Ericsson Stung as Phone Sales Plunge

If Ericsson(ERIC) needed more reason to get completely out of the mobile-phone business, it got it Thursday with the abysmal preliminary first-quarter performance by its joint venture Sony(SNE) Ericsson.

The 42% sequential decline in phone sales was twice as steep as most analysts' expectations and the strongest signal yet that Sony Ericsson has been unable to produce a popular line-up of phones. The venture has been losing market share to outfits with more popular phones like Apple(AAPL), Research In Motion (RIMM) and Samsung.

Time to get out?

Already a drag on Ericsson's earnings, the most recent report by the London-based JV only further advances the notion that the wireless-networking equipment maker may be seeking an exit from the partnership with Sony(SNE).

Sony Ericsson did not immediately return a call and an Ericsson rep said he had no comment

Sony Ericsson's $2.28 billion in sales missed analysts' targets by $605 million, or 21%, a big disappointment, but minor compared with the steeper-than-expected losses.

The company estimated losses for the quarter will fall to $495 million, 70% below analysts' targets, and an alarming plunge further into red ink.

The massive losses put an even stronger focus on the JV's viability. Analysts are now looking more closely on the financial sustainability.

"These numbers suggests that Sony Ericsson will burn through about half of the 1.125 billion euros of cash that it started 2009 with by the end of the year," JPMorgan analyst Rod Hall wrote in a note Friday. Hall rates Ericsson sell.