SONY ERICSSON, the world's fourth-largest mobile phone manufacturer, yesterday warned its pre- tax profit for the first quarter of 2008 could be less than half that of last year, partly because of a shortfall of sales in its core European markets.
The anticipated profit hit suggests the global economic slowdown is starting to bite in the telecoms industry. Analysts said other mobile makers, including Nokia, would be affected.
Sony Ericsson indicated that European consumers were buying fewer new mobiles to replace their existing handsets than previously expected.
The news prompted a near 8 per cent fall in Ericsson's share price to SKr10.59.
Sony Ericsson is jointly owned by the Swedish telecoms equipment manufacturer and Sony of Japan.
Sony Ericsson said its revenue and pretax profit in the first quarter of 2008 would be negatively affected by slowing sales growth for its mid- to high-priced mobiles.
Such mobiles for affluent consumers in European countries have been Sony Ericsson's core strength, rather than cheap handsets for emerging markets.
Sony Ericsson said that its pretax profit for the first quarter of 2008 would be €150-€200 million, compared with €362 million in the same period last year.
The reduced profit guidance is partly due to increased research and development that should enable Sony Ericsson to raise its game in China, India and the US.
Dick Komiyama, Sony Eric-sson's president since November, said the market was proving to be challenging: "This has been more pronounced in the mid- to high-end replacement sector of the market in Europe, where Sony Ericsson has stronger than average market share."
He stood by his target for Sony Ericsson to become one of the top three mobile phone makers by 2011.
Mr Komiyama said he hoped to see a positive financial effect in the second half of 2008 from Sony Ericsson's strategy to improve sales outside Europe.
Richard Windsor, analyst at Nomura, said: "The economic slowdown has impacted Sony Ericsson much harder than we had anticipated."
He said Nokia would feel less pain from the slowdown compared with Samsung, Sony Ericsson and LG because of its strength in emerging markets.
- (Financial Times service)
