Handset vendors Samsung Electronics Co. Ltd. and Sony Ericsson Mobile Communications both suffered notable declines in their its first-quarter financial results. The mixed results appeared to vex investors, who sent Motorola Inc. and Nokia Corp.’s shares down slightly after the news. The declines were in line with a fall in the tech-heavy Nasdaq.
Samsung reported companywide revenues of $13.6 billion, down from the $14.2 billion it scored in the same quarter last year. The company’s profits dropped from around $3 billion in the first quarter of last year to $1.47 billion this year. The company said it does not expect things to improve in the second quarter.
Although Samsung’s mobile-phone business increased shipments in the quarter, the operation posted declines in revenues and profits. Phones account for the vast majority of the sales in Samsung’s telecommunications division, which is the company’s largest division at 35 percent of sales. Samsung posted a slight decline in telecommunications sales year-over-year, while its operating profit dropped by 33 percent. The company shipped 24.5 million phones in the first quarter, a record for the company and a notable achievement in the traditionally sluggish first quarter.
Samsung said it expects the second quarter to play out much like the first, and it plans to ship a total of 100 million phones in 2005. It sold 86.6 million last year, according to research and consulting firm Strategy Analytics.
Sony Ericsson too suffered a sluggish quarter, with declining revenues, profits and handset shipments. Sony Ericsson sold 9.4 million phones in the first quarter, just ahead of the 8.8 million it sold in the same quarter last year but down from the 12.6 million it sold in the fourth quarter. The company posted sales in the first quarter of $1.67 billion, down slightly from the $1.73 billion it scored in the same quarter a year ago. Sony Ericsson’s net income dropped from $106 million in the first quarter of last year to $41 million this year. The company blamed excess inventory from the industry’s stellar fourth-quarter 2004 for its sluggish sales, as well as a slowdown in the Western European market.
“The exciting and innovative products we announced during the first quarter have been well received and will give us a stronger portfolio during the rest of the year,” said Miles Flint, president of Sony Ericsson. “We believe there is good growth potential in the market, both from new subscribers and from consumers who are upgrading their mobile phones, so the increased investments we are making now will build our brand and strengthen our product portfolio so we can continue to excite consumers.”
Analysts generally expected sluggish phone sales in 2005 after the stellar sales record of 2004.
