Sony Ericsson to lay off 2,000

Sony Ericsson reported its first-quarter earnings results with a pre-tax loss of $466 million and is laying off 2,000 employees.
Written by David Meyer, Contributor
Sony Ericsson plans to lay off a further 2,000 employees, in the wake of deeper quarterly financial losses.

The layoffs, announced on Friday, are in addition to the 2,000 job cuts the handset maker outlined in July. They came the same day that Sony Ericsson reported its first-quarter earnings results, which showed that the company had a pre-tax loss of $466 million (€358m) for the first three months of 2009. The company's earnings slipped into the red in the third quarter of 2008, and its losses have deepened ever since.

"As expected, the first quarter of this year has been extremely challenging for Sony Ericsson, due to continued weak global demand," Sony Ericsson president Dick Komiyama said in a statement. "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 indicated there would be more cost cuts to come. "The management intends to pursue an additional cost-saving program targeting a further annual operating expense reduction of $521 million (€400m), to be completed by mid-2010," he said.

Sony Ericsson estimates it will lay out $211 million (€200m) in restructuring charges associated with the latest reduction in headcount. It did not give a business-unit and geographical breakdown of the 2,000 layoffs. However, a company spokesman told ZDNet UK on Friday that the layoffs would take in both permanent employees and contractors, as in the previous round.

Sony Ericsson, which has seen losses worsen for the past three consecutive quarters, now has a declared net cash position of $1.43 billion (€1.1bn). Asked whether this trend means the handset maker might run out of money by the end of the third quarter 2009, a company spokesman responded: "That perhaps could be one conclusion".

"We're obviously reviewing the situation regularly," the spokesman told ZDNet UK on Friday, adding that parent companies Sony and Ericsson "have always maintained their commitment to the joint venture".

Sony Ericsson noted that it now has a six percent share of global handset market — down two percentage points, or 25 percent, on the previous quarter. It also said it expected the global handset market to contract by 10 percent over the course of 2009. That prediction is precisely in line with estimates made by Nokia on Thursday.

In February, Sony Ericsson announced its Entertainment Unlimited strategy, which will integrate various elements, such as imaging and media, into a new generation of handsets. The first new model will be the touchscreen Idou handset, expected in the fourth quarter of this year.

Idou is "certainly a step in the right direction for Sony Ericsson, but one cannot help but wonder if it will be too little too late, given it will only be on the market at the end of the year", Gartner analyst Carolina Milanesi said in a statement on Friday. In January, Milanesi predicted that 2009 would be "a deciding year" for Sony Ericsson.

Sony Ericsson's spokesman noted that the company intends to focus this year on "high-end open OS devices" — a reference to the company's ongoing work on an Android phone and its membership of the Symbian Foundation — and "tap into the 3G market opportunity in such emerging markets as China".

This article was originally posted on ZDNet UK.

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