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Sony Ericsson Sees Slowdown In Sales Of High-End Mobile Phones

The handset vendor issues a warning on sales and profits because of component shortages and slowness in the high-end replacement market.

Softness in the high-end replacement market for mobile phones prompted Sony Ericsson on Wednesday to warn that it won't meet revenue and profit forecasts for the first quarter.

The world's fourth-largest mobile handset vendor also said that component shortages for midrange phones contributed to modest sales growth.

"The market is proving to be challenging. This has been more pronounced in the mid- to high-end replacement sector of the market in Europe, where Sony Ericsson has stronger-than-average market share," Sony Ericsson president Dick Komiyama said. To reduce its reliance on this sector, Komiyama said the company has introduced 15 new phones and added the Windows Mobile operating system to its line. The vendor said it's unlikely to see positive results from those moves until later this year.

"This strategy will continue, and our objective remains to become a top three player globally by 2011," Komiyama added. At present, the market-share leaders are Nokia, Motorola, and Samsung, followed by Sony Ericsson.

Sony Ericsson revised its first-quarter shipment estimates to approximately 22 million phones with an average selling price estimated at $188. That in turn will reduce pretax net income to somewhere between $235 million and $313 million. Gross margins for the quarter are expected to be comparable to the same period a year ago. Official figures will be released April 23, the vendor said.

The warning came in the wake of sluggishness in the mobile handset market. Gartner in late February predicted a slowdown in Western Europe and the United States as other economic problems reduced spending. While overall volume growth for 2007 was 16% worldwide, it's only going to grow about 10% this year, Gartner forecasted.

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