Categories
News

Q: Could we run Sony Ericsson better? A: Yes

Did you catch the FierceWireless newsletter this evening?

It leads with super embarrassing headline:

Should Sony Ericsson throw in the towel?

I think that’s mighty polite of the FierceWireless chaps.

I was particularly taken with this paragraph from FW’s Lynnette Luna:

Now Sony Ericsson’s bailout plan appears to be more high-end phones with high quality cameras. The company reasons that consumers want to have a high-quality camera all the time as posting photos on Facebook and other social networks is a favorite pastime. It seems like a creative niche, but will consumers bite in an ailing economy? Right now, there appears to be a chasm in the market. Feature phones–those that have features like music and cameras and are cheaper than smartphones–are in limbo. The replacement handset market has clearly slowed down in this bad economy, but when people are replacing phones, it appears they are either upgrading to smartphones such as the iPhone or trading down to prepaid and lower-end phones. Sony Ericsson needs some tight relationships with operators to get them to promote its devices.

You know you’re doing a spectacularly rubbish job when the nicest media company in the industry posts an editorial asking if you should just simply give up.

Sony Ericsson, reports Lynnette, expects to spunk a whopping half billion dollars in losses. For anyone wanting the exact stats, here we go:

Sony Ericsson said it expects its first-quarter pretax loss to be between $464.9 million to $533.2 million, well below market expectations.

Let’s call that a half billion dollars.

In losses.

They’re expecting to ship 14 million handsets during this period.

I’ll need to get Excel out, hold on. I can’t work this stuff out freehand. There’s just too many zeros.

So, let’s be clear. When Sony Ericsson’s Chief Executive Officer got out of bed on the first of January, he’d more or less committed to blowing a cool half billion dollars in losses.

In losses.

What’s the sodding point in getting out of bed?

Let’s move past that and congratulate the chap and his management team for getting out of bed anyway.

So, I’ve got my Excel spreadsheet ready.

Half a billion in losses, divided by 14 million handsets.

That means every single handset going out the door is going to cost Sony Ericsson $36.

So if you assume your average bollocks Sony Ericsson handset costs, I dunno, $100 to the consumer. The company is so badly organised, so badly managed, that it’s actually costing them $136 to do the deal.

And you can only do that if you’ve got good bankers.

We all know what’s been happening in that marketplace. So let’s hope your parent companies have sufficient cash to let you keep getting out of bed every morning.

If we’re being inventive — and i think Lynnette at FierceWireless is a little bit too polite to mention this point — let me talk to Sony Ericsson’s shareholders here.

Your company is aiming to ship 14 million handsets at a total cost to you — ultimately — of roughly 36 dollars per transaction. Once everything is taken into account — marketing, manufacturing, CEO office furniture, the whole shebang, once that’s ALL taken into account, add ON an extra 36 dollars. Per unit.

A spectacular loss.

But you know what, we could all save everyone a lot of hassle.

Why don’t you just dump Sony Ericsson and go to one of the Chinese third-party OEM chaps. Ask them how much it would cost for 14 million rubbish handsets. You know, mobile telephones with a diary, a task manager, an alarm clock and a text function.

You’d probably be able to get them wholesale for… I dunno… $3 a piece? If you can buy a rubbish Motorola for £9 — albeit it subsidised, shouldn’t we be able to buy 14 million reaaaaally simple handsets?

Hold that thought for a moment.

The company made 2.8 billion EURO in sales revenue in Q1 2008.

So if you’ll excuse the back-of-fag-packet estimations, let’s assume they can do, I dunno… let’s be kind.. 3 billion EURO in Q1 2009? Or roughly $4 billion dollars.

So you bring in $4 billion dollars.

Good news. That’s a LOT of $0.99 McDonalds hamburgers.

The bad news?

You actually spend $4.5 billion.

So you’ve got $500m in losses.

