Sony Ericsson (SE) executives blamed component shortages resulting from the March earthquake in Japan and falling demand in Western Europe for the company's net loss in the second quarter.
While analysts were forecasting a small profit, the loss of €50 million in the second quarter came as a shock and broke a string of five consecutive quarters of profit. A year earlier SE reported profits of €12 million.
SE said that the Japanese earthquake caused a sudden drop in the supply of vital components and reduced its handset volumes by 1.5 million in the quarter. The company sayid it was only able to ship 7.6 million devices in the second quarter, down 31 per cent compared to the same period last year.
Stuart Jeffrey, analyst at Nomura, described SE's results as "disappointing." He added, as reported by the Financial Times: "Results continue to suggest that the company's underlying market share continues to decline."
Commenting on the latest quarterly results in an interview with Bloomberg, SE CEO Bert Nordberg, said: "The feature-phone market is collapsing much faster than I anticipated." The drop in Western Europe is "enormously big."
"It's a two-tier market," says Tero Kuittinen, an analyst at US-based MKM Partners, told Bloomberg. "Lower-income families in Europe have stopped upgrading phones, have stopped spending, while affluent people are still buying and upgrading smartphones."
Nordberg said that the company is now looking to redesign some products with different components because of the shortages, and aims to return to profit in the next two quarters. "The beginning of the quarter was a disaster for us and then it slowly got better toward the end of the quarter," Nordberg said, adding, to the Financial Times: "I believe if the impact of the earthquake had not been significant we would have delivered a profitable quarter."
Sony Ericsson hit by component shortages, but promises Android dominance
IDC: Smartphones blitz Europe with 100% growth
Analyzing the world's 10 biggest handset makers in Q1
Smartphone success boosts Sony Ericsson's result