Mobile handset maker Sony Ericsson said on Friday it would in future focus entirely on the fast-growing smartphone market as it posted in-line quarterly profits, making no reference to a report electronics giant Sony would take full ownership.

Pretax profit at the company, currently owned jointly by Sony and mobile network gear maker Ericsson, was 31 million euros ($42 million), just higher than the mean forecast of 27 million euros in a Reuters poll and a swing back from a loss of 42 million in the previous quarter.

Last week, a source with direct knowledge of the matter told Reuters that Sony is in talks to buy Ericsson's 50 percent stake in the joint venture.

Sony Ericsson, facing strong competition from Apple's iPhone as well as the likes of Samsung and HTC, has been losing market share -- and money -- for a while. A recent focus on smartphones based on Google's Android platform has been gaining traction, pulling the company back into the black.

The company, which stuck to its outlook for modest growth in the handset market this year, said that it would shift all its production to smartphones during 2012.

Android-based Xperia(TM) smartphone sales now account for more than 80 percent of sales and we have shipped 22 million Xperia smartphones to date, the company said in a statement.

We will continue to invest in the smartphone market, shifting the entire portfolio to smartphones during 2012.

(Reporting by Simon Johnson; Editing by Hans-Juergen Peters)

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