Earnings reports

Sony Ericsson Stays Profitable Despite Quake

Sony Ericsson Mobile Communications reported first-quarter results on Tuesday and revealed that the earthquake and tsunami that struck Japan last month has taken a toll on its supply chain.

The company reported net income of €11 million (US$15.7 million) in the quarter, compared with €21 million ($30 million) in the same period last year, which included a tax benefit. Sales in the quarter were down 19 percent to €1.1 billion ($1.6 billion) year-on-year.

Sony Ericsson shipped 23 percent fewer units in the first quarter compared with last year. Units shipped fell to 8.1 million from 10.5 million last year, which was mainly due to a drop in the number of feature phones that Sony Ericsson shipped as well as seasonality and the introduction of new products at the end of the first quarter rather than at the beginning of the period.

On a more positive note, the company continued to improve its average selling price (ASP) to €141 ($201), a 5 percent increase on the same period last year, thanks to the company's shift to making higher-margin, mainly Android-based, smartphones. That higher ASP also helped to increase Sony Ericsson's gross margin by 2 percentage points to 33 percent for the quarter.

Why this matters
The backwash from the natural disaster in Japan will not help what was already going to be a difficult period for Sony Ericsson as it moves away from feature phones and puts more of its efforts on making Android-based smartphones.

The change in the company's device portfolio is already taking shape.

“Sony Ericsson’s profitability continues as we accelerate our shift towards an Android-based smartphone portfolio, with smartphones comprising over 60% of our total sales during the quarter," said CEO Bert Nordberg in a statement.

But the company has some way to go to make its mark in the hotly contested smartphone market. The company estimates that its share of the smartphone market in the first quarter was 5 percent in terms of units and 3 percent in terms of value.

For more
Sony Ericsson has reported a mixed bag of financial results recently. And it is not likely to be the only smartphone vendor to be affected by last month's earthquake in Japan.

— Michelle Donegan, European Editor, Light Reading Mobile

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