Mobile Phone Market Continues To Suffer
Officials at Sony Ericsson, the 4th largest handset maker, announced on Friday that it would sell barely half of the phones it sold last quarter “” another bad sign of slowing consumer demand, Reuters reported.
The news caused a drop in stocks all over the wireless sector, as the company’s smaller rival Palm reported slumping quarterly sales overnight, while Ericsson dropped to 8.7 percent and Nokia was down 5.5 percent by 8:29 a.m. EDT.
Staggered by weak demand and retailers cutting their inventories, Sony Ericsson projects it will sell only 14 million phones in January after being projected to sell between 15.5 million to 21.8 million.
Jari Honko, an analyst with eQ Bank, said investors are questioning the whole market now, even though he believed the issue for Sony Ericsson was more company specific.
Revenue sank 70 percent from a year ago for U.S. rival Palm Inc, which reported a widening loss for the December-February quarter.
Analysts are calling this the toughest year ever for cell phones, as consumers slow down spending and retailers try to clear inventories of unsold phones from weak holiday sales.
Gartner analyst Carolina Milanesi said the market, overall, continues to be very challenging.
As Sony Ericsson heads into a second year of losses, the company said it expected a pretax loss of $459 million-$526 million in the quarter.
Greger Johansson, from analyst firm Redeye called it “a real catastrophe”.
"It’s obvious that the volumes are much lower than the market had thought. And first and foremost, the losses are much, much bigger," he added.
Sony Ericsson was suffering most from the weak portfolio and the challenging market conditions it faces in European markets, according to Ben Wood, head of research at CCS Insight.
Wood said that with competition intensifying, it would be a tough task to regain momentum until new products appear and economic conditions improve.
Sony Ericsson’s mid-range phones with high-quality cameras and music players have been the key to the company’s success, but this part of the cellphone market is seeing the sharpest fall this year as operators spread out subsidies to more expensive phones.
In spite of the weak economy, Qualcomm, the world’s largest cellphone chipmaker, said on Friday it was seeing strong demand for higher-end smartphones.
Smartphones sales are expected to grow between 10 percent and 20 percent this year, analysts projected.
Jing Wang, a Qualcomm executive vice president, told Reuters that consumer demand for higher-end smartphones remains strong as the demand for wireless Internet, multimedia, and value-added services continues to grow.
He said 3G is continuing to grow all over the world as subscribers migrate from second-generation to third-generation networks and manufacturers are shipping more 3G devices this year than last year.
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