Sony Ericsson's Q4 Phone Sales See Small Smartphone Boost

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Sony Ericsson Mobile Communications sold 14.6 million phones during the fourth quarter, 500,000 more than the previous quarter, a sign that interest in mobile phones, especially smartphones, is coming back.

The fourth quarter will mark a return to year-on-year growth in shipments for the mobile phone industry, said to Geoff Blaber, analyst at CCS Insight, while Carolina Milanesi, research director at Gartner, expects the mobile phone market as a whole to grow much more than Sony Ericsson's numbers. The other major mobile phone manufacturers will report their fourth-quarter results in the coming weeks.

Sony Ericsson's fourth-quarter sales were boosted by the introduction of a new flagship smartphone, the Satio, and a phone that can communicate with Sony's PlayStation 3 game console, the Aino, the company said.

Consumers are buying more expensive phones, pushing Sony Ericsson's average sales price per phone up slightly compared to the third quarter.

There are also signs that buyers are more interested in phones with support for social networking, and less concerned by the megapixel count of built-in cameras, according to Blaber.

Despite the quarter-on-quarter rise, Sony Ericsson's fourth-quarter phone sales dropped compared to the same period in 2008, when it sold 24.2 million phones. The company blamed the fall on the economic downturn and on absence from its product portfolio of the touch-based phones people were hankering for.

Sony Ericsson is still losing money, although less than a year ago. It reported a fourth-quarter loss of €167 million (US$235 million), €20 million less than the same period in 2008, on sales of €1.75 billion, down from €2.9 billion a year earlier.

The results could have been better if Sony Ericsson hadn't stumbled on the software side, according to Blaber. Both the Aino and the Satio were plagued by software problems, he said. For example, the Satio was recalled in the U.K. by retailers Carphone Warehouse and Phones 4U.

"That has undoubtedly impacted confidence among consumers," said Blaber.

A combination of staff cuts and the need to support devices based on a large number of software platforms -- Android, Windows Mobile, Symbian and proprietary platforms -- has made it very difficult for Sony Ericsson to launch products with the software working correctly, according to Blaber.

Sony Ericsson has realized this, and will present a new platform strategy within three months, according to a Sony Ericsson spokesman.

If Sony Ericsson wants to survive, its portfolio will have to be expanded, Blaber said. Products like the Satio and the upcoming Android-based X10 are strong, but also expensive. Sony Ericsson has to announce products that cater to consumers who want cheaper smartphones, below €300 without taxes and subsidies, he said.

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