Sony Ericsson risks all on smartphones

A breakeven third quarter for Sony Ericsson shows signs of progress at the firm, after it reported its first loss in two years during 2Q11.
 
Although year-on-year analysis of third quarter figures shows the firm’s profit slumped from €49 million in 3Q10, that analysis hides the fact the vendor has overturned a €50 million loss from 2Q10 in the most recent period.
 
Chief Bert Nordberg notes that, to break even in the third quarter, the firm has delivered “a solid €73 million improvement in income before taxes,” which was fuelled by a “33% increase in sales.” The firm’s focus on smartphones delivered an 8% increase in average selling price - €166 in 3Q11 -, but lower feature phone sales resulted in a 9% decline in device shipments year-on-year to 9.5 million units.
 
Nordberg revealed Android-based handsets comprised 80% of Sony Ericsson’s sales during the third quarter, and said the vendor will shift its “entire portfolio to smartphones during 2012.”
 
It is a bold strategy given the fierce competition in the smartphone market, the fact Google is acquiring Motorola Mobility, and Apple is pushing its iPhone further down the value chain to engage with emerging markets.
 
The risk of abandoning the low-end seems even greater when you consider Nordberg told Bloomberg that third quarter sales in Western Europe were exceptionally weak, leaving Asia Pacific shipments to pick up the slack.

However, Asia Pacific is increasingly being eyed as a growth market by leading vendors. Canadian vendor RIM recently opened its first flagship store in Thailand, as it seeks to cash in on a cult status in the market and address a $468 million (€338 million) drop in fiscal 2Q12 profit.

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