New phones and a better quarter from Sony Ericsson

By Caroline Gabriel, Rethink Wireless

Sony Ericsson (SEMC) unveiled new devices ahead of quarterly results that showed some improvements in its recently awful financial performance. It launched the Vivaz, which like new phones like the LG Chocolate 2 is heavily geared to HD video. It also announced the first carrier partner for its long awaited Android debut, the Xperia X10, which ships in the coming weeks and will appear first at Japan’s NTT DoCoMo. Meanwhile, its financial report showed a narrower net loss and improved gross margins.

As the first of the big five phonemakers to report this season, SEMC’s better than expected performance will reinforce the hopes of a mobile recovery in the last quarter of 2009. However, it admitted it still faces a “challenging year” as its sales and market share continue to slip, and as it faces revived competition from Motorola, with which it now tussles for fifth place in the market, well behind Nokia, Samsung and LG.

The improvement in fourth quarter profits was down to sales of new higher margin phones, showing that SEMC has reduced its fatal dependence on the midrange, which suffered most during the downturn. It has also engaged in a major cost cutting program, and saw good growth in China.

New CEO Bert Nordberg said that 2010 would “still be challenging as the full benefit of cost improvements will not impact results until the second half of the year, however we are confident that our business is on the right track.”

He emphasised last year’s refocusing of SEMC’s branding to stress entertainment. “We will continue to focus on returning the company to profitability by establishing Sony Ericsson as the communication entertainment brand based on an exciting portfolio of mid- and high end products,” he said in the statement.

The joint venture’s net loss narrowed to €167 million from €187 million a year earlier, far better than analyst expectations of a €254 million. However, this was still the firm’s sixth consecutive quarter in the red. Q4 gross margin improved to 23% from 15% a year earlier and SEMC shipped 14.6 million handsets at an average selling price of €120, down from 24.2 million units at an average selling price of €121 a year before. Net sales fell to €1.75 billion from €2.91 billion, in line with market expectations. The company booked one-off costs of €150 million for ongoing restructuring programs.

As for devices, SEMC unveiled the Vivaz, its latest Symbian phone, which has many of the features of the Xperia X10 but focuses on HD video, allowing users to broadcast themselves in a clear format. The company says it is the first example of its new “human curvature” design philosophy (for “beauty inside and out”).

Billed as a communication entertainment phone, the Vivaz has a dedicated video key for shooting in HD, with continuous auto focus, and content can be reviewed in a standby panel or online via Wi-Fi. There is direct upload via Wi-Fi to YouTube and Picasa using a homescreen button as SEMC targets the boom in user generated content. The gadget has a 3.2-inch widescreen reminiscent of LG’s new video phones, and builds on SEMC’s open media platform, which allows consumers to personalize their entertainment experience by downloading applications through PlayNow and the Symbian Developer Community.

The ‘human curvature’ design approach, first seen in the Xperia X10, will become a consistent feature of Sony Ericsson’s portfolio going forward, says the statement. It is apparently designed to mirror the shape of the human body, and improve interaction with the phone. Other features include an 8.1-megapixel camera, face and smile detection and the Sony Ericsson Media Player. Connectivity support is HSPA 900/2100 and quad-band GSM/EDGE.

Sony Ericsson also said NTT DoCoMo would support a localized version of the Xperia X10, which runs on the 1GHz Snapdragon processor. The firm also plans to launch the Android phone in China this spring and Nordberg said this would be unaffected by Google’s row in the country.

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