Sony Ericsson sees handset market still tough in 2010

STOCKHOLM Fri Jan 22, 2010 1:36pm EST

Sony Ericsson Chief Executive Bert Nordberg smiles during a photo opportunity at an unveiling of the new XPERIA phone in Tokyo January 21, 2010. REUTERS/Yuriko Nakao

Sony Ericsson Chief Executive Bert Nordberg smiles during a photo opportunity at an unveiling of the new XPERIA phone in Tokyo January 21, 2010.

Credit: Reuters/Yuriko Nakao

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STOCKHOLM (Reuters) - Sony Ericsson warned on Friday a recovery in the cellphone market could be slower than many expected as it reported its seventh straight quarterly loss.

The Swedish-Japanese venture's outlook is in contrast to budding optimism for the industry, which comes after a grim 2009 for handset makers and chip firms. Market leader Nokia has forecast global market volumes to rise around 10 percent in 2010 as economies improve, a view shared by analysts.

However, the group warned there would be only slight growth in the market and this would come in the low-price segment.

"During Q4 we saw some positive signs of a market pick-up," Sony Ericsson President Bert Nordberg told analysts. "However, we believe that the value of the market will be flat for the next 12 months."

Nokia this week rattled its rivals, which are engaged in cut-throat competition, by offering free satellite navigation on its phones, matching a move by Google and putting more pressure on Sony Ericsson as it goes after high-end phone sales.

Executive Vice President Anders Runevad said the firm would not see a decrease in its slice of overall revenues in the sector.

"We believe that we will be able to keep or stabilize our value share," he said.

Sony Ericsson owned by Sweden's Ericsson and Japan's Sony Corp, said it would "follow the market" on the pricing of navigation applications.

The group reported a fourth-quarter pretax loss of 190 million euros ($270 million). It nearly match the consensus forecast of 194 million euros in a Reuters poll and would have been better had the firm not taken larger-than-expected restructuring charges.

SMARTPHONES

In addition to struggling to weather the global downturn, Sony Ericsson has been hampered by its weakness in the smartphone segment -- the only bright spot in a shrinking market -- leaving it to play catch up with rivals Apple, Nokia, LG Electronics and Samsung.

Sony Ericsson chief Nordberg said the company's turnaround plan, focused on cost cutting and new phones with advanced mobile Internet and networking functions, was gaining traction.

Sales of Sony Ericsson's new Aino and Satio phones -- along with cost cuts -- gave a big boost to the firm's gross margin.

"On the positive side we see that the new phones ... are well received by customers and they are really selling more high-end phones, and that is raising the average sales price quite a bit," Sydbank analyst Morten Imsgard said, adding the overall results are better than expected once restructuring charges are taken out.

The full benefit of the cost cuts are expected to come through in the second-half of the year, but management would not say when the firm would move back into the black.

Ericsson's other joint venture, ST-Ericsson, also booked a narrower quarterly loss thanks to restructuring and an improving market. The chip-making group said the overall market would see a seasonal decline in the first quarter this year.

"What we want to do now is to work on our cost on one side and work on our top line on the other side and make it so that we get to that profitability as soon as possible," ST-Ericsson Chief Executive Gilles Delfassy said.

Ericsson shares closed up 1.5 percent, outperforming the wider Stockholm market. Shares in STMicro, the venture partner in ST-Ericsson, closed down 2.4 percent

The Tokyo market, where Sony trades, was closed.

($1=.7040 Euro)

(Additional reporting by Brett Young and Tarmo Virki in Helsinki, Veronika Ek, Mia Shanley, Johannes Hellstrom, Oskar von Bahr, Helena Soderpalm and Sven Nordenstam in Stockholm; Editing by Hans Peters, Sharon Lindores and Karen Foster)

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