Now we know what is driving your buddy Ed. He is a finn, perhaps the one making the bizarre and sometimes hysterical posts on the Nok thread.
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"Ericsson's in 'a constant state of restructuring," said Ed Snyder, analyst at JP Morgan H&Q in San Francisco. "Their natural reaction to this type of stress is to announce another restructuring program."
Here's a rundown.
In July 2000, Ericsson trumpeted a "four-point Back-to-Profit Program," It predicted a loss of $1.6 billion for that year, mostly from its handset business.
In March 2001, Ericsson increased its loss forecast for this year to $2 billion. It announced a "Comprehensive Efficiency Program."
This month it unveiled a huge shake-up plan. It did not issue guidance on that plan's effect on earnings.
But First Call's analysts' survey estimates the phone maker will lose 3 cents a share in its third quarter, ending in September. The year-end results will be worse, analysts project. First Call's consensus for 2001 is a loss of 13 cents a share.
Under the newest plan, Ericsson sliced itself into five units. To run them, it assigned a chief operating officer -a new job.
Next, it will merge 100 regional offices into what it calls "substantially fewer." It will redraw its map of the world into three market areas. North and South America will merge. Europe will wed the Middle East and Africa. Asia-Pacific will be as one.
Fewer Groups, More Layoffs
And Ericsson will set up five marketing groups to serve its biggest clients -
Vodafone, France Telecom, Deutsche Telekom, Telefonica and Telecom Italia Mobile.
It will shed 17,000 of its current 107,000 employees. That's on top of 22,000 let go under its Back-to-Profit program. , The net savings from all these gyrations? Ericsson hopes for $1.9 billion a year starting in 2002. That's about what it will lose in its handset division this year.
And on Oct. 1, Ericsson and Sony Corp.
What's it all amount to? "More of the same," Snyder said. "They have not been very effective because they don't address the real issue." That issue, he says, is handsets. "They have to get out of that business because they're completely uncompetitive. The deal with Sony will do them no good at all. Joint ventures have been abysmal failures in this business."
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"The Swedes are stubborn. They don't admit defeat. They don't make changes quickly," May said. They differ from the Finns at Nokia Corp., he says. "The Finns will cut their losses. They'll say, 'We tried that. It didn't work. Let's move on.' " May said. Snyder concurs. "There's a political structure that makes it hard for them to admit they've lost to the Finns,". he said. "They should get out of the handset business. They're just doing it' the hard way -bleeding out slowly."
Sweden's culture does not allow for dynamic business, Snyder says. "That's a reason they've done well in infrastructure. It's a big-ticket item, with fewer suppliers, vendors and customers. So it's more relationship-driven. There's a lot of inertia with infrastructure, which is where they excel." But Ericsson's decision to create the COO position is a good idea, May says. "They need more accountability and responsibility. A COO is the way to do that. He's the go to guy, the kick ass guy."
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IBD 28 Aug 2001 |
