Bailouts, bailouts, bailouts. That certainly has been the hot word lately in American culture. With a 35% plunge in sales during Q1 2009, it is certainly rough times for Sony Ericsson. The company is blazing through cash and will most likely need some sort of financial assistance from Sony and Ericsson. This move is referred to a capital injection, where the two companies are responsible on a loan for Sony Ericsson, to strengthen the joint venture’s balance sheet. No one is confirming anything, but the move seems very likely.
Sony said it was premature to speculate on whether it was preparing to provide Sony Ericsson with financing, adding: “Should that become necessary, we are, of course, prepared to support Sony Ericsson in that way.”
Nomura analysts estimate that Sony and Ericsson could have to make a capital injection of €500m (£441m) each before the end of the year. Dick Komiyama, president of Sony Ericsson, is seeking to return it to profit after it recorded a net loss of €73m last year because of falling sales. JPMorgan analysts estimate it will record a net loss of €1bn this year.
SE’s activity recently has been very erratic. While they do have a heavy influence in America and other markets with lower-end models, several experiments such as the XPERIA X1 have generated interest. However, when XPERIA failed to latch onto any carrier, the phone became more of an oddity. It most certainly seems that they have learned alot from that and perhaps the Idou will change things. Sony Ericsson in Japan makes seriously incredible phones that never make it anywhere else, for the most part. There is a great disparity in the design teams and they need to centralize their efforts and ship a unified lineup.
However, the most interesting news resides in the fact that Svanberg, chief executive of Ericsson, also hinted at Ericsson eventually selling out of the joint venture by saying Sony was “a logical buyer”. He stressed no sale discussions were taking place, although Sony Ericsson’s losses are weighing on the results of both parents.
Sony said: “Our first order of business, as is Ericsson’s, is the success of the joint venture. We are committed to supporting Sony Ericsson in this difficult economic environment.”
Sounds like Sony is ready to either drag this out a little longer or buy it all up within the next year.
Referenced from the Financial Times.
