Sony Ericsson Q4 earnings seen down

Visitors look at dress-up panels for the Sony Ericsson ''W53S'' mobile phone at Wireless Japan 2007 in Tokyo July 18, 2007. Mobile phone maker Sony Ericsson is set to report a drop in fourth-quarter earnings on Wednesday as its focus on lower-priced phones puts pressure on margins, analysts say.

STOCKHOLM (Reuters) - Mobile phone maker Sony Ericsson is set to report a drop in fourth-quarter earnings on Wednesday as its focus on lower-priced phones puts pressure on margins, analysts say.

The mobile venture of Ericsson (ERICb.ST) and Sony Corp (6758.T) is expected to post a drop of 8.6 percent in profit before tax, according to a Reuters poll, weighed down by a rise in marketing costs and a lower average sales price for handsets.

But of at least equal interest will be any fresh signals on the joint venture's strategy, analysts say, in the first quarterly results statement from new president Hideki Komiyama.

"What's he going to do, how's he going to take the company forward? That's the biggest issue," Nomura Securities analyst Richard Windsor said.

Komiyama, who took over from Miles Flint in November, has so far been relatively quiet on Sony Ericsson's way forward as it battles for market share with larger rivals Nokia (NOK1V.HE), Samsung (005930.KS) and Motorola MOT.N.

The Sony veteran told Reuters earlier this month the company would give high priority to North America and to higher-income consumers in emerging markets in 2008.

He also said he was optimistic Sony Ericsson would overtake at least one of its rivals to become a global top-three mobile phone maker in the next few years.

ADDED IMPORTANCE

Meantime the results will have added importance for Swedish co-parent Ericsson, which dismayed investors in October with unexpectedly weak profits, sending its shares at one point down 30 percent.

Sony Ericsson now accounts for around a third of Ericsson's group operating income.

"Sony Ericsson's share of Ericsson's operating result has never been bigger. It was at around 18 percent a year ago, so the increase is dramatic," said SEB Enskilda analyst Mats Nystrom. "In that respect it's important that they don't disappoint the market".

Analysts expect the seven-year-old venture, which has made strides with its Sony Walkman and Cybershot-branded music and camera phones in recent years, to report an average sales price (ASP) of about 121 euros, versus 120 euros in the third quarter.

But the ASP has been falling steadily from 147 euros a year ago, in line with a shift to less expensive handsets.

"The ASP will continue downwards following a broadening of its product portfolio towards sub-euro 50 devices, and that's a deliberate strategy and is unrelated to the market development," said SEB Enskilda's Nystrom.

"I think you're going to see lower ASP and an elevated marketing spend," said Nomura's Windsor.

But he said revenue should tick up in the fourth quarter, when mobile handset sales increase during the Christmas season.

"Those things cancel each other out, giving you profitability that remains broadly flat," Windsor said.

Sony Ericsson in October posted third-quarter earnings and margins above expectations, as its grip on costs helped offset the drop in ASP.

(Editing by David Holmes)