STOCKHOLM — Mobile phone manufacturer Sony Ericsson said Thursday that intense competition slammed fourth quarter sales and forced it to post a loss of 247 million euros (US$318 million) for the year, compared with a 90-million-euro net profit in 2010. The Japanese-Swedish mobile phone joint venture, which will dissolve within the next few weeks after Sony decided to buy out its partner, saw sales in the final quarter of 2011 plunge 15.7 percent year-on-year and 18.8 percent from the previous three-month period to 1.29 billion euros. “Our fourth quarter results reflected intense competition, unfavorable macroeconomic conditions and the effects of a natural disaster in Thailand this quarter,” chief executive Bert Nordberg said in a statement. Sales dropped 17.2 percent overall in 2011. The company said its fourth quarter was among other things hit by “component shortages from the flooding in Thailand in late October and early November 2011.”
Analysts expressed shock at the poor results rounding off the Sony-Ericsson partnership. “One wonders how it could get this bad,” Aalandsbanken analyst Lars Soderfjell told Dow Jones Neswires, pointing out that “it’s probably a relief for Ericsson management that they managed to sell the asset back to Sony.” On October 27, the Japanese electronics giant said it would buy out its Swedish partner from the joint venture created in 2001 for 1.05 billion euros in cash, giving it full control over its increasingly vital handset business.
Ericsson aims to concentrate on the wireless market as a whole. Sony Ericsson meanwhile said its final quarter of 2011 had also been hit by 93 million euros in restructuring charges linked to a programme launched in December and expected to be completed by the end of this year including job cuts to reduce costs and boost competitiveness. Even excluding those charges though, the company’s operating margin plunged to minus 10 percent. “In spite of these challenges, throughout 2011 we’ve shifted our business from feature phones to smartphones, and our Android-based smartphone sales in the quarter increased by 65 percent year-on-year,” Nordberg said. The number of units shipped in the fourth quarter dropped to 9.0 million however, from 9.5 million in the third quarter and 11.2 million in the final quarter of 2010. The average selling price also declined to 143 euros in the fourth quarter of 2011 from the 166 euros in the third quarter. Following the news, Ericsson’s share price was up 0.82 percent in early afternoon trading, while the Stockholm stock exchange showed a gain of 0.51 percent overall.