Sony Ericsson in profit warning

Sony Ericsson has issued a profit warning for the first quarter of 2008 as slowing growth in the mid-to-high end mobile phone market affects sales.

The 50-50 joint venture between electronics giant Sony and Stockholm-based telecoms provider Ericsson develops mobile phones that incorporate Sony's brands, such as its CyberShot digital photography and Walkman music.

Sony Ericsson said slowing market growth of mid-to-high end phones in markets where Sony Ericsson has a strong presence is affecting sales.

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

"As discussed during our fourth quarter 2007 media and analyst call, the market is proving to be challenging. This has been more pronounced in the mid-to-high end replacement sector of the market in Europe, where Sony Ericsson has stronger than average market share," said Dick Komiyama, president of Sony Ericsson.

Sony Ericsson has announced 15 new phones, introduced Windows Mobile and is expanding into new markets. The company expects these initiatives will boost sales in the second half of the year.

Sony Ericsson now plans to ship approximately 22 million phones during the first quarter of 2008 with an estimated ASP (average selling price) of E120 (£94).

This is expected to generate net sales lower than the first quarter of 2007, and pre-tax net income is estimated to be in the range of E150-200 million (£118-£156 million) due to increased R&D expenses as a percentage of sales.

The increased investments in R&D are in line with the company's strategy to meet future growth ambitions. In addition, Sony Ericsson currently expects its gross margin to remain relatively stable for the first quarter of 2008 compared with the first quarter of 2007.