How did Sony Ericsson lose £200m, and can Sony do better?

Sony Ericsson lost £206m in 2011. Just how do you lose £206m, and has Sony made a mistake buying out Ericsson?

Sony Ericsson has revealed it had a disastrous winter and a truly terrible 2011. The company has posted net losses of £173m for the final quarter of 2011 and £206m for the whole year. But just how do you lose £206m?

IDC analyst Francisco Jeronimo told us the results "show how fierce the smart phone competition is", with Sony Ericsson unable to shake its perception as a second-division brand among phone networks.

Sony Ericsson is in a momentous transitional phase at the moment: the decade-old partnership between Japanese giant Sony and Swedish telecoms company Ericsson is ending as Sony buys out the brand and ditches feature phones to focus on smart phones. SE's Android-powered smart phone sales were up 65 per cent, but sales of lower-specced phones dropped off a cliff.

Son Eric bosses blamed "intense competition, unfavourable macroeconomic conditions and the effects of a natural disaster in Thailand this quarter", the latter causing a shortage of components.

Jeronimo reckons Sony has a lot of work to do, but hasn't made a mistake taking over the business: "The mobile business comes to Sony at the right time. Sony needs to integrate all products and services together. The handset business was the missing part and will drive this integration, which will lock consumers into a single and unique experience and set of services."

But Jeronimo believes it won't just be Sony Ericsson struggling this year, with these results forming "the first sign of what we can expect over the coming weeks".

"The phone market is slowing down... IDC expects a significant decline in the feature-phone segment and a strong slowdown in smart-phone growth. Over the next few weeks we expect to see more disappointing results from Nokia, LG, Motorola, and HTC."

Nokia lost a whopping £427m in the middle of last year, but just four short months later the Finnish phone-fanciers made a surprise profit . So that's why Sony is considering Windows Phone ...

Sony's first solo effort is the Xperia S , which we got our hands on at CES last week. It's a high-end, high-powered handset and no mistake, and looks a serious challenger to the best Android phones 2012 will have to offer.

Only Samsung and Apple are expected to announce healthy books this year. Apple is set to release its results next week.

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About the author

Rich Trenholm is a senior editor at CNET where he covers everything from phones to bionic implants. Based in London since 2007, he has travelled the world seeking out the latest and best consumer technology for your enjoyment.

 

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