Sony Ericsson posts €207m loss ahead of Sony buyout

Sony Ericsson posted a net loss of €207m during the fourth quarter ahead of its buyout by Japanese electronics giant Sony, as shipments of mobile units decreased by 20 per cent annually.

The firm had posted an €8m profit in the previous quarter, but intense competition from rival manufacturers, lower pricing and floods in Thailand contributed to the end-of-year slump.

Sony Ericsson sold none million units during Q4, with Xperia smartphones accounting for 80 per cent of sales. However, this represented a decrease of five per cent on the previous quarter.

The firm has sold 28 million Xperia smartphones to date, putting it far behind competitors such as Apple and Samsung, the latter of which claims to have sold more than 300 million devices in 2011.

Bert Nordberg, president and chief executive of Sony Ericsson, tried to remain positive ahead of the completion of its €1bn buyout by Sony, noting the firm has been shifting its portfolio.

"We are aligning our business to drive profitability and to meet customer needs. In spite of these challenges, throughout 2011 we've shifted our business from feature phones to smartphones," he said.

"Our Android-based smartphone sales in the quarter increased by 65 per cent year on year. The Xperia portfolio, including the recently announced Xperia NXT series, will serve as a cornerstone of our smartphone lineup in 2012."

Sony Ericsson has been struggling to make an impact in the mobile market and had to launch a restructuring program including global workforce reductions to reduce costs and drive competitiveness during 2011. In an effort to kickstart mobile sales, Sony decided last October to buy out Ericsson in a deal worth €1.05bn.

Francisco Jeronimo, research manager, European mobile devices at IDC, explained that the disappointing results show just how tough the competition is in the mobile market and he expects Nokia, LG, Motorola and HTC to post declines too.

"During the past 10 years, [Sony Ericsson] struggled to make profits and to increase market share. The focus on Android refreshed the company's portfolio, but didn't bring profits. The company was never able to differentiate with a strong set of devices at competitive price points and was always seen as a tier-two supplier to most operators," he said.

"During 2012, Sony will completely change its handset strategy. The mobile business comes to Sony at the right time. Sony needs to close the product portfolio by integrating all products and services. The firm needs to deliver an integrated portfolio that locks consumers into a single and unique experience and set of services."

Jeronimo also noted that IDC expects a significant decline in the feature phone segment and a strong slowdown in smartphone growth in the fourth quarter of 2011, which will continue into the first half of 2012.