Sony Ericsson warning stuns ailing mobile sector


Sony Ericsson sparked fresh fear of crumbling consumer demand on Friday when the world’s No 4 handset maker said it would sell barely half of the phones it sold last quarter.

Shares across the wireless sector dropped sharply on the news — compounded by smaller rival Palm’s overnight report of slumping quarterly sales — and by 1229 GMT (8:29 a.m. EDT), Ericsson was down 8.7 percent and Nokia was down 5.5 percent.

Sony Ericsson said it expects to sell just 14 million phones in January-March, hit by weak demand and retailers cutting their inventories. Analysts polled by Reuters in January expected between 15.5 million to 21.8 million phones sold.

“Investors are questioning the whole market now, even though I think the issue for Sony Ericsson is more company specific,” said Jari Honko, analyst with eQ Bank.

Overnight, U.S. rival Palm Inc reported a widening loss for the December-February quarter and said revenue sank 70 percent from a year ago.

The cellphone industry has entered its toughest year ever as consumers rein in spending and retailers try to clear inventories of unsold phones after bleak Christmas sales.

“The market, overall, continues to be very challenging,” said Gartner analyst Carolina Milanesi.

Fears over the future of the mobile market also sent shares in chipmakers sharply lower, with Infineon down 6.6 percent and STMicro 5 percent lower.

VERY WEAK QUARTER

Sony Ericsson said it expected to make a pretax loss of 340-390 million euros ($459 million-$526 million) in the quarter as it heads into a second year of losses.

“It’s a real catastrophe. Those are very big losses and they are probably losing a lot of market share,” said Greger Johansson, from analyst firm Redeye.

“It’s obvious that the volumes are much lower than the market had thought. And first and foremost, the losses are much, much bigger,” he said.

Sony Ericsson, the no. 4 global handset maker after Nokia, Samsung and LG, said it expects gross margins to decline both year-on-year and sequentially.

“What is happening now is that everyone will be forced to cut their forecasts for Sony Ericsson and Ericsson,” said analyst Hakan Wranne from Swedbank.

Ben Wood, head of research at CCS Insight said Sony Ericsson was suffering most from the weak portfolio and the challenging market conditions it faces in European markets.  Continued…

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