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Sony Ericsson Profit, Market Share Rise

Sony Ericsson, the world's No.4 mobile phone maker, posted better-than-expected fourth-quarter earnings on Wednesday as it shipped more phones, and said its share of the global handset market had increased.

Sony Ericsson, owned by Ericsson and Sony , said it earned pretax profit of 501 million euros, little changed from 502 million a year earlier but better than an average forecast of 459 million in a Reuters survey.

Sony Ericsson said the average sales price (ASP) of its mobile phones, a key indicator for profitability, rose to 123 euros from 120 euros in the third quarter, beating forecasts for 121 euros.

The joint venture said it gained two percentage points of market share in 2007, taking its share up to slightly more than 9 percent. Market leader Nokia is top, followed by Samsung and Motorola.

"Profits are good, ASP is up sequentially ... Overall it's a good publication for the group," said Eric Beaudet, analyst at Natixis Securities. "It's a little bit above expectations on the profit level, and that's the important part."

Gross margins improved to 31.8 percent in the fourth quarter from 30.7 percent in the third and 29.0 percent a year earlier.

"The good ASP and the fact that the gross margin was near an all-time high is encouraging," said SEB Enskilda analyst Mats Nystrom. "This is a proof of strength, given that many in the market had expected weak results."

Strategic Focus

Phones shipped in the quarter rose 18 percent to 30.8 million from a year earlier.

But Sony Ericsson said sales were in line with the year-earlier figure, reflecting its strategic shift to focus on lower-priced products.

The market had been keen to see whether new President Dick Komiyama would signal any shift in strategy. Chief Financial Officer Ulf Lilja, in a conference call after results, said there was no change.

Komiyama, who took over in November, said in the statement: "Our target remains to become one of the top three players in the industry, and the momentum we established in 2006 and 2007 makes this a realistic and achievable ambition."

Nokia, as of the third quarter, had 38.1 percent of the world market, while Samsung had 14.5 percent and Motorola had 13.1 percent, according to research firm Gartner.

Jari Honko, analyst at EQ Bank, said the news was supportive for co-parent Ericsson's share price. "The wider market is very very weak, but this report is still good news for Ericsson."

Asian Sales Down

Ericsson shares were up 2.4 percent at 15.40 crowns at 1035 GMT, with the wider Swedish stock market down 0.5 percent.

One dim spot in the report was Asia, where fourth-quarter sales fell 18 percent from a year earlier. The company said political unrest in Pakistan, coupled with a loss of momentum in Japan and China, were key reasons for the decline.

Sales in the other two geographical regions increased. "We have addressed the issues both in Japan and China, and we're confident that we have put the right actions in place to address this over time," CFO Lilja said.

Sony Ericsson was positive on the global outlook for the industry, even in the face of an economic downturn. It predicted 10 percent industry growth in 2008.

"We anticipate this percentage including this economic slowdown, because of the general growth momentum of the handset industry," Komiyama said.

Ben Wood, research director at CCS, said 2008 was a critical year for the firm. "They need to step up in the number of areas, not least in sub $100 phones to drive the volume they need."

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