Sony Ericsson sees net profits fall 97%, looks to cut 2,000 jobs

Sony Ericsson warned the world just over a fortnight ago that things wouldn't be too rosy when it came time to announce Q2 results, and rosy things are not. Even though the handset maker was hoping and praying to break even at the end of the quarter, net profits ended up falling through the floor to the tune of 97%. As predicted, weak sales of mid-to-high-end mobiles were blamed for the bulk of the bad news, and it did affirm that conditions would remain rough for the rest of the year. Granted, the looming launch of the Xperia X1 should help matters a bit, but without a new stable of low-end cellies to send to emerging markets, it'll be a long road back to the top. Unfortunately, SE's sagging position in the market has left it slashing 2,000 jobs across the globe, though it didn't say exactly where the cuts would be made. It's okay SE, there's only one place to go when you're laying on the bottom... or something like that.

[Image courtesy of Flickr]

Read - Sony Ericsson's Q2 earnings
Read - Sony Ericsson plans job cuts

[Jack Hannan @ Jul 18th 2008 1:43PM]

Horrible numbers. What is there strategy to rebound from a dismal quarter. www.readtheanswer.com/index.php?RTA=web2

[Peep @ Jul 18th 2008 2:49PM]

Iphone has have a effect, but do you really think that iphone had any effect of this report? I mean iphone sold what 1 million mostly in USA where SE and Nokia don't exist. Iphone even as it's superb product and currently is selling great have absolutely no effect to what SE is going through now. Take those USA glasses away.

SE's problems are the same as Moto's. SE thought it was enough after those groundbreaking products and money coming out of the windows 3 years ago to stop it there and trust that the cypershot and Walkman brand will be enough and what they have achieved now will carry them around, but as we saw with Moto it just dosen't work and so did Nokia steal the spotlight as having best camera around and Nokia, Samsung smoking SE out of the emerging markets.

[Cash @ Jul 18th 2008 3:04PM]

Sales numbers were bad on their mid to high end phones because no one was carrying them. I was all set to pickup a K850 from AT&T in March/April only to see it cut at the very last minute and replaced with that ungodly Z750a. I would happily buy a C902 if a major carrier would come out with a U.S. version. Sorry SE, but I'm not going to pay 500 bucks on ebay for a crippled 3G phone.

I don't know who is responsible for a lack or SE phones supported by U.S. carriers, but thats why I have an iPhone in my pocket instead of an SE. Call it the iPhone effect if you want, me I call it tired of waiting for a quadband SE phone thats worth a damn.

[Jack Storm @ Jul 18th 2008 4:03PM]

survival of the fittest.

[thedesolate1 @ Jul 18th 2008 5:28PM]

SE misjudged consumers... in an effort to try and maximize profits they were releasing a bunch of mediocre phones instead of releasing phones that are good all around. For instance They dubb the cybershot phones for taking pictures and the walkman phones for music... Well the memory is crippled first of all for walkman phones because they started pushing yet another standard the memory stick micro with little memory. Do they not know that people want to put more than 2gb of music on their "walkmans"? The "camera phones" top out at 3MP and again memory shortage... They never released a phone that excelled at both music, functionality and pictures. But this is only the tip of the iceberg..

[Rob @ Jul 18th 2008 1:47PM]

The "iPhone Effect."
Instead of cutting jobs at the bottom, they should start at the top. After all, the guys at the bottom did nothing but follow the recommendations of the ones at the top.

[Krush @ Jul 18th 2008 1:59PM]

Really - the iPhone cut into the wXXX / zXXX series business? C'mon fanboi - it was more a lack of a product line suited to business needs like the Nokia E series lineup or HTC/Samsung/Asus smartphones that cost them the market. The pXX lineup had potential but lacked execution - KXXX lineup has an identity crisis. X1 maybe a tad late to enter the market - but it may be a start for SE to enter the business smartphone segment.

[itlnstln @ Jul 18th 2008 2:17PM]

"Instead of cutting jobs at the bottom, they should start at the top. After all, the guys at the bottom did nothing but follow the recommendations of the ones at the top."

No joke. It seems the guys at the top can't figure out the basic law of business failure: me (corporate exec.) = fail. At least Hector Ruiz made it appear that he understood this, although, I am sure he was pushed out. Dell, for example, cuts 8000 manufacturing/sales jobs (there were other reasons for this as well) when Dell's marketshare was slipping to HP to cut costs. Yeah, I'm sure the poor bastards putting PC's together had everything to do with the company's poor performance, not the a-hole who makes more by himself than everybody he canned. Rinse and repeat for GM, Ford, Chrysler, etc.

