Layoffs at Ericsson despite strong profits

Layoffs at Ericsson despite strong profits
Swedish telecom giant Ericsson announced it would cut 5,000 jobs, including 1,000 in Sweden, despite reporting an unexpectedly strong net profit of 3.9 billion kronor ($463 million) for the fourth quarter of 2008.

Most of the redundancies in Sweden are expected to affect employees in the Stockholm region.

The profit marks a 30 percent decrease from the 5.6 billion kronor the company earned in the final three months of 2007.

However, net sales rose to 67 billion kronor, compared to 54.5 billion kronor a year ago.

Analysts had expected sales to reach 57.3 billion kronor, according to a survey by the Reuters news agency.

Overall, Ericsson saw its net earnings fell 47 percent to 11.67 billion kronor in 2008 from sales that gained 11 percent over 2007 to 208.93 billion.

“We have had a solid performance in 2008,” said Ericsson CEO Carl-Henric Svanberg in a statement.

Despite the positive results, Svanberg also warned of the uncertain effects the current global economic slowdown may have on Ericsson’s business, saying it would be “unreasonable” to think that the company’s infrastructure business would remain unscathed in 2009.

Thus, the company plans to continue with the current round of cost reductions, initially announced in February 2008.

The company estimates that the restructuring will cost between 6 and 7 billion kronor in 2009.

Once reaching their full effect in the second half of 2010, the measures are expected save Ericsson 10 billion kronor per year.

Cost reduction measures will include reducing the number of consultants and other temporary staff, consolidating of research and development activities, and layoffs.

Speaking at a press conference, Svanberg defended plans to eliminate jobs.

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

He cited the situation of other industry participants, notably Nortel, Motorola and Siemens, that he said are currently struggling with the worldwide economic downturn.

“We are the ones that have managed to stay on a lead. I think we have a huge responsibility to take every measure to defend our position and make sure Ericsson stays a grand company,” he said.

Ericsson shares shot up more than 10 percent at the opening of trade in Stockholm on a market that was 0.30 percent weaker.