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Ericsson confirms sweeping job cuts
Monday, April 22 2002
by Sheila McDonald


Ericsson, which employs around 1,850 in Ireland, is to cut a further 17,000 jobs
as it admitted that the telecoms market will not recover this year.

The company said its total cuts for this year and 2003 will amount to 20,000, and
a spokesman told ElectricNews.Net that 3,000 of the cuts have already been made.
Although Ericsson would not give a regional or divisional breakdown for the
reductions, Ireland is not expected to be spared from job losses.



"We are driving efficiencies throughout our processes, and evaluating where we
can do things smarter," said Mads Madsen, Ericsson's director of media
relations. "The cuts are company-wide, so nobody is left out. We are optimising
efficiencies in our operations throughout the world."



Madsen said that research and development, which is a strong focus of Ericsson in
Ireland, remains core to the company, but said there is room for cost cutting in
those activities. "We do think that we have some opportunities for increasing
efficiencies in our R&D operations without hurting our long term technology
drive," he said.



Last year Ericsson slashed its headcount by around 13,000, including cuts
connected to the transfer of employees to Sony Ericsson, its new handset joint
venture with Sony.

 

The job cuts follow deeper than expected losses for Ericsson during the first
quarter as orders tumbled 40 percent. Sales also fell 26 percent compared to the
same quarter last year and totalled SEK37 billion, at the lower end of Ericsson's
expectations. The company's pre-tax loss was worse than expected, at SEK5.4
billion, up from its loss of SEK4.9 billion for the same period a year earlier.



Ericsson announced that it will now undertake a rights issue aimed at raising
SEK30 billion for the company.



The company is suffering in part because its main customers, telecoms operators,
are continue to delay their investment plans, according to Ericsson chief
executive Kurt Hellstrom. 



"As sales will be lower than anticipated, with ongoing aggressive cost cutting
we plan to return to profit at some point in 2003," Hellstrom said in a
statement. "An improvement in the telecommunications equipment market during
the second half of this year was generally anticipated. However, as many
operators have recently announced reduced investment plans, we now believe that
market conditions will remain weak well into next year."



The company's outlook was bleak for the mobile systems market, which it expects
will fall more than 10 percent this year. Ericsson also agreed with Nokia's
outlook last week which predicted total handset sales of 400 million to 420
million phones during this year. 



Ericsson's cost cutting measures will see it reduce its cost base by SEK10
billion at the end of this year and cut an additional SEK10 billion for next
year. The company will take restructuring costs of SEK8.5 billion this year and
SEK2.0 billion in 2003, but it said it expects savings totalling more than SEK106
billion over the next three years.



There was some good news for the company as its Sony Ericsson joint venture
reached break-even ahead of schedule during the quarter. The business shipped 5.8
million phones during the quarter, generating sales of SEK10.3 billion, and
thanks to key features like colour screens its handsets generated an average
selling price that was higher than expected. Ericsson said the division now
employees 4,000 people and still aims to turn a profit this year.



Orders in its mobile systems division were down year-over-year but actually rose
over the previous quarter, which could mean a moderation in the market decline,
the company said. Mobile systems sales in Western Europe and Japan were still
weak, although emerging markets like China and India improved.