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Sony Ericsson continues streak in fourth quarter

Sony Ericsson Mobile Communications L.P. posted big gains in handset volumes, revenue and income for the fourth quarter of last year and the whole of 2006, a feat that may be sending a seasonal chill up executive spines at Samsung Electronics Co. Ltd. and LG Electronics Co. Ltd.

Sony Ericsson has overtaken LG in the past year in terms of handset volumes, and its 2006 results may well reflect a momentum that could bring it to within at least striking distance of Samsung, the world’s third-largest handset vendor. This is so despite the fact that Sony Ericsson offers only GSM products, while LG and Samsung work with both GSM and CDMA technology.

At the same time, Sony Ericsson’s performance has been so strong that CIBC World Markets analyst Ittai Kidron wrote that sustainability could become an issue.

Sony Ericsson reported that fourth-quarter handset volumes jumped to 26 million units, a nearly 63-percent rise from the year-ago quarter. It shipped 75 million units for the year, a 47-percent increase over the prior year. Revenue climbed to $4.9 billion in the fourth quarter, a 63-percent leap over the year-ago quarter. Net income for the fourth quarter reached $579 million, more than triple the year-ago quarter. The joint venture ended the year with nearly $1.3 billion in net income, well over double the previous year’s net income.

Sony Ericsson said that its volume and revenue growth were double the market’s growth rate. Of its 75 million handsets shipped the vast majority (60 million) were music enabled; nearly one-quarter (17 million) were Walkman-branded handsets. Incidentally, for a snapshot of the ultimate challenge ahead, SEMC’s annual volume equaled Nokia Corp.’s first quarter volume of handsets shipped.

The joint venture attributed its trajectory to strong growth in Latin America, the Asia Pacific region and Europe. CIBC’s Kidron speculated that SEMC’s gains ate into Samsung’s market share in Europe and Asia and took a bite out of Motorola Inc.’s sales in Latin America and Asia. Kidron noted that Sony Ericsson’s average selling prices-nearly $188-did not fall as much as expected due to strong demand for the joint ventures’ popular handsets.

Results are expected Friday from Motorola Inc. and on Jan. 25 from Nokia Corp. LG reports on Jan. 23.


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