Sony Ericsson recorded its first quarterly net loss in more than five years yesterday, as the world's fifth largest mobile phone manufacturer was hurt by consumers buying fewer handsets.
The company, owned by Sweden's Ericsson and Sony of Japan, reported a net loss of €25m ($34m) in the third quarter compared with a profit of €267m during the same period last year.
Dick Komiyama, Sony Ericsson's president, announced plans to cut the company's handset range by 20 per cent to raise profitability.
He said the company was consolidating three handset development divisions into one to reduce duplication and improve efficiency.
He also did not rule out increasing Sony Ericsson's €300m cost-cutting programme, which involves removing 2,000 jobs, to improve profitability.
Reflecting on the economic downturn and the banking crisis, Mr Komiyama said: "Consumer confidence is less almost day by day."
European consumers have been buying fewer mobile phones because of the economic downturn, prompting Sony Ericsson to issue profit warnings in the first and second quarters.
Western Europe remains Sony Ericsson's most important market and the company managed to increase sales in Europe, the Middle East and Africa during the third quarter compared with the preceding three months.
That performance was partly achieved through aggressive price-cutting that also enabled the company to maintain its global market share of mobile phones shipped to customers at 8 per cent in the third quarter. It was also 8 per cent in the preceding three months.
Richard Windsor, analyst at Nomura, said: "The company's struggle to remain relevant has cost it dear in margins."
Sony Ericsson reported sales of €2.8bn in the third quarter, down 10 per cent on the same period last year, and profitability was also hurt by a combination of price cutting and restructuring charges.
The company reported operating profit of €2m excluding €33m of restructuring charges in the third quarter compared with €393m in the same period last year.
Mr Windsor said profitability would have been markedly worse but for careful control of operating expenses.
"Sony Ericsson's position remains difficult but losses have been largely contained through efficiencies and the company has defended share," he added.
Mr Komiyama said that he hoped Sony Ericsson could return to profitable growth in the second half of next year.
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