Sony Ericsson's Profits Plunge

Handset maker Sony Ericsson posted a sharp decline in second-quarter sales and earnings, although results matched the company's own tempered forecast.

The Stockholm-based joint venture between Ericsson (ERIC Quote) and Sony (SNE Quote) said second-quarter income plummeted 97% to 6 million euros from 220 million euros in the year-ago quarter. Similarly, net income was down 95.4% from the previous quarter.

Sony Ericsson said revenue slipped 9% from a year ago to 2.82 billion euros, which the company blamed on a "unfavorable exchange rate fluctuation, continued slowing market growth in mid- to high-end phones and increased competition." Gross margin fell from above 29% a year ago and in the first quarter to 23.1% in the most recent quarter.

The average selling price per unit, a key metric for cell-phone makers, slid to 116 euros from 125 euros a year ago and 121 euros in the first quarter. The ASP was down both sequentially and year-on-year due to the impact of softer sales of high-to mid-end models. Sony Ericsson said its market share for the quarter remained constant at 8%.

Additionally, the company's unit shipments fell to 24.4 million in the second quarter from 24.9 million in the same quarter a year ago, although that was up sequentially from the 22.3 million units shipped in the first quarter.

Last month, Sony Ericsson warned it would ship approximately 24 million phones during the second quarter with an estimated ASP of 115 euros. The company also said that gross margin was expected to decline both year over year and sequentially, and net income before taxes was estimated to be about break-even.

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