This decline is described as largely due to continued troubles in selling mid-range or high-end cellphones, particularly in Sony Ericsson's home region of Europe. The company has a "less favourable product mix" at present that skews towards lower-end devices and dropped the company's margins on its phones by 6.5 percent of the total price as a result. Sony Ericsson isn't expected to ship its Windows Mobile-based XPERIA X1 smartphone until later in the year.

Market share climbed during the period, edging up to eight percent in the spring from 7.5 percent in the winter, but the company still plans to encounter difficulties for the last six months of the year and says it will cut about $475.6 million from its annual costs and 2,000 jobs to reorganize and better compete in the market.

Sony Ericsson faces a "challenging" 2008 and specifically highlights the summer quarter as its toughest of the year due to "increased competition," according to the report.

The company expectedly refrains from mentioning specific firms but is notably faced with the launch of the iPhone 3G during the summer. Apple's device not only has potential to cut into sales of Sony Ericsson's mainstay Walkman music phone line but also its P series smartphones and the future XPERIA line. Sony Ericsson has had touchscreen phones since before Apple but only in 2008 began to introduce devices explicitly made for finger input and for home users.

Extra pressure on Sony Ericsson's market share is likely to come from Research in Motion's BlackBerry Bold and Thunder lines as well as four key Nokia phones that include the E66 and E71 for business as well as the N78 and N96 for home.