Sony Ericsson warns over profits

Sony Ericsson is one of the world's largest makers of mobile phones

Mobile phone maker Sony Ericsson has warned investors that its profits would be less than previously forecast as demand for expensive handsets waned.

The company, a joint venture between electronics firm Sony and telecoms equipment maker Ericsson, said markets would continue to be challenging.

Ericsson's shares tumbled 11% to 58.5 Swedish crowns on the news.

Consumer demand has been hurt by a credit crunch that prompted banks to withdraw many loans and mortgages.

As a result, many consumers have had less money to spend and have had to cut back on their outgoings.

At the same time, economic growth in many of the world's largest economies such as the US, UK and Japan has been slowing, putting a further damper on consumer and corporate spending.

Analysts said that the figures may point to an industry-wide problem of weakening consumer spending.

Sony Ericsson said its problems were caused by a deterioration 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," the company said.

It now expects to break even in the three months from April to June.

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