Mobile phone maker Sony Ericsson posted a second consecutive quarterly profit on Friday (July 16) as sales of more expensive smartphones ramped up but it stuck to its view of only slight market growth this year.

After a dismal 2009, when consumers cut back on gadgets like new phones, the outlook for the industry has improved in recent months. However, competition in the key smartphone segment is tough and the global economic recovery remains fragile.

Nokia, the world's biggest handset maker, issued a profit warning in June saying its smartphones were struggling against Apple's iPhone.

Sony Ericsson, owned jointly by Ericsson and Sony Corp., has been slashing costs and revamping its portfolio to feature more phones with PC-like functions and links to social networking sites.

The smartphone strategy seems to have worked with the average selling price of Sony Ericsson's handsets soaring in the second quarter to €160 ($208) against a forecast of €134 ($174).

This helped push second-quarter pretax profit to €31 million ($40.2 million) versus a forecast profit of €16.5 million ($21.4 million) in a Reuters poll. The company lost €283 million ($367.2 million) in the same quarter in 2009.

"It was a good report, better [than expected] on sales, margin and EBIT," said Per Lindtorp, an analyst at Erik Penser. "At the same time, Sony Ericsson is in a turn-around situation when things can change quickly. But it looks very strong and the product portfolio is good."

The world's fifth biggest handset maker launched the Xperia X10 and Vivaz smartphones in the first quarter and the Xperia X10 mini and Xperia X10 mini pro started shipping at the end of the second quarter.

Chief executive Bert Nordberg said Sony Ericsson's new portfolio offerings had been well received by operators and the company was now well positioned for long term growth.

However, competition in the smartphone segment -- which thrived even during the downturn -- is cut-throat.

Nokia is struggling to compete with Apple's iPhone and a fall in the price of smartphones in general. BlackBerry maker Research in Motion has already reported disappointing quarterly shipments.

With the market outlook cloudy, Sony Ericsson stuck by a more bearish forecast than analysts and its competitors.

"Sony Ericsson maintains a forecast of slight growth in units in the global handset market in 2010," the company said in a statement.

Earlier this month, analysts forecast global handset sales volumes would rise 11.6% this year, helped by increasing smartphone sales. In April, growth was seen at 10.8% for 2010.

Nokia expects industry mobile device volumes to be up approximately 10% in 2010 versus 2009.