Sony Ericsson to cut costs by €300m

SONY Ericsson Mobile Communications Ltd, which slipped to fifth rank this year among global mobile-phone producers, said it aims to cut annual costs by €300 million(US$474 million) after quarterly profit was almost wiped out.

Sony Ericsson also forecast the handset market will remain "challenging" this year, particularly in the third quarter, according to a release by the London-based company yesterday. Net income fell to €6 million from €220 million a year earlier, and sales dropped 9.4 per cent to €2.82 billion.

"We are aligning our operations and resources worldwide to meet an increasingly competitive business environment and to help restore our capability for profitable growth," chief executive officer Dick Komiyama said in the statement.

The company, a venture between Sony Corp and Ericsson AB, lost its position in the global handset market to LG Electronics Co this year. Sony Ericsson has suffered from delays in bringing products to the market as well as component shortages. Yesterday's report contrasts with that of Nokia Oyj, the industry leader, which reported earnings and revenue on Thursday that exceeded analysts' estimates and raised its forecast for industry sales.

Sony Ericsson said it will take charges of a similar magnitude to the intended annual cost savings to realign the company. Analysts polled by SME Direkt had anticipated sales of €2.76 billion and net income of €3 million.

Unit shipments fell to 24.4 million from 24.9 million units a year earlier, with average selling price declining to €116 from €125. Analysts had anticipated shipments of 24 million units and an average price of €115, according to SME.

Nokia, based in Espoo, Finland, raised its outlook for global unit sales to 10 per cent growth or more from the about 1.14 billion units sold in 2007. It had previously predicted sales growth of about 10 per cent. Sony Ericsson reiterated today global industry sales by units will rise by about 10 per cent this year, lead by emerging markets. - Bloomberg