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Sony Ericsson stems losses with smartphone sales

Thank heavens for the Android bandwagon

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Sony Ericsson had a good third quarter, turning in a respectable profit on higher-margin smartphones, but won't comment on the rumours that Sony is looking to buy out the partnership.

The last three months weren't as good as the same period last year: SE only turned in a pre-tax profit of €31m (£27m) compared to €62m (£54m) in 2010, but it's much better than the preceding quarter, when tsunamis and earthquakes contributed to the company losing €42m (£36.6m).

It would be even better if the whole profit hadn't been eaten up in restructuring costs, leaving the company to break even, but those shouldn't be recurring.

What's more interesting is the move towards smartphones, with Android-based devices now making up 80 per cent of device sales. The plan is to drop everything else over the next 12 months, making smartphones the only phones that Sony Ericsson will sell.

That pushes the average selling price up, and the margins too, leading the way to profitability.

What the company didn't comment on were recent stories that Sony is looking to buy out its long-term partner and take the operation in-house. Sony Ericsson was set up to combine Ericsson's radio expertise with Sony's experience in consumer products, but radio knowledge is less critical now that it can be dropped in as a commodity module (as Apple has demonstrated, antenna problems aside) so, the idea goes, Sony doesn't need Ericsson any more.

Ericsson won't sell out cheaply; JP Morgan pegged the price somewhere north of $1.3bn with possible ongoing patent costs also involved. Having been in the radio game a long time Ericsson has a lot of key patents, which are now increasingly important as protection against litigious competitors. And with the company now firmly seated on the Android bandwagon, it is going to need that protection. ®

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