CEO Bert Nordberg attributes the company’s terrible 2011 to "intense competition, unfavorable macroeconomic conditions and the effects of a natural disaster in Thailand."
The company reported a net loss in the fourth quarter of €207m, a big jump from Q4 2010’s €8m profit. The company shipped 9 million handsets in the quarter, down 20% and its overall sales for the year dropped from 43.1m in 2010 to just 34.5m phones in 2011. This saw its overall sales drop from €6.3bn last year to just €5.2bn this year, and its gross margin fall from 29% to 28%.
The company says the poor showing can be attributed to the market increasingly moving to smartphones, including declining prices of products launched earlier in the year, and the absence of new products introduced in the fourth quarter.
Sony Ericsson has struggled to be relevant in the modern smartphone market, receiving a sound thrashing by Samsung and Apple. It fairs little better in the feature phone market, as its Xperia smartphones accounted for around 80 percent of its total sales in the fourth quarter. According to Gartner, Sony Ericsson holds just 1.9% market share in overall mobile device sales – dead last. It has fallen from 6th place to 10th place in just a year.
"We are aligning our business to drive profitability and to meet customer needs. In spite of these challenges, throughout 2011 we’ve shifted our business from feature phones to smartphones, and our Android-based smartphone sales in the quarter increased by 65% year-on-year. The Xperia portfolio, including the recently announced Xperia NXT series, will serve as a cornerstone of our smartphone lineup in 2012," said Nordberg.
The average selling price for mobile devices was up however, from €146 to €152.
The company announced in December that it was beginning a restructuring program which will see the workforce trimmed to cut costs in light of Sony’s outright purchase of Ericsson in October. This is expected to be concluded by February subject to regulatory approval. This will therefore be the last time the company is referred to as Sony Ericsson in its annual reports, it will now be known as Sony Mobile Communications. The restructuring is estimated to be completed by the end of 2012.
It estimates that the global smartphone market for the 2011 increased by 60% to 463m units sold, and the company is banking on its new range of Xperia high spec Android phones to turn around its fortunes this year. Sony Ericsson estimates that its share of the global Android-based smartphone market was 10% in volume, 10% in value for the full year.
The launch of 4G LTE phone networks in some of its key markets will also help drive growth. However, the UK is not expected to get its first 4G network operational until 2013 at the earliest, and thus will not be getting any 4G devices.
