Update: Sony Ericsson profits surge

Mobile phone maker Sony Ericsson Mobile Communications reported a surge in first-quarter profits Thursday, helped by a large increase in the number of phones it shipped.

Sony Ericsson said it shipped 13.3 million phones during the quarter, a 41 percent increase over the same period last year. The number of phones shipped was down compared to the fourth quarter, which typically spikes due to the holiday season.

Sales in the first quarter grew 55 percent to €1.99 billion ($2.4 billion) compared to the first quarter last year, and net income more than tripled, reaching €109 million compared to €32 million a year earlier, Sony Ericsson said.

The company credited the volume of new products released during the quarter for the growth. The vendor introduced three Walkman phones and its first camera phone sporting Sony's Cyber-shot brand.

Sony Ericsson also reported that the average selling price of its phones rose to €149, compared to €144 during the fourth quarter last year. The increase follows a similar growth in average selling price at Nokia, which announced earlier this week that the average price of its phones during the quarter was €103, rather than the €99 or less that it had expected.

The boost to average phone prices could be driven by a couple of factors, including a growth in the sales of smart phones, which come with higher price tags, said Rob Bamforth, an analyst at Quocirca. Operating systems that have traditionally fueled PDAs (personal digital assistants) like BlackBerry and Palm are increasingly showing up in the smart phone form factor and those devices combined with the second and third generation smart phones from traditional phone makers are helping to drive sales, he said.

The growth of more expensive handsets may also indicate that mobile users in the established markets are continuing to buy new phones. "It reflects an appetite for upgrade, which seems undiminished despite the focus on saturation and penetration of the market," he said. Many mobile phone makers have recently predicted that a growing portion of their sales will come from low-cost handsets sold to developing markets because regions like Europe, North America and parts of Asia are increasingly saturated.

Sony Ericsson expects growth in the global handset market to continue to beat previous expectations, predicting that 900 million phones will sell globally in 2006. That's up from the phone maker's forecast of 10 percent growth on the 780 million phones sold in 2005.

Sony Ericsson is in fifth place among mobile phone vendors, trailing behind Nokia, Motorola, Samsung Electronics, and LG Electronics.