Sony Ericsson's quarterly profit wiped out, to sack 2,000 employees

19 July 2008

Sony Ericsson Mobile Communications on Friday reported a sharp decline in second-quarter profit and said it would cut its global work force of 11,900 by about 2,000 people as it prepares to face "challenging market conditions" for at least the rest of the year.

Net income fell to €6 million ($9.51 million / Rs40.54 crore) from €220 million a year earlier, and sales dropped 9.4 per cent to €2.82 billion, hurt by lower prices and adverse currency fluctuations, the London-based company reported yesterday.

The phone maker had already sent out a dire forecast last month that had sent shares of parent company Ericsson plummeting in Sweden. Hence, the results did not actually shock investors, as a result of which, Ericsson and Sony shares traded steady in Stockholm and Tokyo respectively. (See: Sony Ericsson sees profits falling in face of declining demand, increasing competition)

Sony Ericsson, which said for the second time this year that profit would fall, lost its ranking as the fourth-biggest handset maker to LG Electronics Co. in 2008 as higher living costs prompted European consumers to buy cheaper models.

It had a market share of around 8 per cent in the first quarter and is now the world's fifth-largest maker of mobile phones behind Nokia, Samsung Electronics, Motorola and LG Electronics.

On a slightly positive note, Sony Ericsson said that its share of the market for third-generation, more advanced phones stands at about 16 per cent to 17 per cent, but signalled it expects "very limited share gains" in that segment this year