Good news for the competition: Swedishness does not allow for job cuts. Hence the guys who produced mobile terminals will be recycled into infrastructure manufacturing. The competition likes that.
Elcoteq hit by Ericsson outsourcing decision
By Maija Pesola
Published: February 2 2001 12:02GMT | Last Updated: February 2 2001 13:14GMT
Elcoteq, the Finnish electronics component manufacturer, on Friday reported a more than six-fold rise in annual profit, but said a loss of business from Ericsson, the Swedish telecoms equipment manufacturer that is one of its largest clients, would lead to job cuts and a delay in expansion plans.
Elcoteq reported net profits before tax and extraordinary items, of E54.4m ($51.2m), compared to E9.8m last year, and attributed the surge to its rapid expansion of production capacity over the last year.
It warned, however, that some of this expansion would have to be scaled back after a decision by Ericsson to outsource its mobile phone production to Flextronics of Singapore, and Arima/Taiwan and GVC of Taiwan.
Elcoteq, which sells 92 per cent of its products to Ericsson and Nokia, said it would cut 600 jobs, or 19 per cent of its workforce, in Estonia, and 800 jobs, or 25 per cent of its workforce, in Hungary as a result of the move.
It also said that the planned expansion of a manufacturing plant in Tallinn would be delayed by six months. The construction of another plant in Wroclaw, Poland, would be delayed by three months, the company said.
Elcoteq said that while sales would be reduced during the first half of 2001, it expected volumes to increase towards the end of the year as the company shifted to a new business relationship with Ericsson, in which it would produce components for mobile network systems rather than handsets.
Ericsson took the decision to outsource its handset production to low-cost manufacturers in Asia in ordert to combat continuing losses at the division. Its mobile networks business, which makes up about 80 per cent of its revenues, has continued to perform well, however, and the company remains a market leader in this sector.
Elcoteq reported sales of E2.2bn for 2000, nearly three times the E752m reported the previous year.
Shares in the company, which fell more then 50 per cent last week after Ericsson's announcement, rallied slightly on Friday, to trade up 1.7 per cent at E16. |
