Sony Ericsson Cuts 2,000 Jobs After First Quarter Loss

Posted by: Kerry Capell on April 17, 2009

Mobile phone maker Sony Ericsson announced plans to cut 2,000 jobs after posting a pre-tax loss of $469 million for the first three months of this year.

Blaming weak global demand for the poor results, Sony Ericsson President Dick Komiyama said the job cuts were part of a cost-cutting plan aimed at generating $523 million in cost-savings by mid-2010.The cuts come on top of a previously announced workforce reduction of 2,000 earlier this year.

“We are aligning our business to the new market reality with the aim of bringing the company back to profitability as quickly as possible,” Komiyama said in a statement.

Sony Ericsson, the world’s fifth largest handset maker, said it had shipped 14.5 million phones during the first quarter, a decrease of 35% compared with the same period last year. Moreover, over the past 12 months the average selling price of its units had fallen by $1.30 to $157—though that is still far better than the $86 average that Nokia commanded in the first quarter. Sony Ericsson’s revenues for the quarter were $2.2 billion, a decrease of 36% from a year ago.

Sony Ericsson isn’t the only handset maker struggling to cope with the downturn. A day earlier, rival Nokia also posted dire first-quarter results, with sales falling 27% from the year-earlier and operating profits plunging 96%.

Both Sony Ericsson and Nokia believe the global handset market for 2009 will shrink by at least 10%. Nokia is likely to benefit from the strength of its smartphone franchise. But Sony Ericsson, a laggard in smartphones, has no obvious fast-growing segment to fall back on. As a result, many analysts continue to speculate that the eight-year old venture between Japan’s Sony and Sweden’s Ericsson may be headed for a break-up.