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Sony Ericsson posts heavy Q1 loss, slashes jobs

Mobile phone maker Sony Ericsson said on Friday it would slash another 2,000 jobs this year to fight a slumping handset market as it posted a big first-quarter loss in line with expectations.

business Updated: Apr 17, 2009 14:26 IST

Mobile phone maker Sony Ericsson said on Friday it would slash another 2,000 jobs this year to fight a slumping handset market as it posted a big first-quarter loss in line with expectations.

Sony Ericsson, owned by Sweden’s Ericsson and Japan’s Sony Corp, made a pretax loss of 370 million euros ($485 million) after restructuring charges of 12 million. Analysts had on average forecast a loss of 371 million euros.

Sony Ericsson President Dick Komiyama announced a target to cut a further 400 million euros in annual operating expenses by mid-2010, which would require an additional 200 million euros in restructuring charges.

The results came a day after the world’s biggest mobile phone maker, Nokia, reported its first-ever quarterly pretax loss, but reassured investors that it saw signs that demand was stabilising.

Sony Ericsson sales slid to 1.74 billion euros in the quarter from 2.7 billion a year ago.

“What should Sony Ericsson do to get out of this slump? They are not big enough to compete with Nokia, and now we have the iPhones. I don’t think they should go after all segments of the market,” said Michael Andersson, analyst at Evli.

Sony Ericsson’s success has been built on a strong offering of mid-range phones with high-quality cameras and music players, but this market segment has seen a sharp fall in demand as operators have doled out subsidies to more expensive phones.

“They should stay where they are, and try to take their part of the high-end smartphone market,” Andersson added.

Extremely challenging

Sony Ericsson repeated that it expected the global handset market to contract at least 10 per cent this year, roughly in line with Nokia’s outlook, and said the market had remained “extremely challenging” in the first quarter.

The cellphone industry has entered the toughest year in its history as consumers rein in spending and retailers try to clear inventories of unsold phones after bleak holiday sales.

An analyst who asked not to be identified said Sony Ericsson’s additional cost cuts were inevitable.

“With the level of losses we are seeing and the gross margins they have, they don’t have any choice. But the uncertainty remains. Will this be enough?” he said.

Sony Ericsson, the No 4 global handset maker after Nokia, Samsung and LG, had flagged its steep first-quarter loss in a profit warning last month, and warned of a collapse in unit sales.

It shipped 14.5 million units in the first quarter, down from 24.2 million in the fourth.

Shares in Ericsson were up 2.5 per cent at 77.9 Swedish crowns at 0831 GMT. Sony shares had closed up 5.9 per cent in Tokyo before the results.