Ericsson Second Quarter Phone Business Records Loss
By Jeff Malester -- TWICE, 9/30/2002
STOCKHOLM, SWEDEN— Ericsson, which has a 50 percent share of a joint mobile phone making venture with Sony — called Sony Ericsson Mobile Communications — reported a loss of $866 million for its part in the new company in the second quarter.
Ericsson cited lower volume, some product delays and increased marketing costs from the introduction of new products, as well as branding activities, for the loss.
The company's overall phone segment reported an adjusted operating loss of $47.8 million in the second quarter, down from an adjusted operating loss of $481.9 million in the year-ago period.
With a slow replacement rate, Ericsson believes the overall market for mobile phones in the second quarter was 85 million, about the same as the first quarter. The company now expects the mobile phone market to be flat to down slightly for the year, compared with last year's 390 million units. It had previously estimated the market to be 400 million to 420 million phones this year.
The company claimed maintenance of a high average mobile phone selling price in the second quarter, leading to sales of 5 million units and dollar sales of $952.6 million.
Overall Ericsson sales into the North American market totaled $656.3 million in the second quarter, up from $600.7 million in the same three months in 2001.
Ericsson said it is ahead of schedule in the results garnered from intensified cost reductions, yet reported lower overall sales and net income in the second quarter.
Sales on a pro forma basis for the second quarter, which excluded mobile phone operations that Ericsson spun off into the Sony joint venture last year, hit $4.2 billion, down from $6 billion year over year. Its net loss dropped to $376.7 million pro forma in the second three months, down from about a $1.5 billion loss in the same quarter in 2001.
For the six months, sales dropped to $8.2 billion pro forma, compared with $11.4 billion in the second quarter of last year. The net loss came in at $779 million pro forma, down from about a $1.5 billion loss in the second three months of 2001.
Looking ahead, Ericsson expects to take a loss in 2002, but with ongoing cost reductions, it believes it can return to profitability sometime in 2003.
