Sony Ericsson Posts 1Q ProfitSony Ericsson Posts 1Q Profit

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Sony Ericsson Zylo Walkman Phone

After sinking for nearly two years, Sony Ericsson surprised investors Friday with a first-quarter profit that showed signs the mobile phone provider could be turning its business around. The company reported a profit of $25 million, confounding investment banking analysts who had predicted continued losses.

The company attributed the turnaround largely to strong sales of its smartphones and to its cost-cutting measures that brought its employee headcount to about 8500 after layoffs of more than 3,000 employees.

The company watched its market share drop precipitously from 7.8% in 2008 to 4.6% in 2009 and its financial picture seemed to follow a downward trajectory, too. However, on Friday, Sony Ericsson president Bert Nordberg boasted that the company not only showed a profit in the current quarter, but he indicated the good news is just beginning.

“We are pleased to see the positive impact of both the launch of new products and the business transformation program improving the company’s results,” he said in a statement. “Increases in both gross and operating margins show that we are on the right track to build the correct cost structure for our business organization and strategy.”

Nordberg cited Sony Ericsson’s Xperia X10, an Android phone, and the Vivaz Symbian phone as being well-received by consumers. Earlier this week, the jointly Sony-Ericsson-owned handset developer, unveiled a pair of Walkman phones, exploiting the longtime success of the company’s music-oriented handsets. The phones appeal particularly to music fans.

As the sale of mobile phones generally lagged in 2009, Sony Ericsson’s market share decline -- along with Motorola’s -- appeared to be in a race to the bottom for mobile phone market share results. Sony Ericsson noted that its shipped units for the quarter fell 28% to 10.5 million and sales fell 19%, but the average selling price of its handsets increased 12%.