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Business

Ericsson to axe 5,000 jobs despite a strong balance sheet

Latest update : 2009-01-21

Ericsson, the world's top mobile telecom equipment maker, plans to continue a cost-savings programme launched a year ago by cutting 5,000 jobs, to counter the effects of the global economic crisis.

AFP - Ericsson, the world's leading supplier of mobile phone network equipment, reported strong fourth quarter results on Wednesday but said it will cut 5,000 jobs to counter the effects of the global economic crisis.

The news sent the Ericsson share price soaring on the Stockholm stock exchange. The share closed up 11.79 percent to 62.60 kronor as the overall market rose 2.90 percent.

Ericsson plans to continue a cost-savings programme launched a year ago, cutting an additional 5,000 jobs worldwide including 1,000 in Sweden, mainly in Stockholm, the company said in a statement.

A spokeswoman told AFP the group had already cut 4,000 jobs worldwide last year but would not specify which divisions were to be affected by the latest round.

At the end of 2008, the group had 78,750 employees, including 20,150 in Sweden, compared to 74,000 a year earlier. In other words, the overall number of employees has increased as Ericsson continues to hire in strategic divisions such as research and development to ensure its future growth while cutting back in others.

The new restructuring plan, which targets annual savings of 10 billion kronor (927 million euros, 1.2 billion dollars) as of the second half of 2010, will entail costs of six to seven billion kronor in 2009, Ericsson said.

In the fourth quarter of 2008, Ericsson's net profit fell 30 percent from a year earlier to 4.06 billion kronor, while sales rose 23 percent to 67.02 billion.

For the full-year, net profit was down 47 percent to 11.66 billion kronor while sales rose 11 percent to 208.9 billion.

"We have had a solid performance in 2008," chief executive Carl-Henric Svanberg told reporters.

He said Ericsson had registered "higher business activity ... (as) basically every market unit around the world had higher-than-expected activity in the fourth quarter."

He said the balance sheet was "strong" with a healthy treasury.

Svanberg said Ericsson had experienced little of the global economic crisis so far but that would likely change this year.

"To date, our infrastructure business is hardly impacted at all but it would be unreasonable to think that this would be the case also throughout 2009."

Svanberg also defended himself against charges that Ericsson was using the crisis as a pretext to cut jobs, citing intense competition in the sector.

"Nothing comes easy in this industry. We have to fight every day for our efficiency, to make sure we stay in a leading position," he said.

He noted that after the previous crisis in the telecoms sector, "we were 12 vendors that were basically able to roll out technology. Today there are three or four left."

Summarising recent development for Ericsson's rivals, he said: "Nortel has disappeared, Motorola is in (trouble) way over, Siemens didn't make it, Lucent didn't make it. Several are struggling. We are the one that has managed to stay in the lead," he said.

"I think we have a huge responsibility to take every measure to defend our position and make sure Ericsson stays a grand company."

He added that Ericsson had developed more efficient work methods enabling the company to do the same work with fewer staff.

Finally, the company said it would propose a dividend of 1.85 kronor per share at Ericsson's annual general meeting on April 27, down 26 percent from the 2.50 kronor paid out last year.

 

Date created : 2009-01-21

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