Sony Ericsson in profit after Japan supply drag

  @ibtimes on April 19 2011 4:00 AM

Booming smartphone demand and cost cuts kept cellphone venture Sony Ericsson in the black in the first quarter, despite the drag of supply disruption from Japan's earthquake and tsunami.

The Japan earthquake made it a challenging quarter operationally and we are experiencing some disruptions to our supply chain, Chief Executive Bert Nordberg said in a statement.

Sony Ericsson posted a pretax profit of 15 million euros ($21.31 million), beatings an average analyst forecast for a loss of 24 million euros, on weaker-than-expected sales of 1.15 billion euros.

Sony Ericsson sold 8.1 million phones in the quarter, missing all forecasts.

These results point to a significant and ongoing impact on Sony Ericsson's supply chain and operations caused by the Japan earthquake with shipments falling a considerable way short of expectations, said CCS Insight analyst Geoff Blaber.

This is a challenging situation for Sony Ericsson but with lowered operating expenses and continued improvement to gross margin, it is at least in a better position to weather the storm than it was 12-24 months ago, Blaber said.

Sony Ericsson said in early April the March 11 quake, which hit component supplies for electronics firms around the globe, was limiting volumes in its new smartphone offerings and delayed the wider launch of its neo model to the third quarter.

Analysts have said this makes 2011 another tough period for the 50-50 venture of Sony and Ericsson, which only returned to profit a year ago after seven straight quarters of losses.

The second quarter and possibly third will be difficult because of Japan, said Gartner analyst Carolina Milanesi.

Sony Ericsson has slashed costs -- including cutting around 4,000 jobs -- and refocused on higher margin smartphones that link to social networking sites like Facebook.

But analysts say it still takes too long for the group to bring new products to market and it has been left trailing by the likes of Apple's iPhone and PC-like smartphones from the likes of Samsung and HTC.

(Reporting by Simon Johnson and Tarmo Virki; Editing by David Cowell)

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