Mobile phone maker Sony Ericsson on Friday reported a third consecutive net profit in the third quarter, mainly thanks to success with its smartphones as well as new product launches and cost cuts.

Lower sales volumes, however, disappointed market watchers who had hoped for a rise. The L.M. Ericsson and Sony Corp. joint venture shipped 10.4 million units in the July-September period, down 26 percent year-on-year and 5 percent from the quarter before.

Shares in Ericsson dropped 1.6 percent to 71.00 kronor ($10.81) in early Stockholm trading.

Sony Ericsson's profit of euro49 million ($70 million), which compared with a year-earlier loss of euro164 million, was helped largely by lower costs, the result of a savings program it launched in 2008.

Revenues, meanwhile, fell slightly to euro1.6 billion from euro1.62 billion, as a 34 percent jump in the average selling price to euro154 could not make up for the lower shipping volumes. Selling prices were down 4 percent compared with the second quarter.

Still, CEO Bert Nordberg seemed pleased, saying his company's "overall performance is stabilizing."

"Our strategy to focus on the smartphone segment is succeeding and smartphones now comprise more than 50 percent of our total sales," Nordberg said, adding his company had launched its Android-based Xperia models in new markets, including both China and the U.S. in the quarter.

"It is our ambition to become the global number one handset provider on the Android platform," he said.

Sony Ericsson said its unit base market share remained flat compared with the second quarter -- at around four percent -- while the value market share is at around 6 percent.

The group also kept unchanged its forecast for units in the global handset market for 2010, saying it expects slight growth.

Helena Nordman-Knutson, an analyst with Ohman Fondkommision in Stockholm, said the report was overall worse-than-expected, with the volumes being the main disappointment.

"The competition out there is extremely tough right now and you have to have new phones all the time," she said, pointing to launches by Samsung as well as Apple Inc.'s new iPhone 4.