July 18 (Bloomberg) -- Sony Ericsson Mobile Communications Ltd., which slipped to fifth rank this year among global mobile- phone producers, plans to eliminate about 2,000 jobs globally after quarterly profit was almost wiped out.
Sony Ericsson, which has 11,900 employees, said the handset market will remain ``challenging'' this year, particularly in the third quarter. Net income fell to 6 million euros ($9.51 million) from 220 million euros a year earlier, and sales dropped 9.4 percent to 2.82 billion euros, hurt by lower prices and adverse currency fluctuations, the London-based company reported today.
The company, a venture between Sony Corp. and Ericsson AB, lost its position in the global handset market to LG Electronics Co. this year. Sony Ericsson has suffered from delays in bringing products to the market as well as component shortages. The job reductions will be in all of the company's functions ranging from manufacturing to research and development, Chief Executive Officer Dick Komiyama said in an interview.
``They really need to renew their product portfolio drastically,'' said Carolina Milanesi, a research director at Gartner Inc.
Today's report contrasts with that of Nokia Oyj, the industry leader, which reported earnings and revenue yesterday that exceeded analysts' estimates and raised its forecast for industry sales.
``We are aligning our operations and resources worldwide to meet an increasingly competitive business environment and to help restore our capability for profitable growth,'' Chief Executive Officer Komiyama said. The job cuts will help Sony Ericsson save 300 million euros in cost annually within a year.
Sony Ericsson said it will take charges of a similar magnitude to the intended annual cost savings to realign the company. Ericsson is also eliminating 4,000 jobs after reporting the biggest drop in quarterly earnings since 2003 this year.
Fewer Shipments
Analysts polled by SME Direkt had anticipated sales of 2.76 billion euros and net income of 3 million euros.
Unit shipments fell to 24.4 million from 24.9 million units a year earlier, with average selling price declining to 116 euros from 125 euros. Analysts had anticipated shipments of 24 million units and an average price of 115 euros, according to SME.
Komiyama succeeded Miles Flint as CEO last year after his predecessor had more than doubled the company's sales, unit shipments and profit. Sony and Ericsson combined their handset units in 2001 after losses at the separate operations mounted.
Nokia, based in Espoo, Finland, raised its outlook for global unit sales to 10 percent growth or more from the about 1.14 billion units sold in 2007. It had previously predicted sales growth of about 10 percent. Sony Ericsson reiterated today global industry sales by units will rise by about 10 percent this year, lead by emerging markets.
To contact the reporter on this story: Juho Erkheikki in Helsinki at jerkheikki@bloomberg.net.
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