Sony Ericsson improves profitability but its not good enough, says Ovum

Revenues were US$3.77bn, up 21 percent on Q3 but were down 0.3 percent over Q4 06. However, operating margin improved to 13 percent from 12.8 percent in the year ago quarter.

For the full year Sony Ericsson was proud to beat 100m shipments for the first time, posting US$103.4m. Revenues were US$12.9bn, up 18 percent, and operating profit was US$1.54bn, an improvement of 23 percent.

Incoming President, Hideki Komiyama, said Sony Ericsson had gained 2 percent market share in 2007 and described it as 'a very good year', in which Sony Ericsson has positioned itself to capture further market share with an expanded product portfolio.

He estimated the handset market for 2007 to have been in line with their forecast of greater than 1.1bn units. He said they estimate the market will grow by 10 percent in 2008.

However Martin Garner, mobile director at US research firm Ovum said taken in isolation these are healthy results, showing that the company is delivering on its strategy of steady, profitable broadening of the portfolio into lower price tiers.

“We think the volumes are a bit disappointing. There's no sign of any consumer slowdown in the mobile phone sector from Sony Ericsson's results, or Samsung's yesterday,” said Garner. “But, given the economic climate and weakening retail sales data coming out of the US, we think that 2008 is not going to be a great year for a big push into the US.”

According to Garner unless Sony Ericsson is gambling on Motorola getting worse and taking share from it - a highly risky strategy. Sony Ericsson should stick to its plan of putting a lot of effort into re-building its position in Asia.

“We think that it would be prudent to give that very high short term priority,” he said.

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