Sony Ericsson (SE), whose Q4 results showed a loss of 247 million in the final quarter of 2011, has fared particularly badly in Western Europe. Overall, on a global basis, sales were down 16% year on year and 19% quarter on quarter. But in Western Europe Sony Ericsson’s sales were down 38% compared to 2010 ‘s fourth quarter. On a full year basis, sales were down 46% compared to 2010. And 2010’s figures were themselves 12% less than 2009’s sales.
A Sony Ericsson spokesperson pointed out to Mobile Europe that sequentially, from Q3 to Q4 201, sales were slightly up – but it’s hard not to determine an overall trend, despite that slight uplift in the final quarter. In 2010, Western Europe contributed 525, 668, 632 and 569 million euros in net sales on a quarter by quarter basis. Yet in 2011 those numbers were down to 303, 323, 313 and 355 million euros. So why is Sony Ericsson struggling in Western Europe in particular?
On its earnings call, SE said that the Q4 loss reflected intense competition and price erosion; macroeconomic issues affected consumer demand, which also impacted holiday sales. In addition, SE had no major product launches in Q4.
Francisco Jeronimo, IDC European Mobile Devices Research Manager, said that the manufacturer has had problems convincing operators to range large volumes of its phones.
“The main reason for that is that SE has failed to attract mobile operators with very interesting devices at affordable prices. The problem has been price – SE is not a brand that everyone recognises as a premium brand compared to Apple and Samsung. And though the devices are good they are not attractive enough to compete with HTC and Samsung on Android, and that’s reason that SE has become a Tier 2 supplier for most operators.”
Jeronimo added that SE’s financial results and perceived instability had also deterred operators. “Operators are not that keen to support the brand because they don’t want to have a lot of stock from a company that may go bust.”
Sony Ericsson said that in Western Europe in particular, it had held share between quarter three and quarter four “in Android”. It added that the region itself is suffering from financial and economical turmoil with fierce competition in these countries.
So with SE stuck in a declining spiral — it needs volume to decrease prices to operators, but it can’t lower prices without achieving volume — where will Sony go from here when it takes full control of the company?
Jeronimo’s view is that Sony must focus on differentiation, integrating its range of consumer assets, such as Playstation and TV, into the device experience. An entirely Sony-owned company could make a better job of integrating those assets than the JV did, he said. Although SE talked the talk of integrating Sony assets into devices, the JV tended to pull in different ways, Jeronimo said, and execution suffered as a result.
“Definitely Sony will improve brand awareness, but the key issue is achieving differentiation from Samsung, Apple and HTC, as even on Android Sony will not have volumes that will allow them to have competitive prices. This quarter is a very good sign that they will struggle if they don’t differentiate.
“They need to keep on with delivering to a niche segment — but with some services that others don’t have, such as replicating the PlayStation experience or allowing consumers to exchange information and media between the mobile device and the TV in a seamless way that others cannot replicate as easy as Sony. They need to create this UI that is unique to Sony products – that’s the only way they can succeed.”
Competing in this way will not be easy, however, as the likes of Google and Apple are also looking for full service integration. Samsung too, of course, has a wide range of consumer assets that it could bring to bear. That said, Jeronimo said he expects to see some interesting devices from Sony over the next year.
“They need to become a niche player at a premium level to become a profitable player again,” he said.