Sony Ericsson Back In Red, Cites Earthquake

By Joseph Palenchar -- TWICE, 7/15/2011

London - Cellphone maker Sony Ericsson largely blamed this year's Japan earthquake for slipping back into the red during its fiscal second quarter following five consecutive quarters of net profits.

The company estimated that the earthquake prevented it from selling 1.5 million more handsets than it did in the quarter, when shipments fell 31 percent year over year to 7.6 million following a first-quarter decline of 23 percent. The company also attributed its continuing decline in handset unit shipments to its transition away from lower-priced feature phones to Android smartphones, which accounted for 70 prevent of company unit shipments in the quarter.

"We estimate that the impact of earthquake-related supply-chain constraints on our portfolio was close to 1.5 million units, with most of the effect in the early part of the quarter," said president/CEO Bert Nordberg.

For the quarter, sales volume fell 32 percent year over year to 1.19 billion euros ($1.68 billion at an exchange rate of $1.41 per euro). The company posted a net loss of 50 million euros ($70.5 million) compared with a year-ago net profit of 12 million euros ($16.9 million), and an operating loss of 37 million euros ($52.2 million). This contrasts with year-ago operating income of 36 million euros ($50.8 million).

Gross margins slipped sequentially to 31 percent from 33 percent but were nonetheless up from the year-ago 28 percent.

In North America, net sales in the quarter fell 13 percent year over year to 193 million euros ($272.4 million) compared with a 25 percent first-quarter decline. For the first half, North American sales were off 19 percent to 345 million euros ($486.9 million). North American net sales were nonetheless up sequentially in the second quarter by 28 percent.

Globally, the company's average selling price for the quarter was 156 euros ($220.2), a 3 percent decrease year on year but up 11 percent sequentially.