Sony will face a tough time turning around the fortunes of Sony Ericsson, which it will soon own outright, after the handset manufacturer posted a staggering net loss of €207m ($265m) for 4Q11. The loss is in contrast to the €8m profit the firm posted in the same quarter a year earlier.

Revenue for the quarter also dropped by 16 per cent year-on-year, to €1.29bn from €1.53bn, and the firm said that the poor performance was due to intense competition, price erosion and restructuring charges.

The company also posted a loss of €247m for the full year, compared with the profit of €90m it made in 2010, while revenues stood at just €5.2bn for the year, compared with €6.3bn in 2010.

“Our fourth quarter results reflected intense competition, unfavourable macroeconomic conditions and the effects of a natural disaster in Thailand this quarter,” said  president and CEO Bert Nordberg.

Ex-parent Ericsson released a statement on Thursday, warning that the handset vendors results will impact its own fourth quarter and full year 2011 results due out on January 25.

“We are aligning our business to drive profitability and to meet customer needs. In spite of these challenges, throughout 2011 we’ve shifted our business from feature phones to smartphones, and our Android-based smartphone sales in the quarter increased by 65 per cent year-on-year.”

He added that the firm’s Xperia portfolio will serve as a cornerstone of its smartphone lineup in 2012; it has shipped 28 million Xperia smartphones to date.

Last month, Sony Ericsson launched a restructuring program including global workforce reductions to reduce costs and drive competitiveness. Restructuring charges for the quarter stood at €93m and the program is estimated to be completed by the end of 2012.