Sony Ericsson posted its second successive quarterly profit Friday as strong sales of newly-launched mobile phones reversed heavy losses a year earlier.
The company reported net profit of EUR12 million for the three months to June 30, compared with a EUR213 million net loss the year before and sustaining the turnaround that started in the first quarter.
Sony Ericsson, a joint venture between Sweden's Telefon AB L.M. Ericsson (ERIC) and Japan's Sony Corp. (SNE), has long struggled with losses and falling market share but in the first quarter 2010 posted its first net profit since the second quarter 2008 due to cost cuts and healthy sales of its new Xperia X10 smartphone, which is built around Google Inc's (GOOG) increasingly popular Android platform.
Its turnaround is in contrast to Nokia Corp. (NOK), its far larger Finnish rival, which last month issued a profit warning due to fierce competition in the premium smartphone market, in particular from Apple Inc.'s (AAPL) iPhone.
Sony Ericsson said Friday its Xperia X10 and Vivaz smartphones as well as the recently launched X10 mini and X10 mini pro devices have been well received by operators.
"We are now well positioned for long term growth," Chief Executive Bert Nordberg said. "Our second quarter results show that the company continued the momentum seen in the first quarter as a result of our focus on the value market and the success of new smartphones," he added.
Friday's report looked decent overall with net profit slightly ahead of market expectations and a strong upturn in average selling price but rather low sales volumes, said Redeye analyst Greger Johansson.
Sony Ericsson shipped 11 million phones at an average selling price of EUR160 in the second quarter, compared with 13.8 million units at an average price of EUR122 a year earlier. Sales rose to EUR1.76 billion from EUR1.68 billion, against expectations of EUR1.79 billion.
The company's estimated share of the global handset market remained flat from the previous quarter at around 4%.
CEO Nordberg told Dow Jones Newswires Friday that ongoing cost-cutting measures and a strategic shift in focus to smartphones should help to sustain profitability.
Android will remain a key platform, while Sony Ericsson will likely drop either Symbian or the Windows Mobile operating system.
"There is an outlook for us winding down to less than those three" platforms, he said.
Sony Ericsson, which reports earnings a week before market leader Nokia, maintained its previous outlook for slight unit growth in the global handset market in 2010.
The company booked restructuring charges of EUR32 million for its cost-cutting program, which was launched in 2008. The program is now in its final stages and on target to cut annual operating expenses by EUR880 million by the end of 2010, it said.
Sony Ericsson's turnaround looks sustainable as its recent launches have been well received and the wider handset market seems stable, said Redeye's Johansson.
Still, he said the company should try to boost its volumes even though its increased focus on more exclusive smartphones has apparently been successful.
At 1255 GMT, shares in Ericsson were down 1.6% at SEK84.90, underperforming a 0.5% drop in the wider Stockholm market and shedding some gains after outperforming earlier in the day in the wake of Sony Ericsson's report.
Sony Ericsson's second-quarter profit was won't have any major financial effect on Ericsson's earnings, but is still positive for the co-parent which has previously had to book losses from the joint venture, Johansson said.
