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Sony Loses $387 Million, To Cut 2,000 Jobs

The handset maker has another tough quarter, but it's beginning to see signs that demand in the mobile market is stabilizing.

The economy continues to sap consumer demand for cell phones, and it led to another rough quarter for Sony Ericsson.

The handset maker posted a $387 million loss for the first quarter, and its gross margins declined year over year and sequentially. The company shipped 14.5 million handsets for the quarter, which is a 35% decrease from the same period last year.

Part of the issue is that the company relies strongly on sales of its high-end handsets, and consumers are holding off replacing their existing phones with the uncertain economic climate. Unlike rivals Nokia, Samsung, and Motorola, Sony Ericsson doesn't have an extensive line of entry-level handsets that sell well in places like India and China.

Sony Ericsson forecasts the overall mobile market will contract by at least 10% for 2009, which is in line with what Nokia predicted Thursday. Sony Ericsson is engaging in a restructuring effort to combat these market conditions, and it will cut 2,000 jobs in order to save about $522 million in costs.

"As expected, the first quarter of this year has been extremely challenging for Sony Ericsson due to continued weak global demand," Dick Komiyama, president of Sony Ericsson, 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."

While it was not a great quarter, executives said they are seeing stabilization of consumer demand, and the company's quarterly loss was within Sony Ericsson's forecasts. The handset maker will soon launch multiple mobile movie and music services to help it make up ground, and its upcoming Idou smartphone is bound to snag customers away from Apple, Research In Motion, and Palm.

InformationWeek has published an in-depth report on the use of business software on smartphones. Download the report here (registration required).

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