Sony Ericsson profit plunges, plans 2,000 job cuts

Sony Ericsson posted a 97% drop in second-quarter earnings and would slash 2,000 jobs worldwide in a move to cut costs.

An Associated Press report also said the company blamed the earnings decline on tougher market conditions, higher development costs and negative effects from exchange rate fluctuations.

Company spokeswoman Lisa Canning in London was quoted as saying that the company would cut 2,000 jobs 'within the next 12 months' as part of an effort to reduce operational costs by €300 million (US$470 million) per year.

In a statement, Sony Ericsson president Hideki Komiyama said his company estimates restructuring charges to 'be of the same magnitude as our reduction in operating expenses.'

Net profit in the quarter fell to €6 million (US$9.5 million), down sharply from €220 million euros in the same period a year ago.

Sales were down about 9% to €2.8 million ($4.4 million), from €3.1 million euros in the second quarter in 2007.

The company had warned already last month that it expected to just break even before taxes in the quarter because of tougher competition and a continued slowing market growth in its mid- to high-end phones, the Associated Press report said.

It was the second profit warning this year from Sony Ericsson, which usually ranks fourth or fifth among the world's biggest mobile phone makers.

'Challenging market conditions are expected to prevail for Sony Ericsson for at least the rest of 2008,' the company said, 'in particular for the third quarter.'

Sony Ericsson's results were in stark contrast to the better-than-expected earnings report by market leader Nokia. Nokia, which makes four of 10 handsets sold worldwide, said it expected the global market for cell phones to grow by 10% or more in 2008, upgrading an earlier estimate.