 20-percent year-on-year drop in overall shipments. Added to component shortages due to the Thai floods, and significant restructuring costs ahead of Sony's buyout of the partnership with Ericsson, this led to net losses of €247m (£206m) for the year of 2011 and €207m (£173m) for the final quarter.

The losses are reminiscent of those Sony Ericsson was making three years ago when it was on the brink of extinction, before Android helped it back to profitability. In 2010, the company made profits of €90m, but that reflected sales revenue of €6.3bn — in 2011, that revenue was down to €5.2bn.

"Our fourth-quarter results reflected intense competition, unfavourable macroeconomic conditions and the effects of a natural disaster in Thailand this quarter," Sony Ericsson chief Bert Nordberg said in a statement. "We are aligning our business to drive profitability and to meet customer needs."

Sony Ericsson's fourth quarter was particularly "tough in Europe, where Samsung and Apple dominated", Gartner analyst Carolina Milanesi said in a post to Twitter. She added it is "interesting" that it cited the Thai disaster as it was mostly PC vendors that had been affected by the floods.

Smartphone-only strategy

Nordberg pointed out that throughout 2011, Sony Ericsson was in the process of switching to a smartphone-only strategy. The poor overall sales results may have shown a huge drop in feature-phone sales, but sales of Android-based smartphones in the fourth quarter actually showed a 65-percent year-on-year boost.

Sony Ericsson has sold 28 million Xperia handsets to date, the company said, and the Android smartphone line represented 80 percent of sales during the fourth quarter. The manufacturer estimates it has a 10-percent share of the global Android smartphone market, which increased in size by 60 percent during 2011.

Ian Fogg, head of mobile at IHS Screen Digest, noted it is "sobering that five years after the iPhone announcement, the established handset [manufacturers] are still struggling to compete".

The restructuring charges for the full year, which all came in the fourth quarter ahead of Sony's €1bn buyout of the joint venture with Ericsson, totalled €93m. Without taking those costs into account, pre-tax losses were only €150m for the year and €154m for the quarter.

The takeover by Sony will take effect at the end of January or in early February, the company said.

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