Sony Ericsson Mobile Communications on Friday reported a sharp decline in second-quarter profit and said it would cut its global work force of 11,900 by about 2,000 people as it prepares to face "challenging market conditions" for at least the rest of the year.

Net income fell to €6 million ($9.51 million / Rs40.54 crore) from €220 million a year earlier, and sales dropped 9.4 per cent to €2.82 billion, hurt by lower prices and adverse currency fluctuations, the London-based company reported yesterday.

The phone maker had already sent out a dire forecast last month that had sent shares of parent company Ericsson plummeting in Sweden. Hence, the results did not actually shock investors, as a result of which, Ericsson and Sony shares traded steady in Stockholm and Tokyo respectively. (See: Sony Ericsson sees profits falling in face of declining demand, increasing competition)

Sony Ericsson, which said for the second time this year that profit would fall, lost its ranking as the fourth-biggest handset maker to LG Electronics Co. in 2008 as higher living costs prompted European consumers to buy cheaper models.

It had a market share of around 8 per cent in the first quarter and is now the world's fifth-largest maker of mobile phones behind Nokia, Samsung Electronics, Motorola and LG Electronics.

On a slightly positive note, Sony Ericsson said that its share of the market for third-generation, more advanced phones stands at about 16 per cent to 17 per cent, but signalled it expects "very limited share gains" in that segment this year

President and CEO Dick Komiyama said in a conference call that the company is taking steps to become a ''faster, more agile and more cost-efficient organization that can continue to create innovative products that excite customers.''

''We are aligning our operations and resources worldwide to meet an increasingly competitive business environment and to help restore our capability for profitable growth,'' he added.

The remedial measures, which include a reduction of its global work force, including contractors, of 2,000 people, are expected to yield annual savings of around €300 million. The company anticipates charges of the same magnitude and said the full extent of the restructuring won't be felt until the second half of 2009.

Unit shipments fell to 24.4 million from 24.9 million units a year earlier, with average selling price declining to €116 from €125. Analysts had anticipated shipments of 24 million units and an average price of €115.

Komiyama succeeded Miles Flint as CEO last year after his predecessor had more than doubled the company's sales, unit shipments and profit. Sony and Ericsson combined their handset units in 2001 after losses at the separate operations mounted.