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Sony Ericsson to cut another 2,000 jobs after weak Q1

Sony Ericsson Mobile Communications AB said today that it plans to cut another 2,000 jobs after its phone shipments and market share both dipped during this year's first quarter.

The announcement comes a day after No. 1 phone maker Nokia Corp. reported a 27% drop in sales and a 90% decline in profits for the first quarter. However, Nokia, which is trying to increase its business in the U.S., offered a glimmer of hope for the current quarter by saying that it expects sales to be similar to or even up slightly from the Q1 level.

A market improvement may not come fast enough for Sony Ericsson, though. The Stockholm-based joint venture between Sony Corp. and LM Ericsson Telephone Co. already cut 2,000 workers in a round of layoffs late last year. And the company's first-quarter results were in line with a revenue and profit warning that it issued on March 20.

Unit shipments during the quarter dropped 35% from the same period last year, Sony Ericsson said. The company added that it lost two percentage points of market share compared with last year's fourth quarter, leaving it with about 6% of the mobile phone market.

Sony Ericsson blamed its poor showing on continued weak consumer confidence because of the economic recession as well as moves by retailers and distributors to clear out existing phone inventories instead of ordering more.

Some recent high-level executive departures and persistent rumors about the future of the joint venture also point to possible internal troubles at the company. For instance, Mats Lindoff, who had been chief technology for six years, recently left Sony Ericsson, as did the head of its North American business unit.

Amid all the challenges, there are rumors that Ericsson would like to exit the joint venture, leaving the company to be wholly owned by Sony. Ericsson has said in response that it is committed to the joint venture, while Sony has declined to comment.

Like other mobile phone makers, Sony Ericsson is battling the ailing economy as well as new rivals such as the iPhone. Thus far, at least, Sony Ericsson's touch-screen Xperia X1 phone, a Windows Mobile device hyped as an iPhone competitor, doesn't appear to be significantly boosting sales for the company.

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