Phone maker lets ax fall

Sony Ericsson to lay off 400

DURHAM -- Sony Ericsson gathered its local employees inside a ballroom at the Sheraton Imperial Hotel Monday and gave them the grim news many had expected for months:

The mobile-phone maker will lay off about 400 workers, roughly half the work force at its North American headquarters in Research Triangle Park.

Similar mandatory meetings were held at all Sony Ericsson locations worldwide, said Najmi Jarwala, president of Sony Ericsson North America.

The company blamed the cuts on an increasingly competitive market, a slowdown in sales in core markets and the weak economy.

The job losses come as unemployment is rising and the economy is slowing, trends that could make it harder for Sony Ericsson's workers to find work. The layoffs are among the largest at a Triangle company in the past two years.

Jarwala said the cuts will take effect by the end of the year and will affect people in all departments including research, development, sales and administration. The company plans to provide severance based on length of employment and some job-placement assistance.

The reductions were not unexpected. After its poor second-quarter earnings in July, the company said it was committed to cutting costs by $432 million, which would include eliminating as many as 2,000 jobs.

Jarwala said the demand for Sony's high-end products has suffered, particularly overseas.

The company, a joint venture between Sweden's Ericsson and Japan's Sony, reported in July that sales fell during the second quarter to $4.07 billion, from $4.49 billion in same period a year earlier.

Analysts who cover the telecommunications industry say Sony Ericsson's products have not evolved fast enough to keep up with the ever-changing demand of its customers. As a result, Sony has been hurt by competitive products such as Apple's iPhone and BlackBerry's smart phones.

"The problem with Sony is boring phones," said Jeff Kagan, an independent telecom analyst based in Atlanta. "The cell phone industry is focused on smart phones with big screens, touch screens, access to the Web, live TV and movies. Smart phones are where the growth is, and Sony Ericsson isn't a big player in that market."

Despite Sony Ericsson's troubles, some analysts were not expecting such deep cuts. "It was clear that Sony was losing market share and had to do something," said Roger Entner, Neilson IAG's senior vice president of communications. "But a cut of this size is certainly surprising."

Experts say it will take several quarters for Sony Ericsson to recover, depending on the how quickly the company gets new products to market and whether the mobile phone industry holds up under the strained economy.