Sony Ericsson's second-quarter profits tumbled as a result of the aftershocks of the tsunami and earthquake that hit Japan in March, which disrupted the company's supply chain. However, the handset vendor forecast a stronger second half of the year.
The company booked a net loss of $70.73 million in the quarter, a dramatic reversal from the net profit of $17 million it reported in the year-ago period. The figures also broke a string of five consecutive quarters of profit. Sony Ericsson CEO Bert Nordberg had warned in April that the company's second quarter would be impacted strongly by the earthquake.
Nordberg told Dow Jones Newswires in an interview that the second quarter "was lost" and the month of April was "a formidable catastrophe" due to supply chain constraints. "Had it not been for the earthquake and the supply chain constraints we would have shipped 1.5 million more units and we would have been profitable during the second quarter," Nordberg said.
Separately, he told Reuters that the company expects to have a stronger second half, and that the effects of the earthquake will be negligible in the third quarter. The Sony Ericsson chief said demand for smartphones remains strong, and that smartphone sales have cut into feature phones. Indeed, he said the feature phone market was "nearly ... collapsing."
Sony Ericsson's reliance on Google's (NASDAQ:GOOG) Android platform is powering its results. Sony Ericsson said 70 percent of its total sales during the quarter were smartphones. Sales slumped to $1.68 billion in the quarter, down from $2.48 billion in the year-ago period. The company shipped 7.6 million units in the quarter, down 31 percent from 11 million in the second quarter of 2010.
Although Sony Ericsson aims to be the world's largest Android handset maker, the company reported that it has around 11 percent of the global Android smartphone market. "Smartphone volume was reassuring, but Sony Ericsson still faces a considerable task in rebuilding and sustaining profit margins," CCS Insight analyst Geoff Blaber told Reuters. "Sony Ericsson is not alone in finding the smartphone transition a challenging one."
Analysts generally expect Samung to report gains in the second quarter, while Nokia (NYSE:NOK) and LG will suffer. Nokia reports its earnings on July 21.
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