Sony Ericsson sees profits tumble, turns on workers

A new low for high-end handsets

Posted in Mobile, 18th July 2008 14:42 GMT

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There'll be long faces at Sony Ericsson this evening, with the gloomy news that the mobemeisters is cutting 2,000 jobs after pulling in just €6m in profits in the last three months.

This is a massive slide on the €220m the company made during the same period in 2007, despite shipping almost as many phones.

In their second quarter results, the company reports that last year it managed to ship 24.9 million handsets during the period, bringing in a total of $3.1bn. This year that figure is 24.4 million, bringing in €2.8bn, but the margins are a lot lower as the economy weighs against the mid-and-high tier handsets that form the core SE proposition.

The company has tried to sweeten the pill - for investors anyway - by announcing cost cutting to tune of €300m. Put another way, the firm is axing 2,000 staff according to reports.

The average selling price of a Sony Ericsson handset is now €116, compared to €125 this time last year, reflecting the tighter margins rather than any redirection of company priorities.

Expansion into the lower end of the market isn't on the agenda for next year either. Instead, the company plans to cut operating expenses, by €300m annually, over the next year or two. That should restore the profits, assuming the cuts can be achieved with no loss of quality or quantity.®

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