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Sun 19 Apr 2009 02:25 PM

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Cellphone makers get drenched in financial storm

Nokia first quarter profit plunges 90% while Sony Ericsson announces 2,000 more layoffs

Cellphone makers get drenched in financial storm
Top cellphone manufacturers are reeling from the effects of the economic downturn which has slashed consumer demand (Getty Images)

There’s no respite yet for cellphone manufacturers as both Nokia and Sony Ericsson post dismal first quarter earnings this year.

Nokia’s operating profit plunged in the first quarter of the year to reach EUR 55 million, down a full 96% compared to the EUR 1.5 billion it raked in for the same quarter in 2008.

Sony Ericsson’s earnings weren’t cause for celebration either. The fourth-biggest handset maker behind Nokia, Samsung and LG Electronics reported a net loss of EUR 293 million in its first quarter earnings.

The company had announced a cost-cutting programme to bring down operating expenses in July last year that included 2,000 job cuts by the end of the first half of 2009. Now management announced it would layoff an 2,000 more employees as part of a fresh effort to bring down operating expenses by mid-2010.

“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,” said Dick Komiyama, president, Sony Ericsson.

Nokia is also remaining optimistic by predicting that the market will turn around by the second half of the year.

“In what has been an exceptionally tough environment, we continue to invest in a focused manner in consumer Internet services delivered across our broad portfolio of mobile devices. Combined, these solutions will drive our future growth,” Olli-Pekka Kallasvuo, CEO of Nokia.

Nokia faces competition from Apple and RIM in the smartphone segment which is bucking the downward trend as consumers look for devices that give them more for their money. In fact, retailer Jacky’s Electronics reported an impressive 30% rise in smartphone sales in the UAE for the first quarter of 2009.

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