Sony Ericsson to draw on new loan facilities

Sony Ericsson reported a net loss of €164m ($244m, £150m) for the third quarter, as the mobile phone maker announced new credit facilities to strengthen its balance sheet.

The joint venture between Japan’s Sony and Sweden’s Ericsson has been burning up cash, and has arranged loan facilities worth €455m during the third quarter, of which €255m has been drawn down.

The company sold 14.1m mobiles during the three months to September 30, down 45 per cent compared with the same period last year. Sony Ericsson recorded sales of €1.6bn in the third quarter, down 42 per cent.

The net loss of €164m compared with a loss of €25m in the third quarter of last year.

Sony Ericsson, like other mobile phone makers, has been hit by the decision of many consumers not to buy handsets during the downturn.

However, Sony Ericsson’s failure to keep up with technology advances in the mobile industry has also been a factor.

It has notably failed so far to produce a mobile that can compete with Apple’s iPhone, which set a new standard in touchscreen smartphones.

Dick Komiyama, Sony Ericsson’s president until Wednesday, drew attention to how the company’s performance improved in the third quarter compared to the previous three months, partly because of his aggressive cost cutting.

He also highlighted new Sony Ericsson mobiles that go on sale in the fourth quarter, including the touchscreen Satio smartphone.

Bert Nordberg, who has worked for Ericsson for 13 years, succeeded Mr Komiyama on Thursday, with a priority of returning Sony Ericsson to profit.

He announced the appointment of Rikko Sakaguchi as Sony Ericsson’s chief creation officer, in a role that will focus on improving the company’s range of handsets.

Mr Nordberg said Sony Ericsson had to improve its portfolio of touchscreen smartphones.

Sony Ericsson had net cash of €841m on September 30, compared with €1.4bn at the same time last year.

It said its parent companies were acting as guarantors on €350m of the €455m of loan facilities, on a 50-50 basis.

Stuart Jeffrey, analyst at Nomura, said Sony Ericsson’s better-than-expected 16 per cent gross margin in the third quarter compensated for disappointing sales.

He added that the launch of mobiles such as the Satio should further boost margins in the fourth quarter, but said more new handsets were needed to reverse the company’s ongoing cash drain.