Oct. 17 (Bloomberg) -- Sony Ericsson Mobile Communications Ltd., the mobile-phone venture of Sony Corp. and Ericsson AB, reported a smaller third-quarter loss than analysts had anticipated as its unit shipments and market share held up.

The net loss was 25 million euros ($33.8 million), compared with a 267 million-euro profit a year earlier, the company said today. Sales fell 9.7 percent to 2.81 billion euros. Analysts in an SME Direkt survey predicted a loss of 141 million euros on sales of 2.74 billion euros, the medians of 22 estimates.

Sony Ericsson, formerly among its parents' biggest profit contributors, posted its first quarterly loss in five years on costs to cut jobs and sinking prices for its Walkman and Cybershot camera phones. The London-based company is eliminating 2,000 jobs globally, which Chief Executive Officer Dick Komiyama said will help restore ``healthy profitability.''

``All in all, this seems like a positive surprise amidst all the challenges Sony Ericsson has been facing, and hence a relief to Ericsson,'' Deutsche Bank analyst Jussi Uskola said. Uskola recommends investors hold Ericsson shares.

The company booked restructuring costs of 35 million euros in the third quarter. Sony Ericsson reiterated it aims to save 300 million euros a year by the second half of next year, and the cost plan is progressing ``in line with expectations.''

Unit Sales

Sony Ericsson's unit sales fell to 25.7 million from 25.9 million a year earlier, topping an SME estimate of 24.3 million units. The venture, which kept its global market share at about 8 percent in the quarter, is betting the new touch-screen Xperia handset will take market share from rivals including Apple Inc.

The company has marketed its models in James Bond movies, and the Xperia X1 device lets users customize the screen with nine touch-screen panels. The C902 phone with a high-resolution camera was among the company's bestsellers in the quarter.

``Media, music and games are key areas for us,'' Anders Runevad, Sony Ericsson's head of sales, said in a telephone interview. ``It's one of our most important areas, and one where Sony is a leader in hardware, software and content, with the music and movie sides.''

Japan's Sony closed 5.2 percent higher at 2,440 yen in Tokyo trading before the venture reported earnings. Stockholm-based Ericsson rose 5 percent to 50.2 kronor in the Swedish capital.

`Challenging'

Sony Ericsson, created in 2001 from the mobile-phone units of Ericsson and Tokyo-based Sony that struggled to survive individually, made its mark with advanced phones featuring high- resolution cameras and music storage. It later slipped in the global mobile-phone rankings after failing to sustain demand and prices for its devices.

``As expected the third quarter has continued to be challenging,'' Komiyama said in the statement. ``We are committed to executing our alignment plan as speedily as possible to ensure we have the right size and organizational structure.''

The average price for a phone was 109 euros, down from 116 euros in the second quarter and from 120 euros a year earlier, Sony Ericsson said. Nokia Oyj, the world's largest maker of mobile phones, said yesterday its phones sold for an average of 72 euros in the third quarter. Nokia also said it would likely regain market share in the fourth quarter.

``We see increased price pressure in the industry,'' Runevad said. When asked about whether the company has cut prices to compete, he said the ``number one priority isn't volume, but rather revenue.''

Currency Effect

Sony Ericsson said its selling prices fell as it sold more low-priced devices. The stronger euro against the dollar and the British pound also hurt average selling prices and revenue, Runevad said. The company said growth this year will be driven by emerging markets, where low-priced models dominate.

Nokia, based in Espoo, Finland, said yesterday industry mobile-phone shipments will be about 1.26 billion units this year, up 10.5 percent from 1.14 billion in 2007. Industry growth is more likely to end up being just below 10 percent this year, Runevad said on a conference call.

``Generally we've seen the credit crunch affecting the markets mainly in Europe and the U.S.,'' Runevad said. ``It's a bit too early to say anything about it, but we'll see how the Christmas shopping goes.''

Runevad said the mobile-phone industry is more resilient than other consumer electronics.

``It's clear that replacement times are getting longer, but this is a market where the technological development is so rapid that it resembles the fashion industry,'' Runevad said.

Sony Ericsson said last year it aimed to eventually capture the No. 3 position among global mobile-phone makers. Trailing Nokia are now Samsung Electronics Co., Motorola Inc. and LG Electronics Inc., which leapfrogged Sony Ericsson this year.

To contact the reporter responsible for this story: Benedikt Kammel in Stockholm at bkammel@bloomberg.net

Last Updated: October 17, 2008 12:52 EDT