Despite the economic turbulence, handset vendor Sony Ericsson managed to turn in a smaller than expected third quarter loss.

At Eur25m the company’s quarterly loss compared to a profit of Eur267m in the same period last year, and follows a second quarter slide which sparked a Eur300m cost saving exercise.

Third quarter sales hit Eur2.8bn, dipping slightly against last year’s Eur3.1bn, while handset shipments reached 25.7 million, compared to 25.9 million a year ago.

Price cuts in the handset space also took their toll as Sony Ericsson’s ASP (average selling price) dropped from Eur120 in the third quarter of 2007 to Eur109.

As well as expanding its popular Walkman and Cyber-shot brand portfolios, the Swedish-Japanese joint venture also launched its first Windows Mobile handset, the X1, which kick starts its new Xperia sub brand.

The company also enhanced its music download service with PlayNow plus, which will launch in the fourth quarter with Telenor in Sweden.

Later on Friday, Sony Ericsson is also expected to reveal further information about its cost cuts and where it intends to slim down operations. With 2,000 jobs set to be cut, it’s rumoured that 400 workers at the company’s North American headquarters in North Carolina face the axe before year end.

“As expected the third quarter has continued to be challenging for Sony Ericsson.  We have moved forward with our plans to align operations and resources with the consolidation of R&D facilities into a more agile and cost efficient organisational structure. As previously announced, our target remains to reduce operating expenses by Euro 300 million annually by the end of the second quarter 2009, with the full effects expected to appear in the second half of 2009.These plans are progressing in line with expectations,” said Dick Komiyama, president of Sony Ericsson.