Sony Ericsson’s fourth-quarter performance was so strong that it beat the Korean giant into third place in terms of market value. It enjoyed a great run up to Christmas thanks to the continued success of its Cyber-Shot (camera) and Walkman (music) handsets. For the fourth quarter, net profit rose 144% to 447m euros ($578m) from 144m euros ($186m) in the year-ago quarter. Sales rose 60% to 3.78bn euros ($4.89bn) from 2.31bn euros ($2.99bn).
2006 has been an extraordinary year for us, said the company’s president Miles Flint. The fourth quarter was a record quarter in terms of profit, sales, and market share.
London, UK-based Sony Ericsson said it shipped 26 million phones during the fourth quarter compared to 16.1 million in the fourth quarter of 2005. For the full year, it shipped 74.8 million devices compared to 51.2 million in 2005.
Samsung meanwhile has seen sales at its telecommunications unit decline 1% in the fourth quarter to KRW 4.65 trillion ($4.95bn) down 3% year-on-year to KRW 18.24 trillion ($19.4bn), despite it selling a record 32 million handsets during the quarter.
However, Sony Ericsson is focused on more expensive phones, often achieving what is probably the highest average selling price of any major player in the market. The ASP increased from 142 euros ($184) to 146 euros ($189) in the fourth quarter. But in order to tap into the emerging markets, it has now also started to sell low-end phones, and it revealed that it would soon ship its first sub-100 euro ($129) Walkman handset.
Sony Ericsson is currently the fourth largest mobile handset maker, behind Nokia, Motorola, and Samsung. But it is pushing very hard and such was its performance in the fourth quarter, helped by its extensive advertising push, that it added 1% of market share to achieve a global market share of approximately 9%. Flint admitted though that this would change during the first quarter of the year.
We are not declaring victory yet, he admitted, and in the first quarter we will slip back again due to seasonal differences between us and Samsung.
However, he hinted that he was optimistic about his company’s chances against the Korean giant. Our target is to become one of the top three players in the industry, and the momentum we established in 2006 makes this an achievable ambition, Flint said. He pointed to Sony Ericsson’s comprehensive product portfolio and its improved supply chain, thanks to increased capacity at its Beijing plant, centralized procurement and logistics hub, and late-stage customization capabilities.
We are no longer a niche player, said Flint. This was the first time that we were able to bring a full portfolio to market. Sony Ericsson’s product portfolio includes traditional candy bar designs, as well as sliders and clamshells, and Flint said the company would launch its ultra thin Walkman phone, the W8880, in February.
Sony Ericsson is seen as the prime target for the newly emerging Apple Inc with its iPhone device. However, Flint was diplomatic about the newcomer’s entry, citing the difficulties and complexity of competing in the mobile handset market. We do not want to comment on competitors, and while we respect all of all our competitors, we fear none of them, he said.
He insisted that Sony Ericsson is not overly reliant on any particular product. We have got hit products in the pipeline to replace our current hit products, he said. This is in marked contrast to Motorola, which many feel has been too focused on one or two products for far too long. Earlier this month, Motorola warned that lower sales and earnings in its handset division would cause it to miss fourth-quarter forecasts for both revenue and profit.
Sony Ericsson also revised its estimates upwards for the global handset market. It estimates that 980 million handsets were shipped in 2006, and believes that 2007 will see 1.1 billion handsets shipped.
For the full year, net income at the handset maker rose to 997m euros ($1.29bn) from 350m euros ($453m) in 2005. Sales rose to 10.96bn euros ($14.18bn) from 7.27bn euros ($9.41bn).
