Sony Ericsson, the world's fourth-biggest mobile phone maker, missed expectations with a 55 percent jump in quarterly profits after it shifted focus to sales of lower-priced phones to gain market share.
Sony Ericsson posted pretax profit of 327 million euros (US$450 million), up from 211 million euros a year ago. Sales rose to 3.1 billion euros from 2.27 billion euros a year ago, in line with average analyst expectations.
Analysts on average had expected earnings of 385 million euros, according to a recent poll of 20 analysts conducted for Reuters.
The strategy helped widen the potential customer base of the cellphone venture of Sweden's Ericsson and Japan's Sony , known for higher-end music phones based on its Walkman brand.
The weaker-than-expected profit came shortly after bigger rival Motorola warned investors of a quarterly loss, blaming weak phone sales.
"Motorola lost a lot of share," said Charter Equity Research analyst Ed Snyder in San Francisco. "A little bit went to Sony Ericsson. A lot went to somebody else, probably Nokia." He said Sony Ericsson phone sales were better than expected but "didn't blow the doors down".
However, average selling prices (ASPs) for its phones fell to 125 euros from 145 euros in the year-ago quarter as the company recently started to sell more low-end phones.
Analysts expected the average price of 132 euros, according to the same poll, but Sony Ericsson said the decline was in line with its own expectations.
Sony Ericsson said it increased its share of the mobile phone market by about 3 percentage points from a year ago to 9% in the latest quarter with market share gains in Latin America, throughout Europe, and in the Middle East and Africa.
The company said it expects the 2007 global handset market to exceed 1.1 billion units.
"We expect the market in 2007 to remain competitive, but with recently announced products such as the flagship Walkman and Cyber-shot models we aim to continue to grow faster than the market," Chief Executive Miles Flint said in a statement.
The company sold 24.9 million phones in the quarter, topping 15.7 million a year ago and the average analyst expectation for 23.6 million.