Sony Ericsson Warns Phone Sales Have Fallen by Nearly Half

Sony Ericsson has stunned the mobile industry, warning it's current sales figures mean it will sell only about half the number of phones it sold last quarter.

The world’s fourth-largest mobile phone maker Sony-Ericsson has dropped a bit of stunning news on the industry: it expects that it will sell barely half the number of phones this quarter as it sold last quarter. The company says it anticipates it will sell about 14 million phones worldwide in the first quarter of 2009, and expects to take a pre-tax loss between about $465 to $535 million as slumping consumer demand hurts sales.

The expected loss and low phone sales figures are significantly worse than most industry watchers expected: analysts were estimating Sony Ericsson’s quarterly loss at around $200 million, and generally expected the company to sell somewhere between 16 and 20 million phones. Sony Ericsson says the average selling price for its handsets is about €120, or about $165.

Sony Ericsson says it expects its gross margins to decline year-over-year and sequentially, as consumers reign in spending and the company faces strong competition and weak market conditions, particularly in Europe.

Sony Ericsonn’s warning comes as the entire mobile industry is experiencing a contraction, as consumers look to save money by putting off purchases of new handsets and mobile devices. Even so, some companies still forecast growth in the smartphone sector, as consumers increasingly embrace more-capable phones that offer Internet, email, and Web features in addition to simple voice service and cameras.