STOCKHOLM - Britain's Carphone Warehouse has stopped selling Sony Ericsson's flagship smartphone due to software problems, dealing a blow to the loss-making Japanese-Swedish firm's turnaround plans.

Europe's biggest mobile phone retailer said on Monday it temporarily withdrew the recently launched Satio. From time to time we experience issues with new handsets and their software, which may result in a customer experience that is below our usually high standards, it said in a statement.

Sony Ericsson's newly appointed chief executive, Bert Nordberg, hopes a range of new products in the high-margin smartphone segment and hefty cost cuts will return the world's fourth largest mobile phone maker to profit next year.

The Satio is Sony Ericsson's current flagship smartphone, offering multimedia features and a 12.1 megapixel camera.

Sony Ericsson's UK Sales and Marketing unit said a small number of consumers have experienced software issues with the Satio when using certain applications.

The company is giving this matter its utmost priority and is working toward solving it, it said in a statement.

Carphone Warehouse said it was working with Sony Ericsson to restock the Satio as soon as possible.

Both companies declined to comment further.

Smartphones, with advanced mobile Internet and networking functions, have been the one bright spot in an otherwise depressed handset market over the last year.

While all mobile phone makers have been hurt by the global downturn, Sony Ericsson has also suffered because it has lacked a strong smartphone offering to rival Apple's iPhone and Research in Motion's BlackBerry.

Market share for the joint venture between Sweden's Ericsson and Japan's Sony Inc. has fallen to around 5 percent.

It lost 199 million euros ($297 million) in the third quarter but CEO Nordberg said the company would return to profitability again in 2010.

At 1316 GMT, Ericsson shares were up 0.65 percent, in line with the European tech sector and lagging telecoms.

($1=.6697 Euro)

(editing by John Stonestreet)

United kingdom Electronics Sony Phone