Sony Ericsson sees imaging as a key driver of handset sales

Pre-tax profit in the three months through September was 136m euros (�93.4m) driven by strong sales of new camera phones.

Market leader Nokia said profit slid by a quarter as it cut the price of its handsets amid fierce competition.

Analysts warn that Nokia's dominant position is under increasing threat.

Upside

Sony Ericsson accounts for 7% of the global market and said it will focus on three main areas to boost revenues; imaging, entertainment such as games, and connectivity aimed at making emails and the internet easier to access.

Nokia's results were a mixed bag Richard Windsor, analyst at Nomura Click for Nokia's share price

It reported that pre-tax profit in the three months through September was 136m euros (�93.4m) from 39m euros a year earlier.

Sales were 1.68bn euros as it shipped almost 11 million handsets. The average price of a phone climbed to 157 euros.

"Over 60% of phones sold during the quarter featured integrated cameras," said Miles Flint, president of Sony Ericsson.

The company, a joint venture between Japan's Sony and Sweden's Ericsson that was born in April 2001, has now posted five consecutive quarters of profit growth.

Mr Flint warned that sales may slow in 2005 from this year, though the firm still expects growth of between 10% and 20%.

"Mixed bag"

Nokia said that third-quarter earnings fell to 14 euro cents a share, 18% less than the same period a year earlier.

Sales, however, rose to 6.94bn euros, more than the average market forecast, as lower handset revenues were offset by rising demand at its phone network equipment business.

HANDSET MARKET SHARE Nokia 29.7% Motorola 15.8% Samsung 12.1% Siemens 6.9% Sony Ericsson 6.6% LG 6% Others 22.9% Figures are for second quarter of 2004 Source: Gartner

The company said it expects earnings to rise to between 16 and 18 euro cents per share in the fourth quarter

Nokia has about 30% of the world's mobile phone market and while the price reductions have hit earnings, it has helped the company retain customers.

The company said that, contrary to the dip in profits, sales volumes were strong ahead of the key Christmas shopping season.

"We expect continued strong growth in global mobile device market volumes in the fourth quarter, even as compared with the remarkable final quarter in 2003," said chief executive Jorma Ollila.

"Nokia's results were a mixed bag," said Richard Windsor, an analyst at Nomura. "The revenues and average selling prices were better than we had expected for the third quarter but their guidance for the fourth quarter was weak."

Shares of Nokia were little changed in Helsinki, up 0.3% at 11.44 euros.