Sony is considering exiting the Sony Ericsson joint venture after posting a 113 million euro ($247 million) loss for 2008.
In an interview with German news source Welt Online, Sony CEO Howard Stringer said the JV has had a difficult year, but that "buying out a partner is never an easy thing."
When asked whether Sony Ericsson will exist in three years' time, Stringer gave what he acknowledged was a "diplomatic" answer.
"We have to work together again as we did two years ago or the joint venture will have to find its own solution," he said.
Meanwhile, in a move likely to further strain relations between the two companies, Sony has reportedly refused to allow Sony Ericsson to license the PlayStation brand.
Sony Ericsson had intended to develop a PSP (PlayStation Portable) phone. But insider sources have told Mobile Today that Sony denied the JV permission to develop this handset in December, and will only license the brand if and when Sony begins developing handsets independently.
The JV posted its Q4 and full-year results on Friday. The company's financial difficulties were exacerbated by the economic crisis. The company posted a $348.5 million operating loss for Q4 alone.
Sales declined by 6.8 million units, with 96.6 million units shipped in 2008. Sony Ericsson's ASP declined to $154 from $166 and gross margin for the full year was down to 22% from 31%.
The company said currency fluctuations had boosted sales, but also had a "large negative impact" on costs.
"We foresee a continued deterioration in the market place in 2009, particularly in the first half," said president Dick Komiyama.