Mobile phone Company Sony Ericsson have said that as a result of Companies like Telstra, Optus and Vodafone stocking less of their products the European Company has no alternative but to lay off 2,000 staff.
CEO Hideki (Dick) Komiyama said that poor customer demand and destocking by distributors and retailers pushed the Company into a first loss quarter loss of $529M.
All the world’s mobile device makers have been experiencing a slump in demand as the industry faces its worst-ever year. Nokia, the world’s biggest maker of mobile devices said last week that a massive slump in sales resulted in their first-quarter net profits falling 90%.
Ericsson executives have said they believe that their strategy which involves parting Company with consumer electronics partner Sony and a bigger focus on revenue rather than market share will help them turnaround their current problems.
The Wall Street Jornal reported that Komiyama said “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. We are confident we have the right products and the roadmap to wow customers again,” he said.
Sony Ericsson forecasts that the global handset market for 2009 will contract at least 10% from around 1.19 billion units in 2008.
Many in the market point to Sony Ericsson’s limited number of high-end converged devices similar to those that have been so popular to consumers, such as Apple’s iPhone and Nokia’s 5800 touchscreen as the root of its woes.
Ericsson has said that is looking to reduce, if not get rid of, its 50% ownership in the handset company. Sony Ericsson says both parent companies continue to support it and are even willing to inject extra funding if needed.
“I think it is highly unlikely that Sony and Ericsson contribute more cash,” said West LB analyst Thomas Langer. “Giving Sony Ericsson more cash would be a big mistake because the only way out of this [poor profitability] is a closer connection to Sony. Mr. Langer said he expects that Ericsson is looking to minimize its exposure to Sony Ericsson and is aiming to offload or reduce its stake to Sony, possibly with the understanding that Ericsson contributes cash to Sony Ericsson as part of any deal.
