Sony Ericsson back in the black thanks to Android but disappoints once more
Friday 21 January 2011
The mobile phone maker Sony Ericsson said yesterday that focusing on the Google Android operating system had catapulted it back into profit, ending a two-year losing streak.
However, fourth-quarter results at the company – which is changing its product mix to sell more high-end smartphones – came in below City expectations. It reported disappointing growth in sales volumes and a fall in average selling prices, compared with the previous three months. Sony Ericsson said its net income for the year to 31 December came in at €90m (£76m), partly driven by an extensive cost-cutting programme, compared with a loss of €836m in 2009 and €73m the year before.
The company's sales plummeted during the credit crunch, forcing it to restructure its cost base to combat the threat from rivals Apple, Research in Motion and HTC. Bert Nordberg, the chief executive of Sony Ericsson, said: "2010 was a turnaround year for Sony Ericsson. Our four consecutive quarters of profit reflect the success of our shift towards an Android-based smartphone portfolio."
In 2010, Sony Ericsson completed its "company-wide transformation programme", which improved its cost-to-sales ratio, slashed its global workforce by 4,000 and consolidated its facilities worldwide. These measures reduced its annual expenses by more than €880m. Total sales at Sony Ericsson, a joint venture between LM Ericsson and Sony, fell to €6.29bn in 2010 from €6.79bn the previous year. The company's net income of €8m in the fourth quarter marked a sharp improvement on a loss of €167m last year. But Helena Nordman-Knutson, an analyst at Ohman Fondkommission, said its final quarter performance was significantly below expectations.
The volume of units shipped in the quarter fell by 23 per cent on last year. And Sony Ericsson admitted the sequential increase of 8 per cent was "constrained by a lack of new product launches" in the final quarter.
This also affected the company's average selling prices, which tumbled 12 per cent on the previous quarter, although it rose 13 per cent to €136m on the previous year. Sony Ericsson said sales volumes in the global handset market "increased slightly" to almost 1.2 billion in 2010.
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