Sony Ericsson has hinted at staffing cuts after a disastrous financial quarter.

The handset maker saw its income drop by some 98 per cent over the quarter, from €327m to €8m. Operating income fell by 101 per cent, while gross profit was down 29 per cent.

Sony Ericsson blamed a shrinking market and increased competition in the high-end handset sector along with an unfavourable exchange rate. The company estimated its market share over the quarter at roughly eight per cent.

As a result, Sony Ericsson is reportedly planning to cut some 2,000 jobs in an effort to save €300m over the next year.

"We are aligning our operations and resources worldwide to meet an increasingly competitive business environment and to help restore our capability for profitable growth," said Sony Ericsson president Dick Komiyama.

"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."

Sony Ericsson's outlook for the next quarter is equally bleak. The firm expects "challenging market conditions" to continue at least through the calendar year.