Confirmed: Sony Mobile Cuts 1,000 Workers In Sweden As Handset Maker Restructures

The shakeout among less successful mobile handset makers continues apace. Sony Mobile is cutting 1,000 jobs in Sweden, one of the company’s key manufacturing and R&D centers, as part of a larger restructuring to push the struggling handset maker into profitability. The news, first reported by Swedish local publication 8till5, was confirmed to us directly in a statement (see below). In all, 575 staff and a further 400 contract positions will be eliminated across all divisions, covering both administrative positions and technical staff.

The reduction will cut the total number of people working at Sony Mobile’s operations out of Lund, Sweden by nearly half, with 1,200 people remaining.

The job cuts should not come as a too much of a surprise: Sony, which appointed Hiroki Totoki as head of Sony Mobile in October 2014, has vowed to turn its troubled handset division profitable by next year. In February this year it said it would lay off 2,100 people in the mobile division, bringing the total number of employees to around 5,000. At the time, the company said the cuts would happen across Europe and China. Then in March, it was initially reported that the cuts in Lund would number 1,000.

Last week, the company confirmed that its president of North West Europe, Pierre Perron, was also leaving the company.

Sony Mobile itself — which was previously a joint venture with Ericsson (hence the Swedish legacy) before Sony took over the whole business — has been limping for a while now.

The company, which makes Android-based Xperia smartphones and tablets, competes against bigger players like Samsung (which itself is struggling amid smartphone competition) in the Android arena, and Apple for higher-end devices, as well as a large swathe of cheaper phone makers at the lower end. In Gartner’s ranking of mobile vendors in 2014, it ranked at number nine for all mobile (feature phone and smartphone) with a 2 percent share of sales globally. Sony Mobile didn’t rank at all among top smartphone makers.

The company had been trying to adopt a strategy of selling devices at lower prices, thereby shifting higher volumes but with thinner margins. It hasn’t worked: The company took a $1.7 billion charge in September 2014 for losses in its mobile division.

In the wake of that, there were reports that Sony might try to sell off the division altogether, although the company denied this. Sony itself has also recently blamed currency shifts — specifically the rise of the dollar versus the yen and the resulting impact on the price of components — as another reason for its problems.

In addition to layoffs, Totoki has planned to wind down operations in markets where the company believes it has little chance of regaining market share and profitability. Perhaps with that in mind, when the company announced its latest flagship Xperia, the Z4, in April, it did so only in Japanese, with no details about international plans and no information about a “compact” version of the device.

The company has said that it expects an operating loss of 39 billion yen ($315 million) in the current fiscal year for its mobile division. Sony group expects an operating profit of 320 billion yen ($2.6 billion).

Update: Sony confirmed the cuts to us, citing a statement from earlier this year:

As part of its ongoing measures to drive transformation into a profitable and sustainable company, Sony Mobile will change its organizational structure effective April 1st, aiming to increase its operational efficiency and transitioning it to a leaner, more agile organization.

In relation to these changes to its organizational structure, Sony Mobile announced today that approximately 1,000 employees and consultants in Lund will be affected by job closures. This number is included in the approximately 2,100 global headcount reduction announced at Sony’s earnings announcement on February 4th, expected to be completed by the end of FY2015.  Sony Mobile filed a redundancy notification (“varsel”) with the Swedish authorities today in this regard.

Lund will continue to be an important site for Sony Mobile, with its main focus on software development, and Customer Services.