Sony Ericsson's profit halved in Q1, warns of supply chain issues

Sony Ericsson reported a net profit in the first quarter on sales of high-end smartphones running Google's (NASDAQ:GOOG) Android platform, but also warned that it is dealing with supply chain issues in the wake of the March 11 Japan earthquake and tsunami.

The company reported net profit of $15.7 million for the first quarter, down 48 percent from the $30 million profit in the year-ago period, when it received a tax benefit. Sony Ericsson CEO Bert Nordberg had warned of a challenging first quarter in January, but there was no way the company could have predicted the disaster in Japan, which Nordberg said had thrown up additional obstacles for the handset maker.

"The earthquake happened late in the first quarter and its impact on our operations during the quarter was therefore quite limited," Nordberg told Dow Jones Newswires, although he said that the second quarter will impacted more. The company had warned earlier this month that a wide launch of its Xperia neo smartphone will be delayed until the third quarter due to the disaster in Japan. Nordberg said the company is having trouble obtaining LCD screens, batteries and circuit boards due to the disaster, and is searching for secondary sources for those components.

Verizon Wireless (NYSE:VZ) is expected to launch Sony Ericsson's Xperia Play PlayStation phone in the near future. Nordberg admitted that the U.S. market remains "one of our biggest failures," but he said hope is on the horizon: "I can say that one more operator in the U.S. has decided to have the Xperia Play phone," Nordberg said, without naming the carrier. AT&T Mobility (NYSE:T) has historically been Sony Ericsson's strongest U.S. partner. 

Sony Ericsson's sales for the quarter clocked in at $1.63 billion, down 19 percent from $2 billion in the year-ago quarter. The vendor shipped 8.1 million units in the quarter, down 23 percent from 10.5 million in the first quarter of 2010. Sony Ericsson blamed the drop on a decline in the number of feature phones shipped, the introduction of new products toward the end of the quarter and seasonality. The company said 60 percent of the phones it shipped in the first quarter were smartphones.

Despite the drop in shipments, Sony Ericsson's average selling price climbed from around $192 in the year-ago period to $201. The company estimated that its market share for smartphones during the quarter was around 5 percent in units and around 3 percent in value. Sony Ericsson did not give estimates for its overall market share. The company predicted modest growth in total units in the global handset market for 2011.

For more:
- see this release
- see this Bloomberg article
- see this Reuters article
- see this Dow Jones Newswires article (sub. req.)
- see this FierceWireless Q1 earnings page

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Sony Ericsson, Verizon hit 'start' on Xperia Play 'PlayStation' phone
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