Sony Ericsson faces 'new market reality', cuts 2,000 jobs

Struggling handset vendor Sony Ericsson’s first quarter loss before taxes came in at the lower end of expectations on Thursday, dropping to Eur368m. For the first three months of 2009, the firm reported a net loss of Eur293m, compared to a profit of Eur133m in the same period last year.

Last month, the Japanese-Swedish joint venture warned that first quarter results would be hard hit by consumer belt tightening and de-stocking in the retail channels. Net loss before taxes was estimated to be in the range of Eur340m to Eur390m.

Unit shipments for the quarter were in line with expectations at 14.5 million, down from 22.3 million in the first quarter of 2008, while the average selling price (ASP) remained almost flat at Eur120, compared to Eur121 in the first quarter of last year. Group sales took a dive to Eur1.7bn, from Eur2.7bn in 2008.

“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,” said Dick Komiyama, president of Sony Ericsson. “The management intends to pursue an additional cost saving program targeting a further annual operating expense reduction of Eur400m, to be completed by mid-2010.”

This additional cost saving program amounts to further job cuts of 2,000 people, leading to new restructuring charges of Eur200m.

Also last month, rumours of a break up were circulating, with Sony reported to be looking down the back of the sofa for enough cash to buy out Ericsson’s 50 per cent share in the joint venture.