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Sony Ericsson records first profit

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Mobile phone maker Sony Ericsson has reported a third quarter profit after almost two years of continual losses.

The number five phone maker, a joint venture between Japan's Sony and Sweden's Ericsson, posted a €39 million pre-tax profit during its third quarter, beating market forecasts of a loss of around €17.5 million. Net profits amounted to €62 million and the good third quarter numbers beat last year's Q3 net loss of €93 million and the company's €88 million in losses during the second quarter of 2003.

The move into profitability, after almost two years of consistent losses, came on the back of substantially higher sales, which reached €1.3 billion in the most recent quarter, compared to €869 million a year ago and just €1.125 billion during Q2 2003.

It is thought that the much-needed profits were also the result of a focus on efficiency and an improved supply chain. During the second quarter, the London-based firm took a €53 million restructuring charge, mostly related to 500 redundancies that were announced earlier in the year.

"We are encouraged by the improvements achieved during the third quarter and particularly with the high demand for our PDC phones in Japan and the continued success of the T610-series in GSM markets," commented Sony Ericsson president Katsumi Ihara in a statement. "During the quarter we also announced several new products including our first GSM clamshell phones Z600 and Z200, an entry-level phone T230 and a range of new innovative accessories. We have received very positive feedback from customers about these new products."

The company also said that shipments were up to 7.1 million units during the three months, compared with 6.7 million in March-to-June and 5 million in the third quarter of 2002. Analysts noted that the company's average selling price per handset, or revenues divided by unit shipments, is among the highest in the industry, €184.

However, Sony Ericsson said that during the fourth quarter it plans to sell an increased number of lower-priced models, which will mean lower profitability during the quarter and will probably drive the firm's average selling price down. The firm also said that volumes should be higher during the October-to-December quarter, which could boost market share beyond the group's current rating of 5.5 percent, according to industry analyst Gartner.

Still, with pre-tax losses of €218 million in the first half, the firm acknowledged that it is unlikely to be profitable for the full 2003 year.

In other commentary released with its results, Sony Ericsson upgraded its estimate of industry-wide mobile phone sales to 450 million for the year, from a previous 435 million estimate, citing stronger-than-expected replacement sales.

© ENN

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