Struggling handset maker Sony (NYSE: SNE) Ericsson (NSDQ: ERIC) posted a worse-than-expected fourth-quarter loss of €187 million euros ($245 million) today, versus a profit of 373 million euros ($492) the same period last year, as market conditions continued to take its toll on the number of handsets shipped. According to Bloomberg a survey of analysts had predicted a €95 million-euro ($126 million) net loss on sales of 2.9 billion euros ($3.8 million). It also reported a loss of €73 million euros ($96 million) for the full year 2008, compared with a profit of €1.1 billion euros ($1.45 billion) for the previous year. Sony Ericsson President Dick Komiyama predicted “a continued deterioration in the marketplace in 2009, particularly in the first half. Its restructuring was “progressing as planned,” he said, with a cost-savings effort of €300 million euros ($397 million ) expected to kick in by the second half of 2009.

More Details:

—Yearly sales sink : Favorable currency fluctuations helped Sony Ericsson post sales of €2.91 billion euros ($3.8 billion), a 4 percent rise from the last quarter. Compared to last year, however, fourth-quarter earnings sank 23 percent.

—Handset volumes down: SE, currently the third-largest handset maker, shipped 24.2 million handsets, down 6 percent in the fourth quarter compared to the third, and down 21 percent year on year.

—Q4 ASP up: The average selling price (ASP) of a handset was €121 euros ($160), up sequentially from €109 euros ($144)  in Q3, but down from €123 euros ($163) compared to the same time last year. The rise in ASP from Q3 was attributed to forex movements and the sale of a higher proportion of high end handsets.

—Market outlook: Sony Ericsson estimates the 2008 global handset market at about 1,190 million units, up 6 percent from 2007. Previous company forecasts expected the market to grow 10 percent. The company expects that the global handset market will shrink in 2009, with industry ASPs declining.

Conference Call Highlights:

—Focusing on the high end: Komiyama said the company was refocusing its efforts on high-end handsets, hoping that this will help increase ASPs and slow SE’s declining gross margins. In Q4, ASPs were boosted primarily by favorable currency movements, and not because of the actual product lineup itself. SE said it was “too early” to predict how next year’s gross margins and ASPs would be hit, as currency fluctuations were making it difficult to forecast, but that it expected high-end handsets to help gross margins. In Q4, gross margins deteriorated to 15 percent, down from 22 percent sequentially, and 32 percent year on year. Komiyama added this did not mean, however, that the company would ignore the low-end. SE also dismissed the idea that the high end of the market was becoming a crowded place, saying that there were many sub segments of that particular slice.

—Profitability over market share: Will chasing the high end mean higher ASPs, but lower market share? Though Komiyama has said in a previous interview he hoped that SE maintained its current third place among handset makers, he said in the conference call that profitability (higher margins, higher ASPs) took priority over market share.

—Android phone in the pipeline: SE said it would continue to back Symbian and Windows Mobile, but that it also had an Android-based phone in the works. The company said that the trend toward free open-source OSs had opened up new business cases and the possibilities of creating “compelling propositions” with a “reasonable return” on high-end models.

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