Phone price war drags Sony Ericsson to loss Sony Ericsson has sunk to a loss in the fourth quarter after shipments of its mobile phones dropped by a fifth in the last set of results before it becomes a wholly-owned subsidiary of Sony. The handset maker said intense competition in its core market caused shipments to fall by 20 per cent to 9m compared to the same period last year, with the decline occurring in its more basic handset business. A two-thirds increase in year-on-year shipments in its flagship Android-based Xperia smartphone, which has sold 28m units to date, failed to offset the decline in the older and less advanced "feature phone" market. The disappointing announcement from Sony Ericsson comes ahead of the latest shipment figures from rivals such as Nokia and Apple, with investors in particular keen to see which company is faring best in the battle for the high margin smartphone market. Most analysts expect strong numbers from Apple following the launch of its latest iPhone model in the last quarter. Yet they anticipate weaker results from Nokia after the launch of a new smartphone range based on Windows software failed to counter a decline in its existing Symbian platform of phones. Sony Ericsson will be wholly acquired by Sony from its Swedish partner Ericsson in the next month. On Thursday, it reported a pre-tax loss of €154m for the fourth quarter, compared to income of €39m for the same quarter last year and €31m in the previous quarter. The decline in profits were blamed on lower gross margins - which fell 6 percentage points year-on-year and 3 percentage points in the quarter to 24 per cent - as well as increased expenses, such as higher development and selling costs. The market for smartphones has become a fierce battle ground for all handset makers, with Nokia re-entering the fray with its Windows-based devices in the last quarter to try to take share away from leading brands such as Apple, Samsung and HTC. Sales for Sony Ericsson in the quarter were €1.3bn, down 16 per cent year-on-year and 19 per cent over the quarter. The company is phasing out its more basic "feature phones" to focus entirely on the smartphone market. Sony Ericsson estimates that its share of the global Android-based smartphone market was 10 per cent in volume and 7 per cent in value during the quarter. Even so, sales for both its smartphone and feature phone businesses declined in the last quarter owing to the negative impact of macroeconomic problems in advanced economies contributing to weaker holiday sales, as well as component shortages from the flooding in Thailand in October and November. "Our fourth-quarter results reflected intense competition, unfavourable macroeconomic conditions and the effects of a natural disaster in Thailand this quarter," said Sony Ericsson's chief executive Bert Nordberg. In spite of these challenges, throughout 2011 we've shifted our business from feature phones to smartphones. The Xperia portfolio, including the recently announced Xperia NXT series, will serve as a cornerstone of our smartphone line-up in 2012.