Mobile phone maker Sony Ericsson needs to deliver new and innovative products to the market immediately if it is to weather its current sales downturn. This was the stark message delivered today by research firm Gartner Dataquest in its third-quarter handset sales statistics.

Sony Ericsson sold just under five million handsets (a 4.8 percent market share) worldwide during that period, while competitor and market leader Nokia gained 35.9 percent market share selling around 37.5 million handsets — up from 34.1 percent this time last year.

But the companies sold a total of more than 8.8 million handsets before their merger. Sony Ericsson has said it aims to become the world's biggest mobile company by 2006, which leaves it with a lot of work to do.

"It was another devastating quarter [for Sony Ericsson]. Unless the joint venture starts to deliver, and it needs a superb product launch at CeBit [electronics trade show in March], it's going to be very tough," Ben Wood, market analyst at Gartner told Reuters.

However, as a whole the mobile industry performed better than expected with a 7.8 percent increase in sales year on year across the board, making total sales of 104 million.

"This is only the second time ever that the third quarter has realised mobile terminal sales volume in excess of 100 million units," said Bryan Prohm, senior analyst at Gartner.

Motorola also saw a fall in sales, which the report blamed on critical delays in the availability of two of its new models the T720 and the C330. Samsung had another strong quarter, achieving a 10 percent market share.

But the report recognises the problems manufacturers are facing in near saturated Western Europe.

"Mass market acceptance of emerging handset features such as colour screens and polyphonic sound may well prove merely short term catalysts for replacement sales," said Prohm. "Vendors will need to be increasingly flexible and even revolutionary in their approach to the market in order to secure the loyalties of an ever more fickle end user and carriers with shifting priorities."