ERIC Ericsson

By Matthias Verbergt 

STOCKHOLM--Ericsson AB plans to lay off nearly 20% of its home-country workforce as the Swedish maker of telecom-network equipment races to cut costs in the face of intensifying competition from Chinese rivals and weak demand for its specialty wireless products.

Ericsson said Tuesday that it intends to cut 1,000 positions in production, 800 in research and development and 1,200 in other operations such as sales and administration, totaling a reduction of 3,000 of its 16,000 workforce in Sweden.

The job-cut announcement comes about two months after Ericsson ousted its chief executive, Hans Vestberg, saying he had failed to reverse a protracted trend of declining profit and revenue. In late July, Jan Frykhammar was appointed acting CEO.

Ericsson is battling slowing demand for its cellphone towers and switches in a market where spending by mobile-service providers on latest-generation mobile networks, known as 4G, has largely dried up. At the same time, competition has risen, with China's Huawei Technologies Co. aggressively expanding on Ericsson's traditional European turf and Nordic rival Nokia Corp. building muscle through the acquisition of Alcatel Lucent SA.

Ericsson is betting on the development of faster wireless networks, called 5G, and software-based services such as the so-called Internet of Things and cloud computing. But the first revenues from 5G are several years away and the new businesses have been slow to take up, analysts say.

"Ericsson is going through a large transformation," Mr. Frykhammar said. "The measures are necessary to secure Ericsson's long-term competitiveness as well as technology and services leadership."

Ericsson, which has around 115,000 employees world-wide, also said it would reduce the number of outside consultants in Sweden by 900. The company said it was in talks with unions over the planned job cuts.

The company said the staff reduction would primarily impact the company's last remaining Swedish production facilities in Boras and Kumla, where it makes prototypes and initial series of mobile products, such as parts of radio base stations. The rest of Ericsson's manufacturing has moved to low-wage countries over the past decades.

"Higher volatility in production volumes has increased the need for flexibility and using partners has become more important," the company said. "As a consequence, Ericsson is consolidating its own production to fewer sites globally."

Over the coming three years, the company said it plans to recruit about 1,000 positions in research and development in Sweden to bring in new competence in new technologies.

Write to Matthias Verbergt at Matthias.Verbergt@wsj.com

(END) Dow Jones Newswires

October 04, 2016 06:08 ET (10:08 GMT)

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