New Financing Secured, Sony Ericsson Faces Platform Choice

Handset joint-venture Sony Ericsson Mobile Communications Ltd. lost a whopping $245 million in its fiscal third quarter, but the news wasn’t all bad.

Despite registering its fifth consecutive quarterly loss, Sony Ericsson managed to surpass analysts’ expectations for the quarter. What’s more, the company announced that it will receive a financing lifeline of 455 million euros ($678 million), 350 million euros ($521 million) of which will be guaranteed by its parent companies.

With global market share of 5 percent in the just-concluded quarter, the joint venture is betting heavily on the success of new camera-equipped handsets and gaming phones. Sony Ericsson thinks the new mobile phones, which are skewed to Sony’s consumer demographics, will give it a better product mix and higher profit margins.

The company needs a turnaround. In the third quarter, it shipped 14.1 million handsets, a decline of 45 percent compared to unit shipments in the same period last year. Sony Ericsson reiterated its outlook for a 10-percent contraction of the global handset market in 2009, but said the decline in global handset markets is slowing.

As it looks to the year ahead, Sony Ericssson will have some difficult decisions to make about the mobile platforms it supports. New CEO Bert Nordberg said the company is preparing a new strategy. Sony Ericcson currently ships smartphones that run Windows Mobile and Symbian, but it has stated that it will also deliver phones based on Google’s Android.

The thinking, within Sony Ericsson and among the analyst community, is that the company will not continue to support three mobile operating systems on its handsets. Android looks set to become a major platform for the company, which means Symbian or Windows Mobile will be shown the door.

Analysts are divided on which one will get voted off Sony Ericsson’s handset island. I could make a strong case for jettisoning either or both. If I had to make a call, I’d say the company will ditch Symbian, but it could just as easily dump Windows Mobile.


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