Sony Ericsson's move to streamline its portfolio and focus on high end handsets has paid off, seeing the company return to profitability in the first quarter.
A resolution of a royalty dispute also helped margins, the company said.
The handset manufacturer earned £18m during the first quarter, after losing £257m in the same period last year and £147m in the fourth quarter.
The results confounded analyst predictions. A mean forecast in a Reuters poll of 27 analysts had been for a £138m loss.
The move has seen a fall in revenue which dropped 19% to £1.23bn. The company shipped 10.5 million phones, 27.5% lower than the first quarter of 2009. The company said its strategy of streamlining of its portfolio to focus on higher-priced phones was behind the fall.
However, the strategy appears to be paying off with average selling prices improving rising to £117 compared with £105 in both the fourth quarter and the first quarter of 2009.
Restructuring charges have also fallen to just £2.63m, compared with £131m in the fourth quarter.
Sony Ericsson president Bert Nordberg, who joined the manufacturer last October, attributed the lift in average selling prices to the launch of the Xperia X10 and the Vivaz smartphones.
'Both models have been well received globally,' he said. 'Increases in both gross and operating margins show that we are on the right track to build the correct cost structure for our business organization and strategy.'
Gross margins rose to 31%, compared with 8% in the prior-year period and 23% in the fourth quarter of 2009.
Operating margins were 1%, compared with -21% in the previous year period and -10% in the fourth quarter.
Market share fell by a percentage point to 4%.
Sony Ericsson also announced that Bill Glaser, former head of Sony Group's risk office, is replacing Ulf Lija as chief financial officer. Lija will return to Ericsson.