Profit warning from Sony Ericsson

On Friday, mobile phone maker Sony Ericsson, issued its second profit warning this year.

The company said that it would only break even in the three months from April to June because of poor European sales of its mid and expensive handsets. It added that markets continue to be challenging.

As a result of the credit crunch, consumers are cutting back and only spending on necessities.

Furthermore, economic growth in several of the world’s largest economies such as America, UK and Japan has been slowing, which has put a further damper on consumer and corporate spending.

The company, which is a joint venture between electronics firm Sony and telecoms equipment maker Ericsson, blamed the difficulties which were caused by a decline of its gross margins, or the amount of money it makes on each phone.

Gross margin is expected to decline both year over year and sequentially, said the company.

Prices are also falling in emerging markets where sales in the company have suffered. Nokia, the market leader, has survived the downturn because sales of their low-end phones are still robust.

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