Sony Ericsson swings back to black but sales slip

The mobile phone maker squeezes out a small profit for its fourth quarter compared with a huge loss a year ago. Sales drop, however, falling short of analysts' estimates.

Sales of its Android phones and internal cost-cutting helped Sony Ericsson returned to profitability in its fourth quarter. But overall sales were down, and results missed analysts' expectations.

The Xperia X10 from Sony Ericsson.
The Xperia X10 from Sony Ericsson. Josh Miller/CNET

For the quarter ended December 31, the Swedish mobile phone maker saw its net income hit 8 million euros ($10.8 million), a healthy swing from 2009's final quarter, which was hit by a loss of 167 million euros. Results were similar for all of 2010 as net earnings reached 90 million euros following a loss of 836 million euros in fiscal 2009.

Seeing 2010 as a turnaround year, the company pegged its profitability on an increasing move toward Android-based phones. Sony Ericsson was a bit late to the Android party, having launched its first Google-OS phone-- the Xperia X10 --just a year ago. But that phone was soon followed up by spinoffs, including the Xperia X10 Mini and Xperia X10 Mini Pro . At CES 2011 earlier this month, Sony Ericsson announced its latest phone-- the Xperia Arc --and it also is expected in the coming months to launch a so-called "PlayStation phone."

Profits were helped by a cost-cutting initiative that was finally completed last year. Tightening its bell, Sony Ericsson consolidated factories around the world, laid off a total of 4,000 people, and ultimately lowered annual operating costs by more than 880 million euros. As a result, 2010's final quarter marked the company's fourth consecutive quarter of profitability.

However, revenues disappointed. Fourth-quarter sales dropped 13 percent to 1.5 billion euros, while sales for the full year fell 7 percent to 6.3 billion euros. Analysts polled by Dow Jones Newswires had been eyeing fourth-quarter sales of 1.75 billion euros, according to AFP.

The company has been striving to streamline its product portfolio to focus on higher-end smartphones, one reason why it shipped only 11.2 million phones in the fourth quarter, a 23 percent decline from the prior year's quarter.

"The product portfolio has been aging and that put price pressure on the products during the quarter," Sony Ericsson's CEO Bert Nordberg said, according to the Wall Street Journal (subscription required). The company is looking at its upcoming Xperia Arc and other new products to help boost profits, but that likely won't happen until after the first quarter, added the Journal.

About the author

Journalist, software trainer, and Web developer Lance Whitney writes columns and reviews for CNET, Computer Shopper, Microsoft TechNet, and other technology sites. His first book, "Windows 8 Five Minutes at a Time," was published by Wiley & Sons in November 2012.

 

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