Ericsson to cut 7,000 more jobs
By Nick George in Stockholm
Published: April 29 2003 8:25 | Last Updated: April 29 2003 8:25
Ericsson shares surged 15 per cent as 7,000 new job cuts unveiled by the world's largest supplier of mobile telephone networks on Tuesday helped take investors' minds off its grim first quarter report.
The Swedish company, which also warned it would not reach profitability this year, reported a net loss of SKr4.3bn, its 10th consecutive quarterly loss, with sales down 30 per cent to SKr25.9bn. The fall in orders was even worse, down 35 per cent to SKr27.1bn.
The company also adjusted down its outlook for the total market for mobile networks saying that this could now decline by more than 10 per cent this year in US dollar terms. The uncertainty in the macroeconomic environment has increased, and several operators are reducing their capital expenditures.
Previously the company had said the market would fall by up to 10 per cent.
The figures give a bleak backdrop for Carl-Henric Svanberg, the company's new chief executive who took over from Kurt Hellström earlier this month.
Ericsson had previously said it would reach profit sometime this year, but the new restructuring measures which will involve SKr11bn in extra charges and mean this will not now be possible.
Analysts said the extent of ricsson's new restructuring programme came as a positive surprise to the market and expected it to quickly translate into improved results, despite the additional charge.
Ericsson's most-traded B shares opened more than 15 per cent higher at SKr7.15.
At is peak in 2001 Ericsson employed around 107,000 but Mr Svanberg said this figure was down to 61,000 at the end of March. The aim had been to reduce the workforce to around 54,000 this year but, "with the additional actions, headcount will approach 47,000 next year," he said.
"The macroeconomic environment has become more uncertain with weaker short-term demand, further actions are therefore needed. We are heading in the right direction but a lot more can be done to simplify our way of working and further reduce costs."
The new cost reduction actions launched will further reduce cost of sales by approximately SKr8bn and the annual operating expenses by SKr5bn. The actions will be fully implemented by the third quarter 2004.
Mr Svanberg is thereby reducing the target for operational expenses to SKr33bn a quarter from the present target of SKr38bn. In the three months to March 31, they stood at SKr47bn.
Ericsson said it despite its problems it expected to maintain our shares of the mobile systems and professional services markets this year.
"However, our total sales reported in SKr will decline more than the total market, mainly due to foreign exchange effects. Divestments and closure of certain businesses as part of our restructuring activities also continue to affect our sales."
"Previously we indicated that we planned to return to profit at some time during 2003. This plan did not include additional restructuring measures. Excluding the additional charges for restructuring announced today we remain determined to return to profit during 2003," it said. |
