Sony Ericsson to cut 2,000 jobs after posting $384 million Q1 loss

World's No.4 mobile phone maker Sony Ericsson on Friday said it would cut 2,000 more jobs after it swung to a loss of €293 million ($384 million) in the first quarter of the year.

The group, which reported losses in the third and fourth quarters of last year, had warned in March that its first-quarter figures would be weak because of recessions in major economies that have hit demand for its handsets. With its margins eroded, sales in free-fall and a lack of new products in strategic sectors, Sony Ericsson vowed to deepen job cuts announced last year in a bid to reduce costs and return to profitability. (See: Sony Ericsson warns of fall in sales in Q1)

"The additional cost saving programme announced today will include a further reduction in the global workforce of approximately 2,000 people," the company said in a statement. The reductions amount to a fifth of its global workforce.

The company said it lost €293 million after earning €133 million in the year-earlier period. Revenue dropped 36 per cent to €1.74 billion from €2.7 billion. Sony Ericsson had warned in March that it would lose between €340 million and €390 million before tax. On Friday, the firm said it lost €370 million before tax.

Sony Ericsson had announced a cost-cutting programme in July 2008 that included 2,000 job cuts by the end of the first half of 2009 that was expected to bring its work force to around 10,000. (See: Sony Ericsson's quarterly profit wiped out, to sack 2,000 employees)

The global economic slowdown has cut demand for consumer electronics and established handset makers such as Sony Ericsson and market leader Nokia must also contend with the runaway success of Apple's iPhone, which dominates the high-end segment of the market.

Nokia reported a 90-per cent drop in its first-quarter net profit and a more than 25-per cent decline in sales on Thursday. (See: Nokia reports 90 per cent drop in quarterly profit, in line with expectations)

Sony Ericsson, created in 2001 in a merger between Ericsson of Sweden and Sony of Japan, has been trying to focus its business on fast-growing emerging markets in order to reduce dependence on the nearly saturated European zone. As a result it entered the low-end market, where prices are lower and the competition is tougher, analysts say, but it has lacked the products to make a splash in emerging markets such as China and India.

Company president Dick Komiyama acknowledged "as expected, the first quarter of this year has been extremely challenging for Sony Ericsson due to continued weak global demand." "We are aligning our business to the new market reality with the aim of bringing the company back to profitability as quickly as possible," he said.

"We lost market share in Latin America, India and Africa, as these markets moved toward low-end phones," Vice President Anders Runevad told a conference call. "We will look to focus on the revenue side rather than on market share."

The company said the latest job cuts, from its workforce of around 10,000, will cost it €200 million, but it hopes its latest cost-cutting drive will cut operating expenses by €400 million by mid-2010. Shares of Sony closed 5.9 per cent higher in Tokyo ahead of the release of the results. In Stockholm, Ericsson shares rose 3.2 per cent.