Oct 17, 2008 2:00 PM,

Sony Ericsson posts loss, but aims for profitability in 2009

By Kevin Fitchard

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Like its larger competitor, Nokia, Sony Ericsson weathered the third quarter, but, as with Nokia, the company today warned of harder times to come and detailed its plans to outlast it.

Sony Ericsson reported a loss of 23 million euros (U.S. $31 million) for the third quarter, compared to a 267 million euro profit the same quarter a year ago. But the loss was smaller than analysts projected. Handset volumes year-over-year were flat at just under 26 million, but sales fell 10% to 2.81 billion euros ($3.76 billion), much of which Sony Ericsson attributed to volatile currency fluctuations. But the company also noted its traditionally high average selling price for phones fell from 120 euros to 109 euros, as the vendor attacked the lower end of the phone spectrum and cut prices on its mid-to-high-end devices.

Sony Ericsson already had issued two profit warnings this year, but it offered no further alerts today. On Sony Ericsson’s earnings call, Dick Komiyama, the company’s president, cautioned that it is still unsure how the current economic climate will affect consumer behavior, but he stated that Sony Ericsson’s restructuring plans are firmly on track, with the handset vendor expecting to be profitable again by the end of 2009.

“As expected, the third quarter has continued to be challenging for Sony Ericsson,” Komiyama said in a statement. “Our target remains to reduce operating expenses by 300 million euros annually by the end of the second quarter 2009, with the full effects expected to appear in the second half of 2009. … We are committed to executing our alignment plan as speedily as possible to ensure we have the right size and organizational structure to return the business to healthy profitability.”

Sony Ericsson has seen its rapid rise as a high-end phone-maker fall off in the last year, as new competitors such as Apple have attacked its feature phone and smartphone share. Earlier this year it lost its No. 4 spot in units shipped to LG Electronics.