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Sony Ericsson Q1 Sales Slide 4%

Stockholm, Sweden — Difficult market conditions and a dearth of new products pushed first quarter sales and earnings downward at mobile phone maker Sony Ericsson.

Sales decreased 4 percent to $1.65 billion in the three months, ended March 31, down from $1.72 billion in the same quarter in 2004.

Net income was more than sliced in half in the first quarter, dropping to $41 million, compared with $105.1 million in the same three months a year earlier. Net income in last year’s first quarter includes the negative effect of a valuation allowance on deferred tax assets of $57.7 million.

The 50-50 mobile-phone making joint venture between Sweden’s Ericsson and Japan’s Sony reported 9.4 million mobile phone units shipped in the first quarter, a 7 percent increase over the 8.8 million shipped in the same three months last year. The company, however, had forecast shipping 10.8 million units in the quarter.

General market conditions, namely an inventory build-up that spilled into the first quarter, led to increased competition and a decrease in average phone selling price. Per-unit average selling price in the first quarter was $176, down from $192 year-over-year.

Also, Sony Ericsson blamed the unfavorable first-quarter results on a mature product lineup, with few new items launched during the period. The company said a shift to cheaper, prepaid handsets and carryover inventory from 2004 were the main reasons for lower quarterly earnings.

The company reported it currently is rolling out prepaid and 2-megapixal camera phones expected to help boost its market share.

Sony Ericsson expects to see moderate overall market sales growth in the next few quarters, and about 10 percent year-on-year. Phone shipments for the full year should be nearly 700 million units, said the company.