Sony Ericsson Stinks Up Q1 As Sales, Profits Shrink

As expected, Sony Ericsson’s Q1 was terrible: Sales and profits dropped as people favoured cheaper phones and the company jacked up its R&D spending.

The mobile phone maker, a joint venture of Sony (SNE) and Ericsson (ERIC), reported 2.7 million Euros ($4.3 billion) of revenue, down 7% from 2.9 million Euros during Q1 2007. Profits fell to 133 million Euros ($213 million) from 254 million Euros a year ago. Sony Ericsson’s market share dropped to 8% from 9% in Q4. And average sales price dropped 10% year-over-year to 121 Euros.

The company blamed the weak quarter on “slowing market growth in mid-to-high-end phones in markets where Sony Ericsson has a strong presence.” WSJ:

Nomura analyst Richard Windsor said the result showed that consumers, hit by an economic slowdown and lower purchasing power, are sticking with free low-end devices instead of paying for an upgrade to a more high-tech device. He said this, combined with a lack of meaningful new products to be released in the second quarter, mean there is little chance Sony Ericsson will regain lost market share.

Sony Ericsson president Dick Komiyama says he expects business to pick up in the second half after new products come out.

Like Nokia (NOK) said last week, Sony Ericsson says it expects the mobile phone market to grow 10% this year, from more than 1.1 billion units last year. The problem: Most of that growth will come from emerging markets, where phone prices are lower.

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