Sony Ericsson battles for parts after Japan quake

STOCKHOLM/HELSINKI Tue Apr 19, 2011 10:46am EDT

A Sony-Ericsson Xperia Play is displayed at the GSMA Mobile World Congress in Barcelona, February 14, 2011. REUTERS/Albert Gea

A Sony-Ericsson Xperia Play is displayed at the GSMA Mobile World Congress in Barcelona, February 14, 2011.

Credit: Reuters/Albert Gea

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STOCKHOLM/HELSINKI (Reuters) - Cellphone maker Sony Ericsson is suffering component shortages following the Japanese earthquake and has roped in its bigger parents to give it more muscle in the fight for supplies with bigger rivals.

Chief Executive Bert Nordberg said there were shortages of displays, batteries, camera modules and some printed circuit boards due to the March 11 quake, adding the problem was stabilizing but would definitely have a bigger impact in the second quarter.

"We are now fighting for parts with bigger players," Nordberg told Reuters in an interview, adding the company was cooperating closely with its parent groups Sony Corp and Ericsson to garner more influence in talks with parts makers.

First-quarter results from Sony Ericsson, which only returned to profit a year ago after seven straight quarters of losses, showed the company staying in the black on the back of booming smartphone demand and cost cuts. Yet Nordberg's comments add to signals from other global companies on the continuing impact of the earthquake.

Earlier on Tuesday Toshiba Corp said its operating profit missed forecasts due to the disaster, while chip maker Texas Instruments Inc warned overnight of slower-than-usual quarterly sales growth as it scrambles to restart production.

Japanese component factors will also be in focus in reports from Apple Inc on Wednesday and Nokia Oyj a day later.

DELAYED ROLLOUT

Sony Ericsson had said in early April the March 11 quake was limiting volumes in its new smartphone offerings and delayed the wider launch of its neo model to the third quarter.

"The second quarter and possibly third will be difficult because of Japan," said Gartner analyst Carolina Milanesi.

Sony Ericsson has slashed costs -- including cutting around 4,000 jobs -- and refocused on higher-margin smartphones that link to social networking sites like Facebook. The share of smartphones in its sales rose to 60 percent from 40 percent in the previous quarter.

But analysts say it still takes too long for the group to bring new products to market and it has been left trailing by the likes of Apple's iPhone and smartphones from companies such as Samsung Electronics Co and HTC Corp.

IDC analyst Francisco Jeronimo said the group -- which dropped behind HTC to ninth-largest phone maker by volume -- risks remaining a niche player if it does not expand its offering beyond the top end of the market.

"They are not Apple. I do not see a bright future for them if they do not do more," Jeronimo said.

Sony Ericsson posted a quarterly pretax profit of 15 million euros ($21.3 million), beating an average analyst forecast for a loss of 24 million, but within a wide range of estimates.

Revenue missed forecasts as Sony Ericsson sold just 8.1 million phones in the quarter, below all expectations, and giving it market share of just over 2 percent, the lowest level since the venture was formed 10 years ago.

Shares in Ericsson were 0.1 percent higher at 76.55 crowns by 1317 GMT, in line with a slightly firmer European technology sector.

"These results point to a significant and ongoing impact on Sony Ericsson's supply chain and operations caused by the Japan earthquake, with shipments falling a considerable way short of expectations," said CCS Insight analyst Geoff Blaber.

"This is a challenging situation for Sony Ericsson, but with lowered operating expenses and continued improvement to gross margin, it is at least in a better position to weather the storm than it was 12 to 24 months ago," Blaber said.

(Editing by David Cowell and David Holmes)

($1=.7039 Euro)

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