Sony (NYSE: SNE) Ericsson (NSDQ: ERIC) surprised analysts with a strong first quarter, after working for the past year to cut expenses and shift production to higher-end devices.
The joint venture turned a profit, increased the average selling price of its phones, and substantially grew gross margins compared to the year-ago period. The restructuring is obvious when looking at the number of phones it shipped, which dropped 28 percent to 10.5 million from the year ago period. The drop is attributable to building fewer, more expensive phones, which could pay-off. The average selling price increased to $181 (Euro 134) from $162 (Euro 120) a year ago. Sony Ericsson still has work to do to increase its market share, which it estimated to have fallen by one percentage point to about 4 percent.
The company also announced today that it appointed Bill Glaser, Jr, former Sony VP and Head of Sony Group Risk Office, to the position of CFO. Glaser will succeed Ulf Lilja, who will go back to work at Ericsson on July 31. Glaser will report directly to Sony Ericsson’s President Bert Nordberg, and will split his time between the London and Lund, Sweden offices.
Sony Ericsson reported a profit of $28 million (Euro 21 million), compared to a year ago loss of $396 million (Euro 293 million). That clearly beat analysts’ expectations. In a Reuters poll of 27 analysts, the mean forecast called for a 157 million euro loss. However, revenues continued to decline, totaling $1.9 billion (Euro 1.4 billion) during the quarter, or 23 percent less than the year-ago period. Gross margins jumped significantly to 31 percent from 8 percent in the first quarter 2009.
In a release, Nordberg said, “We are pleased to see the positive impact of both the launch of new products and the business transformation programme improving the company’s results.” The company started selling its first Android-based device, the Xperia X10, towards the end of the quarter. A better economy might also help Sony Ericsson, which is forecasting a slight growth in global mobile phone shipments in 2010.
Since mid-2008, Sony Ericsson has reduced its workforce by about 3,150 people for a total of 8,450. It expects to reach its goal of cutting annual expenses by Euro 880 million in the second half of this year. During the quarter, Sony Ericsson said it raised additional funding of Euro 150 million from its parent companies, and now has a cash balance of Euro 563 million.