Sony Ericsson reported a revenue slump of 23 per cent to $3.84bn (£2.57bn) caused by a drop in consumer demand for mobile phones.

The firm posted losses of $245m (£164.1m), compared to a profit of $494.3m (£330.7m) in the same quarter last year.

A restructuring charge of $170.9m (£114.3m) also contributed to the negative results, but the firm expects to see the benefits of its cost-savings scheme by the second half of 2009.

The number of handsets shipped through the Christmas trading period dropped 21 per cent to 24.2 million, the company said.

The mobile phone market has been greatly affected by the slowdown and, as expected, the fourth quarter continued to be very challenging for Sony Ericsson, said the firm's president Dick Komiyama.

"Our business alignment is progressing as planned, with the full effect of annual savings of around €300m (£266.2m) expected by the second half of 2009," he said. "We foresee a continued deterioration in the marketplace in 2009, particularly in the first half."

The expectation of a sales slowdown in 2009 for Sony Ericsson in the European and Japanese markets means that the company needs to build presence in markets such as North America where its share has historically been limited, according to Gartner research director Carolina Milanesi.

"We believe that 2009 will be a deciding year for Sony Ericsson as it battles between profitability and market share growth," she said.

"The recent decisions of working with Android and the Symbian Foundation are the right steps to make given the increased emphasis around smartphones and the relatively weak presence of Sony Ericsson in this space so far."