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Sony Ericsson blamed for the lions share of Ericsson losses for 2008

Mobile phone makers are seeing sales drop and profits dwindle amid the struggling global economy. That means that many of the mobile firm's parent companies could also be facing troubles, even if those firms are larger telecom companies.

Ericsson, the parent company behind Sony Ericsson mobile phones, has announced that it intends to chop 5,000 employees from the payroll. The firm cites weak handset sales and restructuring charges for a 31 percent profit decline reported for Q4.

Despite losses in its Sony partnership handset business, Ericsson says that its core business operations are not yet feeling the sting of the global economic crisis. Ericsson will be incurring restructuring charges of about 3 billion kronor as it cuts jobs and cements its financial future.

Ericsson's core infrastructure business reported better than expected earnings for Q4 sending shares of its stock climbing 10 percent in trading to close at 62 kronor per share in Stockholm. Ericsson's handset division, Sony Ericsson, reported a Q4 loss of about $243 million USD.

A weakening kronor helped boost Ericsson's total sales to 67 billion kronor, up 23 percent from the 54.5 billion kronor in sales the prior year. Ericsson CES Carl-Henric Svanberg told the AP, "It remains, however, difficult to more precisely predict to what extent consumer telecom spending will be affected and how operators will act. To date, our infrastructure business is hardly impacted at all, but it would be unreasonable to think that this would be the case also throughout 2009."

Ericsson knows that its core infrastructure business could face a tough 2009 and one of its largest rivals, Nortel Networks, has already filed for bankruptcy protection in Canada and America. The planned 5,000-employee cut will see the company shedding 6 percent of its 79,000-employee workforce.

The restructuring charges, expected to total 6 to 7 billion kronor, will save Ericsson about 10 million kronor by the second half of 2009. Ericsson profits fell 48 percent for all of 2008 to 11.3 billion kronor. Profits in 2007 were 21.2 billion kronor. Despite the profit loss, Ericsson was able to grow sales by 11 percent to 209 billion kronor.

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Can't say that I'm surprised
By Aloonatic on 1/21/2009 11:38:24 AM , Rating: 3
The whole division seems to have rested on it's laurels after the success of a couple of phones (up to the K800) and done little to improve over the last couple years, assuming tweaking their tried and tested "candy bar" design would prove to be a big success, regardless of what everyone else was doing.

SE smart phones are as rare as the proverbial rocking horse excrement, which they seemed to be quite keen on 5 or 6 years ago when the public at large didn't want them, but now in the age of the blackberry and the iPhone etc what have SE produced? I have no idea and I was a big SE fan from my T610 to K800 and used to check up on what they were making quite often.

I'll stick with my N85 8GB which, whilst not perfect is pretty good and does all that I need as far as a camera goes (not as good as my K800i though), a functional if not wonderful MP3 player, OK sat nav and useful memory stick that I always have on me. Which is useful as a standard USB connection can be used, not the stupid propriety connections that SE seem to insist on which break way too easily.

On a side note, I think the days of people getting a new phone every year with a new contract are well and truly over. Most providers in the UK now seem to be pretty much forcing 18 month contracts on people, some even 2 years.

That is going to affect every mobile phone manufacturer straight away, and it's not like people are going to stump up a lot of money for the latest phones as the improvements seen in phones over a year now are no where near as great as seen within a year 3 or 4 years ago.




RE: Can't say that I'm surprised
By amanojaku on 1/21/2009 11:59:51 AM , Rating: 3
quote:
On a side note, I think the days of people getting a new phone every year with a new contract are well and truly over. Most providers in the UK now seem to be pretty much forcing 18 month contracts on people, some even 2 years.
I refuse to buy into cell phone contracts; as soon as mine is up I don't change my plan for several years. I don't see the point in changing so many things in your life so often, and that includes good service. It's not necessary to lock me into a plan if I'm happy already. Cell phone carriers who take your money because you leave are like b1tchy exes who trash your house after a breakup.


RE: Can't say that I'm surprised
By Aloonatic on 1/21/2009 12:10:04 PM , Rating: 2
Contracts are great as long as you take the time to find on that works for you. They usually work out well even for those people who don't use their phone that much.

On thing that a lot of people do here (UK) is to renew their contract to get an upgraded phone and then put it up on eBay straight away. If you don't want a new phone providers usually reduce your monthly charge to something a lot less than you were paying before and it's a rolling monthly thing.

I don't know anyone who has ever tried to leave a contract early though. I think all they can do is make you keep paying your monthly payments, as per the agreement that you made, which is true of most contracted services over here such as ISP or satellite/cable TV provide.

Is that how contracts work in the US?


RE: Can't say that I'm surprised
By amanojaku on 1/21/2009 12:45:41 PM , Rating: 2
Not even close. Cell phone contracts in the US are generally designed to get money out of the consumer. Once you sign an agreement and pass a (inexplicably flawless) trial period you are required to stay with the carrier for the duration of the contract. Once the trial period is passed consumers find out what the service is REALLY like and many want to bail. Renegotiating the terms may be grounds for extension of the contract. Breaking the contract results in a fee, typically inversely proportional to the length of time with the carrier, but sometimes flat. Monthly fees are NEVER reduced unless a different contract is negotiated, resulting in the dreaded extension.


RE: Can't say that I'm surprised
By cokbun on 1/21/2009 11:46:46 PM , Rating: 2
Well i like their phones, i'm using a w830 to reply this. Yes they did release something to compete with iphone etc, its called xperia x1. Its so Fugly and at 800$ here. So.. Yeah..


Ericsson cutting 5K jobs.
By fteoath64 on 1/21/2009 11:45:58 PM , Rating: 2
Still strong result under prevailing conditions. I work for the infrastructure business in that company and it really pisses me off with the SE branch sucking money this way while we pile in the profits and getting the orders and doing nett sales out of the door.

Someone else can handle the terminals becuase without good strong infrastructure, these terminals are pretty useless. We got HSPA mobile data growth and still reasonable growth in overall infrastructure. Terminals come and go, while the low-end has still sustained growth regardless. Operators are still raking in good money. I don't see a reason for caution as the company is really well structured for growth. Losing some key talents may hurt. But still Ericsson is doing very well compared to the other players.




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