'We're going to cut 2,000 jobs within a year all over the world, out of 12,000 employees,' spokesman Susanne Andersson told Agence France-Presse last Friday.

For the second quarter, Sony Ericsson's net profit plunged to 6 million euros (S$12.9 million) from 220 million euros, down 97 per cent, as sales fell 9.4 per cent. Operating losses came to 2 million euros (S$4.3 million), compared with a profit of 315 million euros a year earlier.

In a statement presenting its second-quarter earnings, the group announced a restructuring programme aimed at cutting operating costs.

'Our target is to achieve a reduction in operating expenses of 300 million euros annually, with the full effect expected to appear within a year,' said chief executive Dick Komiyama.

He said the measures were aimed at creating 'a faster, more agile and more cost-efficient organisation that can continue to create innovative products that excite consumers'.

For the past year, the group has been trying to develop its business in fast-growing emerging markets so as to reduce its dependence on its traditional, near-saturation European outlets. As a result, it sold more low-end phones, the company said, noting the prices are lower and the competition tougher than in the high-end segment.

But Sony Ericsson has been hit by a double whammy: It is suffering from an economic slowdown in Europe, and it lacks the products and volumes necessary to make a splash in emerging markets such as China and India.

'The market in general is much, much worse than it was one or two years ago. Also, its products are not as strong as they used to be,' said Redeye analyst Greger Johansson.

'Sony Ericsson is not big enough in Western Europe or in the mid- to high-end segment. So we are seeing a slowdown in Western Europe and in this higher-end market,' said Evli Bank analyst Michael Andersson. 'That creates a problem right away as the firm doesn't have a strong enough low-end or global offering.'

Mr Andersson said Finnish rival Nokia went through a similar phase several years ago when sales of its high-end phones began to flag in Western Europe. But it compensated for the fall with strong sales in emerging markets, which allowed it to maintain strong margins.

Given its late entry into emerging markets, Sony Ericsson had to cut average handset prices to 116 euros from 125 euros in the second quarter last year, weighing down profits.

'It's a big problem because the firm is very dependent on the Western European market and Nokia is very dominant in emerging markets,' said Mr Andersson.

The analysts said they felt Sony Ericsson's restructuring plan was necessary. At the end of last month, the firm had 8 per cent of the mobile phone market, against Nokia's 40 per cent.

AGENCE FRANCE-PRESSE