/rant

[Rob @ Jul 18th 2008 2:33PM]

@Krush:
I'm not fan of the iPhone at all. To the contrary, I'm sick of hearing/reading so much about it. But, if you're to tell me that the money people decided to spend on the iPhone instead of other manufacturers' phones has had no effect at all, then I'm at a loss for words. That's as foolish to assume as the statements made by Sony saying that the Wii is no competition for them. The money people are spending on the Wii is money they're not spending on the PS3. Same thing with Sony-Ericson; the money they're spending on the iPhone is money they're ... The irony of it all. The Wii is eating Sony's lunch, and the iPhone is ... you got it.

It's not about being a fanboy, as you're quickly categorized with. It's all about being an informed consumer and seeing things for what they are, and not what CE companies, and their marketing departments, want you to think they are. Love it or hate it, the iPhone has had an effect in the cellphone business just like the Wii has done the same in the video games arena.

[borland502 (SDF Macross) @ Jul 18th 2008 2:37PM]

"not the a-hole who makes more by himself than everybody he canned."

Wonderfully democratic of you, but the a-holes at the top rarely make more than everyone they fire. Check my math, but 2,000 people working 40 hours at just minimum wage for a year is $24,336,000. That's discounting any overtime, senior workers, etc. I doubt all 2,000 were just minimum wage ($5.85 USD).

Yeah it's the leadership that often fails a company first, but if you've got peons eating up that much cash with no one buying...well, it's not just the leaders that need to go. Unions may point to ridiculous exec salaries for sympathy, but those GM workers aren't pulling in pennies a year. They're part of the fiscal problem too.

That doesn't make workers bad people, or even responsible. But slicing off the top layer and thinking that'll solve everything is the kind of stellar thinking that made the USSR such an economic success.

[Steffen Jobbs @ Jul 18th 2008 2:50PM]

The iPhone owns Sony Ericcson. Might as well kiss the Experia goodbye since it'll be useless against the iPhone in generating revenue. One more company to experience the iPhone steamroller effect.

It's like when Hancock goes to prison and the seasoned inmates want to ream him because he's fresh meat. Instead Hancock turns the tables and puts guys heads up each other's asses. That's what the iPhone 3G is doing to the smartphone market.

[Pdexter @ Jul 18th 2008 2:52PM]

Iphone has have a effect, but do you really think that iphone had any effect of this report? I mean iphone sold what 1 million mostly in USA where SE and Nokia don't exist. Iphone even as it's superb product and currently is selling great have absolutely no effect to what SE is going through now. Take those USA glasses away.

SE's problems are the same as Moto's. SE thought it was enough after those groundbreaking products and money coming out of the windows 3 years ago to stop it there and trust that the cypershot and Walkman brand will be enough and what they have achieved now will carry them around, but as we saw with Moto it just dosen't work and so did Nokia steal the spotlight as having best camera around and Nokia, Samsung smoking SE out of the emerging markets.

[itlnstln @ Jul 30th 2008 4:46PM]

"Yeah it's the leadership that often fails a company first, but if you've got peons eating up that much cash with no one buying...well, it's not just the leaders that need to go. Unions may point to ridiculous exec salaries for sympathy, but those GM workers aren't pulling in pennies a year. They're part of the fiscal problem too. "

True, and I do recognize that there is other fiscal resposibility companies, and, therefore execs. must manage; however, in GM's case, the execs. signed on for the ridiculous compensation packages that union workers receive (like full salary for several years to go back to school (however that is defined since some of the reports I have seen/read suggest that they may not even attend school), after which they do not have to return to GM). Also, GM's (and Ford's) execs. decided to continue producing large trucks and SUVs as other manufacturers moved to smaller, more fuel-effecient vehicles, leaving GM's (and Ford's) sales reeling. Just sayin'...

[borland502 (SDF Macross) @ Jul 18th 2008 4:35PM]

"Also, GM's (and Ford's) execs. decided to continue producing large trucks and SUVs as other manufacturers moved to smaller, more fuel-effecient vehicles, leaving GM's (and Ford's) sales reeling. Just sayin'..."

