Smartphone success boosts Sony Ericsson's result

A renewed focus on high-end mobile phones has been the key to Sony Ericsson's second consecutive quarterly profit, helped by strong global sales of its Xperia X10 and Vivaz smartphone.

The company reported Q2/10 net profits of €12 million--compared to the loss of 283 million it made a year earlier--on sales of €1.75 billion, up 25 per cent from Q1/10 and a 4 per cent increase year-on-year.

The company, which is part way through an annual €880 million cost-cutting programme, said it had reduced its product portfolio and managed to increase its average selling price (ASP) to €160--an increase of 19 per cent from the previous quarter and a 31 per cent rise compared to the same period a year ago.

This increase in ASP, an increasingly key metric for handset vendors, is a significant success for Sony Ericsson. Analysts believe this shift to focusing on smartphones and away from more basic models targeted at emerging markets is behind its return to profitability.

According to Gartner analyst Carolina Milanesi, Sony Ericsson products are now significantly better than anything the company has had over the past three years. "The JV seems able to roll out a constant stream of attractive products, rather than the occasional bestseller."

However, Milanesi warned that the market for smartphones was becoming more competitive with each quarter. "As a result," she said, "Sony Ericsson's window of opportunity to re-establish itself in the market for upscale phones--while Nokia has operational issues and LG is struggling to find its niche--will be short-lived and they need to make the most of it."

Of note was the company's poor performance in Europe, the Middle East and Africa, where sales declined 5 per cent year on year, whereas in the Americas, they increased 14 per cent and in Asia 17 per cent.

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