In its third quarter results, Sony Ericsson revealed a 45% decline in shipments to 14.1 million units from the 25.7 million units shipped in 3Q08, while the average selling price (ASP) fell 6% from 2Q09, but rose 5% against 2Q08. Net income declined from a €25 million loss in 3Q08 to a €164 million loss in 3Q09, despite the improvements against the second quarter. Sony Ericsson lost €11.6 per unit shipped in 3Q09, significantly higher than the €1.0 loss per unit shipped in 3Q08.
Sony Ericsson’s results show the need for a stronger portfolio, stated research firm, IDC. The mobile phone market continues to be affected by the economic slowdown, but major vendors are responding aggressively with adjusted portfolios and price cuts.
While other vendors’ portfolios are evolving to a wide range of smartphones, running different operating systems, and targeting mid-tier prices, Sony Ericsson’s portfolio continues to focus on high end feature phones, complained IDC.
In terms of smartphones, only the Xperia X2 and Satio were launched in the third quarter, and again they were high end devices. When it comes to pricing, Sony Ericsson managed to increase the ASP from €109 in 3Q08 to €114 in 3Q09, which would be a great result if the market weren’t experiencing a demand slowdown and a shift from premium prices to low-end and mid-tier prices.
The future doesn’t look bright for Sony Ericsson, stated IDC. The need for stronger cost cuts to compensate the sales decline will jeopardize product development. On the other hand, the plunge in volumes will bring manufacturing costs up as volume scale advantages vanish, which will make life more difficult for Sony Ericsson when it comes to price competition with major players trying to increase market share, the firm claimed.