Sony Ericsson says market to get tougher

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Sony Ericsson doesn't expect its troubles to end soon, as the head of sales at the floundering handset maker said poor economic conditions will continue to hit sales and market share.

Global sales chief Anders Runevad said that the firm would need to focus on its core high-end segment and play to its strengths before trying to launch a fresh attempt at regaining market share.

The remarks about tough business conditions - coming as international financial markets are reeling - go beyond what Sony Ericsson said in its second-quarter report. At that time, it predicted a challenging market at least through this year.

Owned by Ericsson and Sony, the world's No. 5 handset maker posted a €2 million (£1.6 million) operating loss in the second quarter and announced plans to cut 2,000 jobs and save €300 million in costs. For more on its downturn, click here.

"I think that the market will continue to be challenging going into 2009. I think it's prudent to plan for a continued challenged market," Runevad said.

Asked whether any additional savings measures were being discussed, Runevad said, "No."

Falling demand for high-end phones, the result of protracted economic anxiety, have led to an abrupt downturn for the firm. Sony Ericsson had to issue profit warnings for both the first and second quarters.

Runevad acknowledged that the past couple weeks of havoc in financial markets was not a welcome development, although he was cautious about talking about the specific effect.

"The situation has not improved since Q2, that's for sure," he said. Asked if the backdrop had grown worse, he only repeated that it had not improved.

The executive said that when Sony Ericsson gave its outlook in the second quarter report, it of course did not expect the banking crisis that has pummelled global markets and is threatening to unhinge the world economy.

"But realistically, for that to ripple through to the consumer behaviour probably takes a little bit of time. I mean it's not instant."

He said Sony Ericsson could not think this was just a short-term dip and that next year "everything will be rosy again."

Asked how long it might be before Sony Ericsson made a bid to rise back up the market share rankings, Runevad said now was a time to be prudent, see what was happening in the market and focus on Sony Ericsson's core strengths.

"We have to take a little bit of a step back, to go back to those basics again, and that means, for example, we will not ... go drastically into lower-end entry just to get the volume."

That marks a change from Sony Ericsson's past ambitions. Buoyed by a string of strong quarters, the company as recently as last year wanted to go deeper into emerging markets.

Runevad said Sony Ericsson still saw opportunities in markets such as China and India, but it would focus on its traditional strengths.

Sony Ericsson, under President Dick Komiyama, who took the job in late 2007, has also signalled it wanted to improve in North America.

"We're making good progress in North America," Runevad said.

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