Sony Ericsson’s second quarter net profit has plummeted from £174m last year to just £4.7m for the same period this year.
The manufacturer says it will now slash 2,000 jobs worldwide as part of plans to cut operating costs by 300 million euros (£238m) a year.
It is understood the job cuts will be made within the next 12 months, but a UK-based spokesman said it was too early to say what the impact would be on the UK.
Sony Ericsson’s Q2 sales fell from £2.47bn last year to £2.23bn although handset volumes remained relatively steady, down by just 500,000 from 24.9 million last year.
Sony Ericsson’s operating income dropped from £250m to a loss of £1.58m during the same period partly due to higher research and development investments as a percentage of sales.
The company also said that it expects ‘challenging market conditions’ for the remainder of the year and issued a specific warning about the third quarter.
Prices of Sony Ericsson handsets dropped during the period from £99 to £92 due to the impact of a greater proportion of lower priced phones in the product portfolio, as well as increased price competition in the market for mid- to high-end phones.
Sony Ericsson’s market share for the second quarter is estimated to be around 8%.
Dick Komiyama, president of Sony Ericsson said: ‘We are aligning our operations and resources worldwide to meet an increasingly competitive business environment and to help restore our capability for profitable growth.
‘The measures we are taking are aimed at becoming a faster, more agile and more cost efficient organisation that can continue to create innovative products that excite consumers.
‘Our target is to achieve a reduction in operating expenses of Euro 300 million annually, with the full effect expected to appear within a year.
‘We estimate that our restructuring charges will be of the same magnitude as our reduction in operating expenses, and we will incur such charges as our measures are implemented.’