Sony Ericsson Profits Down, Turnaround Slows

BY KENDRA SRIVASTAVA | TUE APR 19, 2011 2:22 PM

Sony Ericsson today posted lower profits, suggesting the company's transition from feature phones to smartphones hasn't been fast enough.

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The Japanese-Swedish joint venture actually beat expectations of a loss, but profits were still down, owing to a difficult transition with Google. The company is still the fifth largest handset maker worldwide, but it has stumbled after relying on music and camera-centric phones while the market shifted to smartphones.

Trying to quicken the transition, CEO Bert Nordberg is betting on Android phones, whose popularity beat out even the iPhone earlier this year.

"Sony Ericsson's profitability continues as we accelerate our shift toward an Android-based smartphone portfolio, with smartphones comprising over 60 percent of our total sales during the quarter," Nordberg said.

The March earthquake disrupted supply chains, pushing back release dates for its Android-based gaming smartphones, the Xperia Arc, Play andNeo. Sony is hoping these phones propel the struggling handset maker on thesurge in popularity of mobile gaming.

"We are now fighting for parts with bigger players," Nordberg said, adding the company was working with parents Sony and Ericsson to secure more parts.

The effects could delay the rollout of future Android devices. Sony Ericsson hinted that the launch of the Neo could be pushed back to the third quarter. It was originally scheduled to debut in the coming months.

Nordberg's Android strategy may be sound, judging from the success of HTC and Motorola, both which threw their weight behind Google's software. Motorola, which lagging without a coherent smartphone strategy, refocused efforts on its now-successful "Droid" line and turned around a $3.6 billion loss.

HTC made $513 million last quarter on the success of its new Thunderbolt, among others.

In March, Nordberg said he hoped to increase Android sales to capture a quarter of the global market, up from the 14 percent it was at the beginning of the year.

Sony Ericsson reported a $21.3 million profit on 8.1 million phones sold in the quarter, giving it market share of just 2 percent, the lowest level since the venture was formed a decade ago.