Sony Ericsson warning hits Ericsson shares

Sony Ericsson, the Swedish-Japanese mobile phone maker, warned on Wednesday that its profits would be lower for the first quarter as sales growth slowed.

“Moderating sales growth of mobile phone units is expected to negatively impact net sales and net income before tax for the first quarter of 2008,” the joint venture between Japanese electronics giant Sony and Ericsson of Sweden, said in a statement.

The company said it expected to report a pre-tax profit of €150-200 million ($235-310 million) for the first quarter “due to increased research and development expenses as a percentage of sales.”

Analyst estimates were for pre-tax profits of €305-409 million before the statement.

On the Stockholm stock market, Ericsson B shares plunged in midday trading by 10.03 percent to 10.31 kroner ($1.72), in an overall market down by 1.15 percent. The Sony Ericsson group is not listed on the stock exchange.

Sony Ericsson said higher research and development costs were “in line with the company’s strategy to meet future growth ambitions” and that it expected gross margins to remain “relatively stable” for the first quarter of 2008 compared to the same period a year earlier.

It said it expected to ship some 22 million mobile phones during the first quarter at an average selling price of €120.

In the first quarter of 2007, the group shipped 21.8 million phones, according to Thomson Financial News.

Sony Ericsson said sales were affected by slowing market growth in mid- to high-end phones in markets where Sony Ericsson has a strong presence, such as Europe.

“In addition, certain component shortages for popular mid-priced phones have contributed to modest unit sales growth in the first quarter,” it said.

The group’s president, Dick Komiyama, said Sony Ericsson has for the last year been “focused on expanding the breadth of its portfolio and developing its presence in new markets to lessen its historic reliance on the European high-end sector for growth.

“This strategy will continue, and our objective remains to become a top three player globally by 2011,” he said.

As part of this strategy, the group this year launched 15 new phones and introduced a new platform to its portfolio, Windows Mobile.

“We expect to start seeing a positive effect from these announcements during the second half of 2008,” Komiyama said.


Ericsson suspends all Russia operations indefinitely

Swedish network equipment maker Ericsson said Monday that it was suspending all of its Russian operations over the war in Ukraine for the foreseeable future.

Ericsson suspends all Russia operations indefinitely

The telecom giant already announced in late February that it would stop all deliveries to Russia following Moscow’s February 24 invasion of Ukraine.

“In the light of recent events and of European Union sanctions, the company will now suspend its affected business with customers in Russia indefinitely,” Ericsson said in a statement.

The company added that it was “engaging with customers and partners regarding the indefinite suspension of the affected business.”

“The priority is to focus on the safety and well-being of Ericsson employees in Russia and they will be placed on paid leave,” it said.

READ ALSO: How has Sweden responded to Putin’s war in Ukraine so far?

Hundreds of Western firms ranging from Ikea to Coca-Cola, Goldman Sachs and McDonald’s have stopped operations in the country since the invasion, with French banking group Societe Generale announcing Monday it was selling its stake in Russia’s Rosbank.

Ericsson has around 600 employees in Russia, and is a “major supplier to the largest operator MTS and the fourth largest operator Tele2,” a company spokeswoman told AFP, adding that together with Ukraine, Russia accounts for less than two percent of revenue.

As a result, the equipment maker said it would record a provision for 900 million Swedish kronor ($95 million, 87 million euros) for the first quarter of 2022 for “impairment of assets and other exceptional costs,” though no staff redundancy costs were included.
Ericsson is due to publish its first quarter earnings on April 14.