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Sony Ericsson reports profits bounce, but short of estimates

business Updated: Jul 16, 2010 14:01 IST

Mobile phone manufacturer Sony Ericsson reported a second quarter running of net profits on Friday after a bad patch last year, saying it had raised prices by targeting the top end of the market.

The Japanese-Swedish group, the fifth-biggest player in the global sector, said that in the three months to the end of June, it had made a net profit of 12 million euros (15.5 billion dollars) in contrast to a loss of 213 million euros for the same period last year.

Sales rose by 4.0 percent to 1.76 billion euros, the company said.

But the outcome fell short of the figures expected by analysts who had forecast a net figure of 50 billion euros and sales of 1.79 billion euros, on the basis of a poll by Dow Jones Newswires.

In early trading the price of shares in Sony Ericsson was showing a gain of 1.1 per ent to 87.20 kronor. The overall market showed a rise of 0.3 per ent.

Sales and the net outcome had plunged in 2009. Last year the company launched a programme to reduce costs involving an extra loss of jobs amounting to nearly 2,000 cuts.

The group decided to focus on the high end of the market for handsets.

Chief executive Bert Nordberg said: "We are now well positioned for long-term growth." Since the middle of 2008, the company has reduced its workforce by about 4,000 people to a total of about 7,800 at the end of June. The group said that its programme was now in the final phase and would generate economies of nearly 880 million euros per year.

The outcome of the programme and strategy showed in the results. The number of handsets sold fell from 13.8 million to 11.0 million in a year, but the average price per unit rose to 160 euros from 122 euros.

Nordberg said that the results showed that the business was continuing on the upward path noted in the first quarter because it had concentrated on the top end of the market and owing to the success of new so-called smartphones.

The group is owned equally on a 50-50 basis by Ericsson of Sweden and Sony of Japan. The company estimated that its share of the global market was steady at 4.0 per ent in terms of volume in the second quarter, and it held to its forecast that the total number of mobile telephone handsets sold in the world this year would rise slightly from the figure last year.

Ericsson, in common with its long-term rival Nokia, faces head-on new competition from US group Apple with its iPhone and the Canadian company RiM which makes the Blackberry. This has pushed Sony Ericsson to review its strategy to win back market share at the top end of the market.