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Sony Ericsson 1Q Profit Drops

Mobile phone maker said net profit fell by 48 percent in the first quarter amid lower sales volumes, higher taxes and disruptions to its supply chain.

STOCKHOLM (AP) -- Mobile phone maker Sony Ericsson said Tuesday its net profit fell by 48 percent in the first quarter amid lower sales volumes, higher taxes and disruptions to its supply chain following the Japan earthquake and tsunami.

The company, a joint venture between L.M. Ericsson and Sony Corp., posted a profit of euro11 million ($15.8 million) for the quarter, down from euro21 million a year ago, when earnings were boosted by a tax benefit.

Revenues during the three months ending March 31 fell by 19 percent to euro1.15 billion from euro1.41 billion a year earlier.

Sony Ericsson said it shipped 8.1 million phones during the quarter -- a 23 percent decrease year-on-year -- but sold the phones for a 5 percent higher average price.

The company, which has tried to streamline its product portfolio to focus on higher-end smartphones, started selling its new Xperia arc, Xperia play and Xperia neo models at the end of the third quarter. It said smartphones accounted for more than 60 percent of its sales during the quarter.

Sony Ericsson's chief financial officer, Bill Glaser, told The Associated Press the company aims to increase its current 11 percent market share in the Android segment to become the number one supplier in the coming years and is working hard to increase its market share in the U.S.

"Part of our growth has to be the U.S. ... I think we are just beginning to see some penetration, but that's a long, long effort," he said. "I think we'll see some fruit from that in future years, I don't know about this year but certainly in 2012, 2013 and beyond."

Glaser said it is still too early to say anything about the market response to the new models, but said the company is "hearing positive things" and that the launch in Japan was "very, very succesful."

He said he expects to see more of an effect from the new products in the second quarter.

The earthquake in Japan had a marginal effect on the first quarter results, but will impact the second quarter and beyond, he added.

"I think everyone in the industry relies on Japan and especially this portion of Japan which was impacted, because it is the hub of technology," he said. "I can't say whether we are more impacted or less than others."

Helena Nordman-Knutson, an analyst with Ohman Fondkommision in Stockholm, said the result was largely in line with expectations and it was positive the company hadn't seen any price pressure during the quarter.

The low volumes and higher average selling price were mainly due to Sony Ericsson's shift toward smartphones and the fact the new models weren't launched until late in the quarter, she added.

Shares in Ericsson traded flat at 76.35 ($12.2) in Stockholm.

Sony Ericsson said it estimates its market share for smartphones during the quarter was about 5 percent in units and 3 percent in value.

The company said it forecasts modest growth in total units in the global handset market for 2011.

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