Sony Ericsson released its fourth quarter earnings today and the numbers paint an interesting picture. Despite a downturn in revenue, increased handset sales point to growing presence in the market ... and Sony Ericsson's desire to kick Motorola while it's down.Though Sony Ericsson disappointed in the fourth quarter from a revenue perspective, 2007 was still a good year for the company. It boosted yearly revenue by 18% to $19.1 billion and net income 12% to $1.65 billion. Unit sales also jumped handily from 74.8 million in 2006 to 103.4 million in 2007. This increase in handset volume pushed Sony Ericsson's world market share to 9%, up two percentage points from last year. Not bad. Not bad at all.

Sony says those percentage points came from its highest-end mobile phones, such as the Cyber-Shot K550 and its Walkman-series phones. This growth is good, but analysts contend that Sony Ericsson could have been more aggressive throughout 2007 to capture some of the market share lost by Motorola. Instead, Motorola ceded market share to Samsung and LG, which rank second and fourth in worldwide market share, respectively.

If Sony Ericsson really wants to take advantage of Motorola's current weakened state, it needs to jump at the American market. Motorola may have slipped to the number three provider in the world, but it still holds the top spot in the United States. To date, Sony Ericsson has reserved its best phones for the European market (just as Nokia does). Some of the new phones announced last week at CES are true world phones, and that is a step in the right direction. The W760, for example, has quad-band GSM/EDGE radios as well as tri-band WCDMA radios for worldwide 3G roaming. Sony Ericsson needs to make more phones like this, and market them in the United States, as they are compatible with AT&T's 3G network. Sony Ericsson appears to have the same trouble in the United States that Nokia does, though, and its market share is similarly low here.

Instead, Sony Ericsson President Hideki Komiyama said, "Investments are being made in both research and development and brand building, to deepen the portfolio and strengthen Sony Ericsson's presence in new and developing markets around the world."

I don't disagree that developing markets will be a cash cow down the road. But Sony Ericsson needs to remember that the success of the more capable media phones such as the iPhone, LG Voyager, and Nokia N95 demonstrate that people with extra cash to burn are willing to pony up for good hardware.

Sony Ericsson knows how to make good hardware. The question is, can it make good marketing decisions as well?