In total, the Sony and Ericsson joint venture sold 12.6mn phones in the quarter, the upsurge being led by consumer demand for its V800 series and Z1010 3G phones, as well as GSM models like the S700, K700 and K500 series. The good news was that the Average Selling Price (ASP) of each unit, already one of the highest in the industry, increased sequentially to €160.

"2004 was a good year for Sony Ericsson as the company established profitability and entered into a growth phase in its development," said Miles Flint, President of Sony Ericsson. "The fourth quarter continued a trend of expansion in both volume and sales, showing the company's ability to effectively compete in this dynamic market."

During the fourth quarter, Sony Ericsson launched a new entry-level GSM product, the J200, for the Asia Pacific and Chinese markets, and introduced the Vodafone V800 and V802SE UMTS phones for the global and Japanese markets. The company also announced the entry-level T290 which will start shipping globally during Q1 and signed an agreement with Sharp Corporation in relation to the co-development of 3G FOMA base software for NTT DoCoMo in Japan.

Commenting on the results, Martin Garner, Research Director at Ovum, said: "2004 really was a turning point for Sony Ericsson. It started with the company winning Phone of the Year for its T610, continued with it moving into profit, getting a new president, taking a controlling stake in BMC (a Chinese phone manufacturer), launching the media-centric S700 and K700 phones, and ended with successful launch of its V800 3G phone. It has also launched an entry-level GSM phone into the Asia-Pacific and Chinese markets." However Garner expressed concern that profit was below analyst expectations, and profitability fell during Q4. "We suspect that this is due to cost control more than pricing pressure."

Looking forward the Ovum research director identified two main areas which Sony Ericsson needed to address in 2005. "It (the company) must carry on exploiting the rapid expansion of the smartphone sector that it has used as a platform for its growth. That will not be easy as it is now becoming a crowded sector with strong products from several vendors and increasing control over the specifications from the operators. Sony Ericsson also needs to improve its profitability while broadening its range into lower cost phones. This should be helped by higher volumes bringing greater economies of scale. But expect average sale prices to fall and a very strong focus on costs."
Ian Channing