EarningsCenter

Sony Ericsson, Nokia stumble: will they be eclipsed by new mobile stars?

Google (GOOG), IBM (IBM) and Intel (INTC) all turned in solid earnings performances this quarter, prompting optimism about the tech space. But there were some laggards, particularly among mobile phone makers.

Sony Ericsson said Friday it lost $245 million in the third quarter due to falling sales, but skittish investors were comforted by news that the joint venture between Ericsson and Sony (SNE) had secured fresh financing from external investors. Meanwhile, Nokia (NOK), the world's largest cellphone maker, shuffled its management team, one day after reporting a whopping $836 million loss thanks to a steep decline in its smartphone market share.
The dispiriting results shouldn't be all that surprising. When was the last time you or anyone you know has purchased a Motorola (MOT) or Sony Ericsson phone? To be sure, many consumers still use and buy the products, but the brands have lost their luster. Both companies used to be among the hottest gadget-makers, but have been eclipsed by Apple's (AAPL) iPhone, Research in Motion's (RIMM) BlackBerry and brand new devices like HTC's Android-powered Hero.

Sony Ericsson said its third-quarter sales fell by more than 40 percent to 1.6 billion euros, compared with 2.8 billion euros last year. Units shipped declined to 14.1 million, down 45 percent on the year. But despite the harrowing numbers, investors were comforted by a fresh injection of capital from external financiers, backed by Sony and Ericsson, designed to shore up the company's books.

Sony Ericsson faces a tough choice moving forward. Until now, the cellphone maker has sold phones based on Windows Mobile and the Symbian operating system. The company has plans to ship phones powered by Google's Android open source operating system, but details have been scarce.

It's unclear, however, if the company can support three different operating systems -- an issue that has bedeviled handset makers as well as software designers. Company CEO Bert Nordberg said he will announce a new strategy at some point during the next two quarters.

Ben Wood, an analyst at CCS Insight told PCWorld that Windows Mobile will be the first casualty. "It's very apparent that Windows Mobile at the moment is behind everybody else, and also from a business model perspective it's the last of the operating systems that's demanding a licensing fee," Wood said.

The big challenge for Sony Ericsson, the magazine notes, will be to catch up with HTC, Samsung, Motorola, LG and Acer, which have all started shipping or announced Android-powered devices.

Nokia, meanwhile, said Timo Ihamuotila, currently head of global sales, will replace Rick Simonson as chief financial officer next month, one day after posting the nearly $1 billion loss. Simonson, who has been CFO since 2004, apparently has been demoted to head of mobile phones in the devices division.

"After six successful years as CFO, it is great to have Rick move to such an important operational role," Chief Executive Officer Olli-Pekka Kallasvuo said. "Rick Simonson's deep knowledge of the business and its financials will be valuable for the significant part mobile phones play in Nokia's business."

Nokia shares, which had plunged 11 percent on Thursday, fell another 1 percent to 9.10 euros ($13.53) on Friday in late trading on the Helsinki Stock Exchange, the AP reported.

in the wake of Nokia third quarter beating, Moody's Investors Service lowered its credit rating for the company from A1 to A2, saying the cell phone market "will become more challenging for Nokia as a result of its more modest long term growth and more formidable competition in the attractive segments of the market."

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