Well you know what, it would probably have been CHEAPER if the entire staff at Sony Ericsson stayed at home and did nothing for Q1 2009.

On the basis of $36 ‘losses’ per handset sold in Q1 2009, they could have gone to a China manufacturer, bought 14 million handsets for $3 each. Stick a Sony Ericsson badge on each. Give each one away with $10 worth of mobile credit and retail them into the channel for $20 each.

That would cost $280 million.

And one would hope that since the staff stayed at home, they’d have avoided blowing the other $220million that made Q1 2009’s losses hit almost half a billion dollars.

My maths is a little skewed. I recognise that.

But the logic is sound.

What the hell are you doing if you’re knocking out handsets at an average selling price of roughly 100 euro and you’re making 26 euro loss on each?

You’re almost sounding as bad as Motorola.

So Sony Ericsson is to focus on high end ‘expensive’ handsets to try and tempt consumers into upgrading to something decent.

Only, how many customers buy their Sony Ericsson handsets?

Almost none.

Sony Ericsson’s customers are the mobile operators. Not you and me. You need the mobile operators to subsidise these expensive handsets.

Annnnnd if you’re wondering just how excited operators are at this prospect, may I point you to T-Mobile UK who were so screwed at the end of 2008 that they’d run out of ‘subsidy budget’. Customers were offered money off their line rental to NOT upgrade.

There’s little in the way of enthusiasm at the operators for funding $700 handsets. And there’s a limited amount of consumer enthusiasm when Apple, Palm, Nokia and the Android Guys are walking up and down the catwalk getting attention from every single customer in the room.

It looks to me as though Sony Ericsson have got caught making telephones.

It’s not about the telephone.

Not any more. The future is interaction + telephone. There’s still a market for $50 telephones — and it’s a big one that every single one of Sony Ericsson’s competitors are eating up.

14 million handsets in a quarter? In roughly 90 days?

Do you want to take a rough guess at just how many Nokia are knocking out in the same period? What is it, between 7 and 10 million units a day in some periods?

So the low-end — traditionally a Sony Ericsson stable — is no longer the company’s focus? Now they want to play with the big boys.

Not with Windows Mobile. The Xperia? The less said about that, the better.

Maybe with S60.

But there’s a lot more companies out there eating the Sony Ericsson lunch before the company’s even got out of bed. Look at INQ winning best handset at the Mobile World Congress last month. Where is Sony Ericsson?

Good cameras. Limited handsets.

Show me the Sony Ericsson developer support. Show me the $1bn app store market/content market for Sony Ericsson devices.

Oh.

Yeah it’s not there and won’t be for years.

What a total disaster. They used to be good! Really good!

Could we reading MIR run Sony Ericsson better than their existing management?

[insert joke about chimp]

In years gone by I’d joke about this kind of thing. But seriously, you have to wonder if a we wouldn’t be able to pull a better strategy out of our arses.

In fact I’d go so far as to say we could. Indeed some of the readers here would love the chance.

I’ll leave it there.

Only, I’d like to point out that we were the first to launch Sony Ericsson News in the MIR TV Show episodes late last year. If you didn’t catch them, you’re missing quite possibly the best Samuel Beckett inspired news reporting on the planet. The feature consisted of one of the team introducing ‘and here’s Ewan with this week’s Sony Ericsson news’. Cut to me simply me standing staring into the camera for 30 seconds before moving on to the next segment.

Brilliant.

An absolute brilliant feature and rather surprisingly one of the most popular features of the early MIR TV Shows. And wholly illustrative of Sony Ericsson’s predicament. What more can you say?

Hire us, Sony Ericsson, hire us all and we’ll fix it.

By Ewan

Ewan is Founder and Editor of Mobile Industry Review. He writes about a wide variety of industry issues and is usually active on Twitter most days. You can read more about him or reach him with these details.

6 replies on “Q: Could we run Sony Ericsson better? A: Yes”

Leave a Reply

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.