Sony Ericsson, the world’s fourth-biggest manufacturer of mobile phones, has warned that it expects to make a loss of between €340m (£319m) to €390m in its first quarter after cash-strapped consumers stopped buying new mobile phones.
It will be the company’s fourth consecutive quarterly loss and the London-based company said it expects to sell 8m fewer phones in the first three months of this year compared with the same period last year.
It will also make less money on every phone it does sell. It estimates the average selling price of handsets in the period will be €120 – €1 less than in the last three months of last year, despite the rising cost of producing increasingly complex devices.
The company, which has already announced plans to cut 2,000 staff has so far refused to rule out further job losses. A spokeswoman said 1,000 employees have already left the business, with 1,000 more to follow soon in an attempt to achieve €300m in cost savings by the second-half of this year.
However, at the end of January the company announced a further €180m cost-cutting drive, which “will have an additional impact on jobs”. The business employs about 500 staff in the UK. One site in Manchester is already earmarked for closure.
Nicolas von Stackelberg, an analyst at the investment bank Sal Oppenheim said: “Sony Ericsson burned free cash flow of €277m. The way things are going, the first quarter of 2009 could top even that.”
Yesterday’s profit warning, which does not include restructuring charges of €10m to €20m, was the third in less than a year from the joint venture between Japan’s Sony and Sweden’s Ericsson. Both parents have highlighted the business as a key reason for the collapse in their overall profits. Sony is planning to cut 16,000 staff and Ericsson will shed 5,000 jobs this year on top of 4,000 last year.
Sony was yesterday rumoured to considering ending the partnership. Sir Howard Stringer, the chief executive of the Japanese electronics giant, told a German newspaper: “It’s certainly been a difficult year but buying out a partner is never an easy thing.”
Sony Ericsson warned that it expects global mobile phone sales to decline by 10pc this year, double an earlier estimate from its president Dick Komiyama. It expects to sell 14m phones in the three months to the end of March, down from 22.3m in the same period last year.
Carolina Milanesi, research director at mobile phone research house Gartner, said: “The mobile phone market is not a pretty place to be for anybody at the moment. The days of steady 20pc year-on-year growth are over.”
She added that Sony Ericsson is suffering more than some other players because it is mostly makes mid-market devices. “People are still upgrading to high-end devices like the iPhone, but generally they will stay with what they’ve got or downgrade to a cheaper model.”
The news comes just days after Nokia, which makes almost four in 10 of all handset sold worldwide, announced plans to shed a further 1,700 jobs, on top of 1,000 already announced. Motorola, the fifth biggest player, is thought to be on the verge of bankruptcy.
by Rupert Neate