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Losses mount at Sony Ericsson, but joint venture arranges new financing

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RESEARCH TRIANGLE PARK, N.C. - Mobile phone maker Sony Ericsson on Friday said its losses widened to $245 million in the third quarter, mainly due to plunging sales, but reassured the market by announcing it had secured new financing from external investors.

The LM Ericsson and Sony Corp. joint venture, which maintains its U.S. headquarters in RTP, said losses in the same period a year ago came to some $37 million.

Sales in the quarter fell more than 40 percent to $2.4 billion, compared from $4.2 billion in the same period in 2008.

Units shipped in the July-September period amounted to 14.1 million, up 2 percent on the quarter, but down 45 percent on the year.

Despite the weaker earnings, market watchers drew a breath of relief on the news the group will get fresh financing from external investors - backed by parent companies Sony and Ericsson - to strengthen its balance sheet and improve liquidity.

The group said it signed up for $676 million in external financing facilities at the beginning of the quarter, of which some $400 million have already been taken. It also includes a $300 million two-year back-up. Sony and Ericsson have together guaranteed $425 million of those facilities, it said.

In April, Sony Ericsson announced it would slash 2,000 jobs, on top of 2,000 jobs cut last year, to lower costs. Also that month, Anderson Teixeria took over as head of Sony Ericsson North America. The group has fewer than 400 employees in the Triangle after slashing hundreds of jobs last fall.

Najmi Jarwala, who led the Sony Ericsson North American unit for four years, left earlier this year.

Sony Ericsson also has a new top executive. Bert Nordberg, a 14-year Ericsson executive, replaced Hideki “Dick” Komiyama, an executive from Sony, as of Oct. 15. Komiyama retired, according to the company. He had led the company for nearly two years.

Sony Ericsson also recently named a new chairman - Howard Stringer, chairman and chief executive at Sony.

Komiyama said the company had worked at strengthening its image during the quarter. "Having refreshed our brand we are now better positioned to support the launch of new products," he said.

Greger Johansson, an analyst at research firm Redeye, said the financing issue was the single most important bit of news in the report.

"This will give them some working peace for the next year," he said, noting it is likely to push up Ericsson shares somewhat during the day.

Although sales may have been "marginally lower" than hoped, the income line still beat analyst estimates by a bit, he said.

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