Yeah, but it's also easy to see the writing on the wall in retrospect. But SUVs and large trucks were the mainstay of those corporations. I'm sure careful market research suggested that heavy investment was the key to profitability for a long stretch.

Ford made their hybrids and GM has the Volt, but the American culture in which they exist cherishes livin' it large. Management was stupid and definitely overpaid (aren't they always?), but rare is the leader chosen that makes a deliberate choice to screw up. But you might be better versed in the actual character of company leaders. I just temper my condemnation with the realization that I've never had billions riding on my choices.

[YpoCaramel @ Jul 18th 2008 8:24PM]

The iPhone effect? For a company that draws most of its sales from outside the United States? The iPhone wasn't sold in Asia until last week, and its success in UK/Germany/France was limited. Clearly some there's other problem here.

[Niz @ Jul 18th 2008 1:47PM]

N95 is to blame! they did not have a competing phone at all, although no on else did either.

[sr1329 @ Jul 18th 2008 2:15PM]

You could say that it was Nokia altogether. SE had nothing to compete with Nokia in pretty much any market. The only thing they had was some decent mid-range feature phones, which Nokia had a better model for each SE model. Nokia is sitting pretty right now, but they need to start moving faster since they have some very capable competition now.

[Frun @ Jul 18th 2008 1:48PM]

I Don't think the X1 is going to help at all. I have a feeling they are going to miss the boat on this one.

[Jimjo @ Jul 18th 2008 1:48PM]

Lol, well looky here. Im first. Im hardcore.

[Keisha Kornbread @ Jul 18th 2008 2:24PM]

FAIL!!

[helloUser @ Jul 18th 2008 1:51PM]

Has anyone else noticed that a lot of news that engadget posts about sony is usually done, or tried to be done done with a negative approach? Even if the story is neutral or good news?

[CharlieX @ Jul 18th 2008 1:57PM]

OMG. blogspiracy!

[Dax @ Jul 18th 2008 1:58PM]

How is 95% fall in profits not negative??

[fh @ Jul 18th 2008 2:04PM]

Well, Engadget was pretty stoked about the new Sony laptops the other day (yes, Ericsson is a completely different story).

But I guess that happens only once in a blue moon. Besides, Engadget clearly doesn't need to worry about credible or professional journalism since it's "just a blog".

/rhetoric

[JerkfacedFed @ Jul 18th 2008 2:05PM]

helloUser, this is Earth speaking, have we met?

or maybe its because almost all of the news about sony is negative to begin with.

love to hate sony

[phanbouy @ Jul 18th 2008 2:28PM]

nah, i don't think it's done done any differently

e-gadg were championing the shit out of blu ray also, iirc

[Walt @ Jul 18th 2008 3:07PM]

New headline:

"Potent and visionary Sony Ericsson achieves success at limiting inverse profits to less than 100 percent; also fights global warming through reduced manufacturing and lowers carbon footprint of those who would otherwise be driving to work."

[Gordon Page @ Jul 18th 2008 1:53PM]

Shame, I love my SE phone with the 3.2mp camera... hope the continue to make more phones

[fanman @ Jul 18th 2008 2:29PM]

It's a shame, I've never seen a bad SE phone, but they have a product range of ten million handsets which are all variants on the same three themes (a cyber shot, a walkman and a smartphone). They should streamline things a bit.

[rob @ Jul 18th 2008 2:03PM]

LOL. this is great news. i've owned the p910 and p990 (not sure why i bought the p990 after the frustrations with the p910) a while back. and all i can say is after the p990 and basically paying (i forget exactly) around $800 for the "privilege" of doing product QC for Sony Ericsson, this news makes me laugh my ass off. sorry for the language. but swore off all sony ericsson products after several years of spending countless hours scouring message boards for bug fixes/work arounds, updating firmware, re-flashing phones, restarting the phone OS, dealing with unsympathetic and unknowledgeable phone support, etc... just makes me appreciate my htc s710 THAT MUCH more. die and go to hell sony ericsson. ha ha.

[Rich @ Jul 18th 2008 2:13PM]

"Granted, the looming launch of the Xperia X1 should help matters a bit"

The X1 isn't going to help for two reasons:

1) It's a niche device.
2) Every preview has said it's horrible - either complaining about the speed, the stability, the keyboard or the camera. Sure, these things *might* be fixed but it's supposed to be released in Q3 (i.e. NOW) and SE's track record on recent smartphones isn't good.

