Sony Ericsson swings to Q4 profit, but warns of aging handset lineup

Sony Ericsson squeezed out another quarterly profit, but the handset maker posted a decline in shipments in its fourth quarter and predicted a weak first quarter as it tries to refresh its smartphone lineup.

The joint venture between Japan's Sony and Sweden's Ericsson (NASDAQ:ERIC) said its portfolio of smartphones running Google's (NASDAQ:GOOG) Android platform needs to be updated. However, despite the company's efforts to bring flashy new gadgets into its stable, Sony Ericsson executives said the company expects a challenging first quarter. 

"The product portfolio has been aging and that put price pressure on the products during the quarter," CEO Bert Nordberg said on the company's earnings conference call. He said the company will try to use new products to boost profitability and market share, but warned the launches likely will do little to aid performance in the first quarter.

Sony Ericsson reported a net profit of $10.7 million, a notable reversal from the $225 million net loss it reported in the year-ago period. The company continues to benefit from a streamlined cost structure and a focus on higher-end models. Still, sales fell to $2.05 billion, down from $2.35 billion in the year-ago period. Sony Ericsson estimated its global market share to be 3 percent in units and 5 percent in value.

Sony Ericsson's overall handset shipments fell to 11.2 million units, down 23 percent from the 14.6 million units it posted in the fourth quarter of 2009--a result Sony Ericsson said was "consistent with the streamlining of the portfolio to focus on higher-end smartphones." The company's average selling price dropped to $183 from $207 in the third quarter, which the company blamed on price erosion, foreign exchange rates and product mix. Sony Ericsson said prices will continue to decline until new products start shipping.

Earlier this month at the Consumer Electronics Show, Sony Ericsson unveiled its newest flagship Android device, the Xperia Arc, which runs Android 2.3, or Gingerbread, and will start shipping this quarter. Many of Sony Ericsson's earlier Android phones ran older versions of the software and the company has been slow to provide software upgrades.

Sony Ericsson is widely expected to unveil a phone focused on gaming--and possibly leveraging parent Sony's PlayStation brand--next month at the Mobile World Congress trade show in Barcelona, Spain, though it's unclear when the phone will begin shipping.

For more:
- see this release
- see this Bloomberg article
- see this WSJ article (sub. req.)
- see this FierceWireless Q4 earnings page

Related Articles:
Report: Sony to unveil PlayStation phone in February
Sony Ericsson chief hints at PlayStation phone
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Rumor Mill: Sony Ericsson planning Android gaming phone

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