Mobile phone maker Sony Ericsson posted an unexpected net gain for the first quarter on Friday, reaching euro21 million ($29 million) in the black from a previous loss of euro293 million, much thanks to new products focused more on the high-end market as well as continued efforts to shave off costs.

Although sales dipped in the three months ended March 31 to euro1.4 billion, from euro1.74 billion, the gross margin of the LM Ericsson and Sony Corp. joint venture still jumped to 30.6 percent from a previous 8.4 percent.

Sony Ericsson CEO Bert Nordberg said new high-end products, such as the group’s Xperia X10 and Vivaz which began shipping at the end of the first quarter, had been “well received” by the market.

Falling operating costs also helped bump up the company’s bottom-line figures, dropping to euro423 million from euro528 million.

“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,” Nordberg wrote in the income statement.”

In 2008, Sony Ericsson launched a cost-cutting programme under which it had by the end of the quarter had slashed its global work force by around 3,150 people to 8,450.

Sony Ericsson, which aims to cut operating costs by euro880 million said the programme is running according to plan, with full benefit still expected in the second half of this year. Total costs associated with it now amounts to euro342 million.

The group said it shipped 10.5 million units in the quarter, a 28 percent decrease compared with the same three months in 2009, but was up from the 14.6 million units shipped in the fourth quarter.

The average selling price for its phones also jumped substantially, increasing 12 percent both sequentially and year-on-year.

Helena Nordman-Knutson, an analyst with Ohman Fondkommision in Stockholm, called the report “really good.”

“If only this is long-term it is fantastic,” she said, adding “it’s the new phones that are behind this.”

The first-quarter profit took the market by surprise she said, saying a turnaround had not been on the analyst cards just yet.

“We thought we’d have to wait until at least next quarter.”