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Sony Ericsson’s Move To All-Smartphones Cannot Come Soon Enough

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Sony (NYSE: SNE) Ericsson (NSDQ: ERIC), the JV between the consumer electronics company Sony and mobile equipment giant Ericsson, may be the subject of Sony takeover rumors at the moment. But for today it is continuing with its strategy to refocus its business on high-end smartphones in a bid to claw back some of the market share and margin that it has lost over the years. Today’s Q3 earnings underscored that it still has a long way to go, though.

The company reported a decrease in unit sales, revenues and margins over the same quarter a year ago, and zero net income — but, in one sign of the strategy to focus on high-end working, at least the average selling price of its devices has gone up.

The number of units shipped by the company was down to 9.5 million, compared to 10.4 million in Q3 2010. Total sales were down slightly to €1.59 billion ($2.18 billion), compared to €1.6 billion ($2.2 billion) a year ago. Both gross and operating margins were also down (respectively: 27 percent, down from 30 percent; and two percent, down from four percent); and operating income was nearly halved, with €38 million for the quarter compared to €63 million the year before.

Although net income was zero this last quarter, compared to net income of €49 million a year ago, it is at least an improvement on the net loss of €50 million last quarter, when the company was still working through issues related to the natural disasters in Japan.

Bert Nordberg, CEO of Sony Ericsson, today noted that the increase in ASP to €166 ($228) versus €154 ($211) a year ago was down to the growing number of smartphones in the company’s sales mix. Smartphones now account for 80 percent of Sony Ericsson’s sales and the aim is for that to be 100 percent sometime next year — a strategy that the company has been pushing for some time.

Sony Ericsson has never been the market leader in mobile — before or since the Android explosion — but it has definitely declined in its status in the last several years, especially as newer rivals from Asia, and Apple (NSDQ: AAPL), have altered market dynamics. It’s hard to say whether it can ever be the leader at this point, although there is definitely room for improvement and for the company to at least become a strong middle-rank cash generator.

Today, the company noted that it accounts for 12 percent of all Android sales by units and 11 percent by value. That’s a slight increase on the quarter before, when the company said it represented 11 percent of Android sales by units.

While Sony Ericsson is making the shift to an all-smartphone strategy, it will need to decide where it should focus its regional efforts as well. Today’s results showed that sales in what has traditionally been its strongest market, EMEA, were down by 43 percent over last year, to €480 million. Declines in that region as well as in North America were almost entirely make up for by growth in Asia, which reported sales of €985 million, a rise of 81 percent.

According to Gartner the company had an overall market share of 1.7 percent in mobile worldwide, compared to 4.3 percent in Q3 2009.