Sony Ericsson Profit Drops Less than Anticipated

Mobile phone maker Sony Ericsson posted sharply lower profits on Wednesday as a slowdown in consumer spending hit its business, but earnings were at the high end of the firm's range and exceeded market expectations.

Sony Ericsson said first-quarter pretax profit fell to 193 million euros ($306 million) from 362 million a year earlier.

Sony Ericsson, owned by Ericsson and Sony , had warned markets last month that pretax profit would be between 150 million euros and 200 million euros, adding gloom to the handset sector and knocking Ericsson's shares.

Analysts in a Reuters survey after the earnings warning had forecast pretax profit of 176 million euros.

The company said the average selling price (ASP) for its phones, a key measure for industry analysts, fell to 121 euros from 134 a year earlier. That was slightly above market forecasts for 120 euros.

Jan Ihrfelt, analyst at Swedbank, said the gap between market expectations and the result was due to research and development costs. 

"The result improvement (over expectations) is explained by lower R&D costs. Apart from that it was very much in line with expectations in terms of volumes, ASP and so on," he said.

Sony Ericsson said it expects the global handset market to grow about 10 percent this year but its own market share in the first quarter fell by one percentage point to an estimated 8 percent. 

Sales fell to 2.70 billion euros from 2.93 billion, beating forecasts for 2.64 billion.

Sony Ericsson President Dick Komiyama said product announcements in the first quarter had been well received in the industry. "And we expect to see a positive effect from these announcements during the second half of 2008."

The company has pursued a strategy of going after lower-priced markets, but last month it signalled an end to a long string of strong quarterly results during which it gained market share.

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