* Pretax loss 261 million euros, wider than consensus
* Sees market worsening in 2009, especially in first half
* Announces further cost measures, plans second half profit
* Ericsson shares up 2.6 percent
(Adds conference call, Gartner comment, updates shares)
By Anna Ringstrom and Sven Nordenstam
STOCKHOLM, Jan 16 (Reuters) - World number three mobile phone maker Sony Ericsson announced plans for further cost cuts as it braced for even weaker demand, when it posted a much bigger than expected fourth-quarter loss on Friday.
President Dick Komiyama forecast global demand would shrink at least 5 percent this year, and said market share was less of a priority than preserving profitability in those conditions.
While Sony Ericsson was the first of the big handset makers to release fourth-quarter earnings, it was only the third of the top four to react to crumbling sales in the past few days, after Motorola and Samsung.
The number one mobile phone maker, Nokia, will report on Jan. 22.
Sony Ericsson made a 261 million euros ($346 million) pretax loss in the three months to end-December, versus the mean forecast in a Reuters poll for a 77 million loss. A year earlier, the Ericsson and Sony venture made a 501 million profit.
Sales rose to 2.91 billion euros from 2.81 billion but gross margin halved to 15 percent from 32 percent due to impact from exchange rate fluctuations, restructuring charges and writeoffs.
The company said it was on track to deliver 300 million euros in annual savings, and had initiated more measures aimed at saving another 180 million from end-2009.
Asked at an investor conference about the prospects for profitability in 2009, Komiyama said: "Overall, it still probably will be (on the) negative side, but we plan to be positive in the second half."
Ericsson shares, which had fallen 13 percent from a 15-week high at 66.40 Swedish crowns on Jan.7, were up 2.6 percent at 59.50 crowns by 1215 GMT, outpacing a 2.0 percent rise on the broader Stockholm market.
Richard Windsor, technology specialist at Nomura Securities, said the big question mark was in the gross margins.
"How much have they had to discount high-end products in order to hang on to market share?" he said.
"If they can get back to (a margin) in the mid 20s (percent) and deliver on the cost savings the company should be able to get back to about break-even by the end of this year."
TOUGH YEAR AHEAD
Sony Ericsson said it expected the market to worsen further in 2009, particularly in the first half. It estimated its market share in the fourth quarter remained at about 8 percent.
It estimated the 2008 global handset market grew about 6 percent to 1.19 billion units, versus a previous outlook for about 10 percent growth.
"They clearly missed on the volumes. The company has to retreat into its shell," said Jari Honko, analyst at eQ Bank.
He said while the firm wanted to grow its market share aggressively, numbers showed it needed to cut its product range.
The average selling price (ASP) for Sony Ericsson's handsets in the quarter was 121 euros, versus a year-earlier 123 euros.
Sony Ericsson sees the global handset market shrinking and the industry ASP declining in this year, it said.
"We believe the global market will contract more than 5 percent in 2009," Komiyama said. "Business conditions will continue to be extremely challenging over the next 12 months."
The group, which in recent months has signalled a renewed focus on the high end of the market, issued two profit warnings last year as consumers scaled back on phone purchases.
"Maintaining the third position in the worldwide ranking achieved in the third quarter of 2008 will be very difficult for Sony Ericsson," research group Gartner said in a note. "We believe that 2009 will be a deciding year for Sony Ericsson as it battles between profitability and market share growth."
Komiyama said Sony Ericsson would "aggressively pursue the high-end, smart phone segment" of the market to target profitability.
Expenses for the new cost-saving measures would be covered by a previously announced 300 million euro charge. (Additional reporting by Tarmo Virki, Brett Young, Adam Cox, Sven Nordenstam, editing by Dan Lalor)