Sony Ericsson: Cellphone market still in free fall

Sony Ericsson, the handset design and manufacturing joint venture between the two companies, posted dismal earnings for the second quarter. By far the most important figure in the earnings release: the units shipped dropped 43 percent to 13.8 million.

Sony Ericsson posted a quarterly pre-tax loss of 283 million euros. That compares to a profit before tax of 8 million euros in the same period a year ago. The company confirmed its forecast that global handset sales will drop 10 percent in 2009.

The handset company's results were discouraging for the industry, but they are more telling than that. Sony Ericsson's line of products is dominated by high-end smartphones for consumers. That gives it very little access to emerging markets where price points for handsets have to be low.

The results also point to the disadvantage a smartphone company has if it is not Apple (AAPL) or RIM (RIMM). The iPhone and Blackberry are so popular that they destroy any reasonable chances that their competitors have to do well. For Sony Ericsson that trouble is compounded by the recession.

Sony Ericsson is not likely to rebound much with the economy. It has become an "also ran" in the high end of its market.

Douglas A. McIntyre is an editor at 24/7 Wall St.


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