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Sony Ericsson Expects Drop In Shipments

Vigorous competition from Apple's iPhone and various BlackBerry models has stolen much of Sony Ericsson's thunder in recent months.
Sony Ericsson stunned the mobile handset sector Friday by reporting that consumer demand for the joint venture's phones has been plunging and will cause a substantial first-quarter loss.

The predicted loss, which is estimated to range from $465 million to $533 million, will be well below earlier investment banking analysts' estimates. The partnership has had a stormy history, with ups and downs in acceptance of its handsets driving sales and earnings up and down, too. New vigorous competition from Apple's iPhone and various BlackBerry models has stolen much of Sony Ericsson's thunder in recent months.

The joint venture already reported declining sales in the fourth quarter that produced losses of more than $200 million. Sony Ericsson's sweet spot has been the midrange phone, and that category has been particularly hit hard. Low-cost phones have been selling well as handset makers have successfully targeted emerging markets for their phones. On the high end, smartphones -- a weak category for Sony Ericsson -- are generally selling well, too. Sony Ericsson said it expects to ship 14 million phones in the quarter versus the 21 million units that some analysts had been predicting.

The latest news means that Sony Ericsson is likely to burn through its cash hoard if it can't turn around its operation. The joint venture telegraphed the news in advance of April 17 when it plans to unveil its official financial report. After the Friday announcement, Ericsson shares dropped nearly 9%. In recent days, rumors have been rife that Ericsson wants to leave the partnership. Nokia shares dropped 5.5% in sympathy with the Sony Ericsson announcement.

Market researcher Gartner said recently that mobile phone shipments declined about 5% in the fourth quarter. Gartner said about 315 mobile phones were delivered in the quarter.


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