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Mar. 21, 2009

Wireless handset maker Sony Ericsson warns it expects to post a first-quarter loss as it continues to struggle from falling consumer demand amid the global financial meltdown.

In a brief statement, the joint venture also said it is taking a hit from distributors and mobile phone retailers cutting on their store inventories.

The two companies predicted a first-quarter loss of between $465 million to $533 million.

Ericsson shares dropped almost 9 percent to $8.64 in Stockholm after the announcement. Sales are forecast to be weaker in the three-month period it said, and the gross margin is expected to fall both year-on-year and compared with the fourth quarter.

The announcement is yet another sign that the wireless industry is not immune, as many had thought, to the current recession. New Millenium Research Council (NMRC) just released a survey that showed mobile consumers are starting to cut back on cell phone spending, switching to prepaid plans and trimming extras like data and texting as a way to save.

Earlier this year, Gartner reported slumping handset sales for the fourth quarter of 2008 and projected a continued decline in sales for 2009.

Sony Ericsson is due to release its first-quarter results on April 17.

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Source: Sony Ericsson.