Sony Ericsson shift to smartphones pays off

Sony Ericsson today surprised the industry by turning a small profit for its first quarter of 2010. The cellphone designer swung from a $226 million loss as recently as this fall to a $28.4 million surplus in the winter. Some of the recovery came through job cuts but was also helped by a major shift towards smartphones, which included the first full uninterrupted quarter of sales for the Satio but also the late shipping of the Vivaz and its most important phone, the Android-based XPERIA X10.

The company went so far as to say it had made a willing sacrifice in sales numbers to reach its goal. The number of phones shipped plunged in the early part of the year from 14.6 million down to 10.5 million, but the average selling price for a phone jumped from $162.40 to $181.40 while the gross profit margin climbed to 31 percent. As a consequence, Sony Ericsson now believes its market share has dropped a full point to just four percent but that it's in a much more sustainable point as it no longer has to depend as heavily on price.

Much of the shift in strategy effectively follows the Apple business model for the iPhone, which deliberately avoids low-cost phones due largely to the extremely tight margins needed to remain competitive as well as the declining market for regular phones themselves. Nokia has had to use a similar approach despite its dominance in feature phones as it was not only losing market share but giving up some of its profitability at the same time.

By Electronista Staff