Ericsson Slashes 3,000 Jobs in Sweden -- 2nd Update
October 04 2016 - 12:07PM
Dow Jones News
By Matthias Verbergt
STOCKHOLM -- Ericsson AB on Tuesday said it 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.
The announcement is the first step of a wider restructuring
program that will see Ericsson significantly reduce its global
staff of 115,000, according to Ericsson's acting chief executive,
Jan Frykhammar, who warned even tougher cost-cutting measures may
be necessary.
"The industry we're operating in is undergoing a very fast
change," Mr. Frykhammar said in an interview. "If the speed of
change in the industry accelerates further, we'll need more
transformation."
Mr. Frykhammar was named acting CEO in late July when Ericsson
ousted Hans Vestberg, saying he had failed to reverse a protracted
trend of declining profit and revenue.
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
revenue from 5G is several years away, and the new businesses have
been slow to take up, analysts say.
In Sweden, the company said 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 local workers. Ericsson 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.
Ericsson 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 of network gear has moved to low-wage
countries -- mainly China and Estonia -- over the past decades.
Mr. Frykhammar said Ericsson would keep "limited prototype
manufacturing related to 5G" in Kumla, adding that the company is
looking for a potential buyer for the Boras plant.
The acting CEO said the company would book between 4 billion and
5 billion Swedish kronor ($464 million to $580 million) in
restructuring charges against 2016 earnings, but added more charges
would weigh on 2017 results.
"We will come back with charges for next year," Mr. Frykhammar
said.
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 11:52 ET (15:52 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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