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Sony Ericsson posts another loss in 2Q

HANDSET maker Sony Ericsson said today it booked another loss in the second quarter as the global economic crisis continued to weigh on mobile phone sales.

The LM Ericsson and Sony Corp. joint venture said the loss of €213 million (US$299 million) compared with a profit of €6 million a year ago. The result was the fourth consecutive quarterly loss for Sony Ericsson.

The company shipped 13.8 million units in the quarter, down 43 percent year-on-year. Sales for the period fell by 39 percent to €1.7 billion from €2.8 billion in the second quarter of 2008.

EQ Bank analyst Jari Honko said the report was largely in line with his expectations and underlines that Sony Ericsson is in "deep trouble."

"My future outlook for the company is pretty dark," he said. "I haven't seen any magical trick that could improve Sony Ericsson's position."

He said that although the weak handset market was causing difficulties for Sony Ericsson, it also had some "major company-specific issues" regarding its product strategy.

"One should not draw any hasty conclusions for other companies, such as Nokia from this report," he said.

Shares in Ericsson rose 2 percent to 77.90 kronor (US$9.99) in Stockholm.

Sony Ericsson estimates its market share was over 5 percent in the second quarter compared with about 6 percent in the first quarter. It also reiterated its outlook for the global handset market to fall at a rate of around 10 percent in 2009.

"As expected, the second quarter was challenging and we still believe the remainder of the year will be difficult for Sony Ericsson," President Dick Komiyama said in a statement. "Our focus remains on bringing the company back to profitability and growth as quickly as possible, and our performance is starting to improve due to our cost reduction activities."

Speaking at a conference call, Vice President Anders Runevald said that although the global mobile phone market is still deteriorating - especially in emerging markets - the decline has started to slow in Europe, North America and China.

The company's weak position has triggered speculation in the media that the company may need a cash injection, possibly altering the ownership structure.

Sony Ericsson's chief financial officer Ulf Lilja acknowledged the company would need more capital in the second half of the year, but said "availability of financing will not be an issue." He said capital could come from the parent companies, from external sources, or from a combination of both, depending on what the owners find is the optional solution.

In April Sony Ericsson said it would slash 2,000 jobs, on top of 2,000 jobs cut last year, to lower costs.

Today it said programs launched in 2008 to cut costs by some €880 million are on track, with the full benefit expected during the second half of 2010. Since the beginning of the cost-cutting programs, Sony Ericsson has shed around 2,350 jobs, it said.



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