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Thursday, October 12, 2006

Sony Ericsson Profits Up, But Future Dim

Stocks: (SNE)(NOK)(ERIC)(MOT)

Sony Ericsson said third quarter earnings tripled as its high end handset sold well. Handset sales rose 40% to 19.8 million units during the quarter. The company also said that global handset sales would hit 950 million this year, up from previous estimates.

However, hidden in the good news was a caution. Revenue per handset will probably drop in Q4. Margins at most cell phone manufacturers rely heavily on what each phone gets as it is sold to cell provider. Any drop in the number may spell bad news for Motorola, Samsung and Nokia as well.

Many analysts expect the rate of cell phone sales growth to slow in 2007. If this is combines with a lower yield per phone, next year could be dicey for investors in the big cell providers.

Douglas A. McIntyre can be reached at He does not won securities in companies that he writes about.

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