Struggling handset maker switches output entirely to smartphones

Mobile phone maker Sony Ericsson will focus entirely on the booming smartphone market, putting it head-to-head with rivals such as Apple and HTC.

The company yesterday said it would shift all its production to smartphones during 2012 as it reported a swing back to profit. It also warned of further margin pressure, partly due to a global slowdown.

The company’s chief executive Bert Nordberg said: “If the consumer confidence problem continues, it will hurt the mobile industry.”

Analysts believe the world’s ninth-largest handset maker can only succeed in attracting avid gadget users away from its rivals by being fully integrated into Sony’s wide portfolio of devices and getting access to the Japanese giant’s entertainment assets, like PlayStation and music catalogues.

That has sparked talk of a possible deal by Sony to buy out Ericsson’s 50 per cent stake in the phone-making joint venture.

Smartphones currently account for about 80 per cent of all Sony Ericsson’s sales and the company said its share of the global Android-based smartphone market during the quarter was some 12 per cent in volume and 11 per cent in value.

Geoff Blaber, from CCS Insight, said: “Speculation persists that Sony will buy out the [joint venture].

“This is arguably the most desirable endgame for a company that needs full access to Sony content and services.”

In contrast to Apple’s roaring success, Sony Ericsson has been losing money for some time, although its recent focus on smartphones based on Google’s Android platform has pulled the company back into the black.

Third-quarter pre-tax profit at the company was €31 million (£27m), a little ahead of market forecasts and a swing back from a loss of €42m in the previous quarter.

The joint venture sold 9.5 million phones in the quarter, ahead of analysts’ forecasts.