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Sony Ericsson to lay off 2,000 more workers

Phone maker's earnings have deepened ever since slipping into the red in the third quarter of 2008. Latest cuts affect both full-time staffers and contractors.

Will the touch-screen Idou phone, expected in the fourth quarter of this year, come too late for Sony Ericsson? This is a deciding year for the company, according to a Gartner analyst. Sony Ericsson

Sony Ericsson plans to lay off a further 2,000 employees in the wake of deeper quarterly financial losses.

The staff cuts, announced on Friday, add to the 2,000 cuts the handset maker outlined in July. They came the same day that Sony Ericsson reported its first-quarter earnings results, which showed that the company had a pretax loss of 358 million euros ($467 million) for the first three months of 2009. The company's earnings slipped into the red in the third quarter of 2008, and its losses have deepened ever since.

"As expected, the first quarter of this year has been extremely challenging for Sony Ericsson, due to continued weak global demand," Sony Ericsson President Hideki "Dick" Komiyama said in a statement. "We are aligning our business to the new market reality, with the aim of bringing the company back to profitability as quickly as possible."

Komiyama indicated that there would be more cost cuts to come. "The management intends to pursue an additional cost-saving program targeting a further annual operating-expense reduction of 400 million euros, to be completed by mid-2010," he said.

Sony Ericsson estimates that it will lay out 200 million euros in restructuring charges associated with the latest staff reduction. It did not give a business unit and geographical breakdown of the latest layoff. However, a company representative told ZDNet UK on Friday that the cuts, as in the previous layoff round, would affect both permanent employees and contractors.

Sony Ericsson, which has seen losses worsen for the past three consecutive quarters, now has a declared net cash position of 1.1 billion euros. Asked whether this trend means that the handset maker might run out of money by the end of the third quarter of 2009, a company representative responded, "That, perhaps, could be one conclusion."

"We're obviously reviewing the situation regularly," the representative told ZDNet UK on Friday, adding that parent companies Sony and Ericsson "have always maintained their commitment to the joint venture."

Sony Ericsson noted that it now has a 6 percent share of global handset market--down two percentage points, or 25 percent, since the previous quarter. It also said it expects the global handset market to contract by 10 percent over the course of 2009. That prediction is precisely in line with estimates made by Nokia on Thursday.

In February, Sony Ericsson announced an Entertainment Unlimited strategy to integrate various elements, such as imaging and media, into a new generation of handsets. The first new model will be the touch-screen Idou handset, expected in the fourth quarter of this year.

Idou is "certainly a step in the right direction for Sony Ericsson, but one cannot help but wonder if it will be too little, too late, given (that) it will only be on the market at the end of the year," Gartner analyst Carolina Milanesi said in a statement on Friday. In January, Milanesi predicted that 2009 would be "a deciding year" for Sony Ericsson.

Sony Ericsson's representative noted that the company intends to focus this year on "high-end open-(operating system) devices"--a reference to the company's ongoing work on an Android phone and its membership of the Symbian Foundation--and on "(tapping) into the 3G market opportunity in such emerging markets as China."

David Meyer of ZDNet UK reported from London.