Sony Ericsson blames investment for profits slump

Mobile phone giant Sony Ericsson reported on Friday falling profits for the second quarter, saying continued high spending on research and development weighed on the bottom line.

Second-quarter net profit fell to 75 million euros from 89 million euros a year ago.

Pretax profit came in at 87 million euros, down from 113 million a year earlier, and compared with financial analysts’ expectations of 92 million. The number of units shipped increased to 11.88 million from 10.40 million

as the company’s decision to broaden its portfolio paid off.

This led to a rise in sales to 1.6 billion euros from 1.5 billion.

Sony Ericsson itself called the period a “solid second quarter which saw the company gaining momentum as new products began to ship”.

It said its market share had increased, but offered no details. New phones, including ones equipped with high-resolution cameras, had been “well received” by consumers. The company said it would shortly ship a personal stereo phone, called the Walkman phone.

Sony Ericsson told AFP in June that it had raised its sales forecast for the world’s mobile phone market to 720 million units in 2005 from 690 million, a prediction it reiterated on Friday.

Analysts welcomed Sony Ericsson’s improvement in sales, but chided the company for the weak bottom line.

Brokers Global Equities said the company’s margins were “surprisingly low” given that sales had been vigorous.

Shares in Ericsson, Sony Ericsson’s co-parent, fell 0.37 percent to 26.80 kronor on the Stockholm stock exchange.

Across Europe, mobile phone giants felt the impact of investor disapproval over Sony Ericsson’s performance. In Helsinki, Nokia shares slipped 0.2 percent to 14.80 euros, while in Paris, Alcatel lost 0.50 percent to 9.97 euros in morning trading.