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Sony Ericsson: Hello Profit, Goodbye Market Share

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Can a PlayStation phone save Sony*Ericsson (NSDQ: ERIC) from more decline? The handset maker today posted a Q4 profit of €8 million ($10.8 million), its fourth consecutive profitable quarter and a massive turnaround from the €167 million ($225 million) loss reported for the same quarter a year ago. But it’s clear that the Sony (NYSE: SNE) and L.M. Ericsson JV has not yet proven to be one of the main beneficiaries of the smartphone boom: shipments of new devices for the quarter were 11.2 million, 23 percent down from 14.6 million for the same quarter a year ago. And in the same period, sales were down 13 percent to €1.53 billion ($2.05 billion).

Sony Ericsson had been one of the early supporters of Symbian, but more recently it has put its chips on Android. That has delivered some positive numbers. The ODM says that sales of its Xperia line of Android phones have shipped 9 million units since launch.

But by its own admission, Sony Ericsson’s market share is not very big: the company estimates that the global handset market for the full year 2010 was 1.2 billion units. Of that, it says its market share was four percent in terms of units and six percent in terms of value; for the quarter its market share was three percent, which analyst Horace Dediu says is down from five percent.

The profit had less to do with sales than it did with cost-cutting. In 2010, the company reduced its workforce by 4,000 people and decreased operating expenses by €880 million ($ 1.18 billion).

Perhaps because of its focus on cost cutting for the year, Sony Ericsson hasn’t been launching new handsets. That lack of new models played a part in lower sales figures, says the company.

That may not change in the next quarter, either. Helena Nordman-Knutson, an analyst with Ohman Fondkommision in Stockholm, quoted in a Bloomberg report, thinks that we won’t see any new devices until March this year. One of those is likely to be the Xperia Arc shown at CES this month (pictured).

Will those devices also include a PlayStation phone? This has been a long-rumored product, and if Sony Ericsson pulled it off, it certainly could galvanise consumer interest.

Sony Ericsson at this point needs to build on its new business basis before it falls further behind. Two encouraging numbers from today’s results are that gross margins shot up for the full year: 29 percent in 2010 compared to 15 percent in 2009. And the average price for a handset also went up, to €146 from €136.

Those are a far cry from Apple’s iPhone margins of 70 percent and average sale price of $625, but at least they’re a change in the right direction.