Alarm bells ringing at Sony Ericsson

The near €25 million loss reported by Sony Ericsson for its third-quarter has prompted the company's president into taking drastic action. The most notable will be the decision to slash the handset product portfolio by 20 per cent, followed by a consolidation in R&D activities and the possibility of further job cuts numbering in the thousands.

Sony Ericsson's president, Dick Komiyama, blamed the worsening economic climate in Europe for the company's woes as consumers purchased fewer mobile phones. "Consumer confidence is less almost day by day." This was reflected in the company reporting sales of €2.8 billion in Q3, down 10 per cent on the same period last year, with profitability also being hurt by a combination of price cutting and restructuring charges.

In an effort to put a positive spin on an increasingly gloomy picture, Komiyama said that he hoped Sony Ericsson could return to profitable growth in the second half of next year.

While analysts don't believe these problems are terminal for Sony Ericsson, the continued success of LG's handset division - with Q3 sales up 30 per cent, must cause extreme frustration within the Swedish/Japanese joint venture.

The company also revealed that it would no longer be supplying handsets to NTT DoCoMo, and in addition, due to skyrocketing development costs and sluggish sales in Japan, had withdrawn from a coalition led by DoCoMo to develop advanced handset technology.

For more on this story:
- go to the Financial Times and Mobile Today

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