[Shinigami @ Jul 19th 2008 6:53PM]

SE!

Grow up or die! I'd prefer the first but you seem to move towards the second...

[OGHowie @ Jul 18th 2008 2:13PM]

Looks like people don't really care THAT much about Camera phones?

[Rich @ Jul 18th 2008 2:20PM]

Quite the opposite. Nokia brought out the N95 and SE had *nothing* to compete with it.

They're only just catching up now and they still haven't matched the N82.

[GadgetGuru @ Jul 18th 2008 2:16PM]

This is not good

[Johnny @ Jul 18th 2008 2:16PM]

When I first saw the X1, wow, I was ready to pull the trigger. Looked to be the best thing out there. But September? Just late too late....I bought the 16gb 3G on the 12th and I'm satisfied. If Sony had a *good* device out in May, I would have bought it...

[rob @ Jul 18th 2008 2:17PM]

see my post above... anything wrong with the X1 will most likely go unfixed and leave you with a doing free QC for SE... trust me.

[rob @ Jul 18th 2008 2:22PM]

damn comment system. meant as a reply to Rich

[primetime4 @ Jul 18th 2008 2:26PM]

I'd like to know which wireless manufacturers are actually doing well. If Moto and SE are on their deathbeds then what is everyone buying? In the US I do not see much of a Nokia presence. Samsung and LG seem to be catching on but still not dominant. It seems like regardless of units sold these companies find some other way to lose money (and cut jobs).

[Beast @ Jul 18th 2008 2:33PM]

you can look at the bright side there's still that 3%...ouch

[Maeztro @ Jul 18th 2008 2:35PM]

The X1 is going to have such low volume it will have no impact on the bottom line. The bread and butter for these handset makers is not their high end gear.

[Bender @ Jul 18th 2008 2:47PM]

I'M SHOCKED TO SEE THAT MOST PEOPLE MENTION THE X1 FOR GOOD OR FOR BAD BUT NO ONE MENTIONS THAT PRICE TAG. LET'S BE REAL HOW MANY PEOPLE HERE WOULD PAY MORE FOR THEIR PHONE THEN THEY WOULD FOR THEIR BASIC LAPTOP? I WOULDN'T PAY OVER 700 USD FOR ANY PHONE WHEN I CAN GET ONE THAT DOES THE SAME THING FOR 200 DOLLARS LESS!!! AND NO IM NOT TALKING ABOUT THE IPHONE!

[YpoCaramel @ Jul 18th 2008 8:24PM]

It's a very normal price for a smartphone not subsidized by a carrier, as in the norm outside the USA. Its not much more than an unsubsidized iPhone.

[img eL @ Jul 18th 2008 2:49PM]

It'll be up 97% when they pull out all the stops with the PSP cell phone ditty

[Peep @ Jul 18th 2008 2:50PM]

And this is of course meant to Rob.

[JMMGoalster @ Jul 18th 2008 2:51PM]

hmmm....first Motorola, now SE.....maybe this is telling the cell phone companies something...MAKE A GOOD PHONE! Anyone else here tired of terrible, feature-less cell phones? We can only hope Android will clean this up...

[Centre @ Jul 18th 2008 2:51PM]

SE sold 24 million phones & Nokia sold 120 million in Q2 alone. iPhone has sold what.. 10 million in total? Claiming iPhone had something to do with SE's bad quarter is pretty ridicilous. It may have a impact in the future, but not yet. Nokia however, is another story..

[Zip @ Jul 18th 2008 2:55PM]

Nokia is doing great currently and it's shares wen't actually 8 up after yesterdays 2Q report.

[Zip @ Jul 18th 2008 3:04PM]

Moto and SE are something that have really been living their past achievements.... and done absolutely nothing after that. Just wrapping old products to new shells.
Nokia is really getting easily currently. For 2Q they didn't have any new devices out yet and Nokia managed to raise it's market share to 40.5%. When new S40 phones start to ship soon and Nokia's Septembers event announces new S60 handsets it has tight hold of the market. I don't have my hopes too high with Samsung to really be able to give a fight, but maybe LG can as it's really the raising start in the top 5. While iphone of course give it's TS flavor for higher mid phones.

[Zeeblop @ Jul 18th 2008 3:21PM]

Btw anybody know about this Nokia's Tube(5800) shown in Batman The Dark Knight!?! I haven't seen the movie yet, but it's all over the net currently!