LONDON – Sony Ericsson Wednesday posted a 17% drop in fourth-quarter net profit due to higher operating costs as it expanded its handset portfolio to also target emerging markets.
Sony Ericsson, the mobile-phone joint-venture between Japan's Sony Corp. and Sweden's Telefon AB L.M. Ericsson, saw net profit for the three months to Dec. 31 fall to €373 million ($555 million) from €447 million in the year-earlier period. Revenue for the world's fourth-largest phone maker remained relatively flat at €3.77 billion from €3.78 billion the previous year. Pretax profit also stayed flat at €501 million year-to-year.
Although it said the number of shipped units had climbed to around 18% in the quarter, compared with the same period in 2007, operating costs increased to €724 million €623 million.
"Investments are being made in both research and development and brand building, to deepen the portfolio and strengthen Sony Ericsson's presence in new and developing markets around the world," the company's new President Hideki Komiyama, who joined on Nov. 1, said.
Faced with stiffer competition in its core high-level and mid-tier Walkman-music and Cybershot camera-phone business, Sony Ericsson has been extending its operations to make less expensive, simpler handsets targeted at highly populated regions, such as India, China and Brazil. This has led to the London-based company selling more than 100 million phones during the 2007 financial year, with 30.8 million of them shipping in the fourth quarter.
Despite lowering average selling prices, or ASPs, of handsets to €123 from €146 the previous year, the company said that it was continuing to see market-share gains and profitable growth, while maintaining strong margins. Sony Ericsson said its market-share increased by two percentage points to just over 9% of the world-wide phone market, and its phone ASP increased quarter-to-quarter by three euros.
For the full financial year, Sony Ericsson saw net profit increase 12% to €1.1 billion and revenue increase 18%, despite average selling prices of handsets dropping 15% to €125.
ING analyst Damien Chew said that the company's sales and profitability came in slightly better than expected. "It's holding up pretty well following decent numbers from rival Samsung yesterday."
On Tuesday, rival Samsung Electronics Co. said that its telecommunications unit increased earnings by 67% to 580 billion. Shipments increased 41% year-to-year to 46.3 million units.
Sony Ericsson's expansion into the lower-end handset market to some extent has been a result of rivals Nokia Corp.'s and Apple Inc.'s push into music-phone sales, a sector previously dominated by Sony Ericsson in the Western music-phone market.
Sony Ericsson's shares were trading 1.7% higher in the morning session.
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