Sony Ericsson said first quarter net profit almost halved as a slowdown in consumer spending knocked demand for its expensive music and camera handsets.

The mobile phone manufacturer, which is owned by Sweden’s Ericsson and Japan’s Sony Corp, said net income fell to €133 million (£106.8 million) from €254 million in 2007.

The group blamed an 8 per cent drop in sales to €2.7 billion on a slower market for mid-to-high end phones and higher research and development costs.

It slipped to fifth position behind South Korea’s LG in terms of global market share. Nokia is still clear market leader with a 39 per cent market share, followed by Samsung Eletronics and Motorola.

Sony Ericsson sales chief, Anders Runevad, said consumers were becoming more cautious. "We see that the demand on the high end has softened," he said.

"Most of volume growth comes from emerging markets and the low-end segment, where we don't have a strong position today,” Mr Runevad admitted. “But it's important to us to keep our market share in terms of value,” he added.

However, the profits drop was not quite as steep as some had expected and shares rose 1.4 per cent, or 0.16 Swedish kronor, to 12.04 kronor (£1.03), in afternoon trading in Stockholm. In early March Sony Ericsson had revised its forecasts down to €150 to 200 million.

Jan Ihrfelt, an analyst at Swedbank, said: “The first-quarter results are better than expected but we do not see that it is sustainable.”

The disappointing results are the latest in the mobile phone market, which is feeling the effects of the economic slowdown.

Last week Nokia painted a gloomy picture of the sector, predicting a slowdown in the global handset market as it reported first-quarter profit below analysts’ estimates. Its share price fell 13 per cent. But the Finnish handset maker has balanced slowing sales in Europe and the US with strong growth in emerging markets such as India and China thanks to its cheaper handsets.

According to analysts at Dresdner Kleinwort, 60 per cent of Sony Ericsson’s phones are Walkman or Cybershot branded, which has left it exposed in a weakening European market.

Sony Ericsson's high-end music and camera phones, or smart phones, range in price from the 3G W880i with Walkman music player at £249.95 to the 3G P990i smartphone at £399.95. However, in the UK market handsets are heavily discounted or free when customers sign up to 18-month contracts.

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