To all - WSJ's wrap-up on ERICY :
December 10, 1998
Ericsson to Cut 10,000 Jobs
As Global Slump Hurts Profits
An INTERACTIVE JOURNAL News Roundup
Swedish telecommunications-gear maker Telefon AB L.M. Ericsson warned
Thursday that 1998 profit will be disappointing and said it will cut 10,000 jobs,
or 10% of its work force, next year as the global financial crisis stifles sales.
The news stunned investors. In Stockholm at midafternoon, Ericsson's shares
were down 52 kroner, or 22%, at 185 kroner. The company's American
depositary receipts were down $4.375, or 15%, to $24.50 in midday trading on
the Nasdaq Stock Market.
Ericsson of late has been plagued by a plunging stock price, virtually flat sales
of mobile phones, and organizational problems. Meanwhile, its latest
mobile-phone models have had technical problems.
The company said that although it has seen recovery in some Asian markets,
the global financial slowdown has cut demands for its products, especially in
its public networks business. Ericsson also said its mobile phone operations
have been hurt by a shift in product availability.
Ericsson ranks third in the U.S. market for mobile phones, and second in
European markets, according to market research. It has been locked in a
competitive struggle with Finnish rival Nokia Oy and U.S. counterpart
Motorola Inc.
Shares of Motorola and Nokia also fell Thursday, hurt by the possibility that
the problems Ericsson faces may spread across the industry. Motorola's shares
were down 50 cents to $59.5625 on the New York Stock Exchange, while
Nokia's ADRs were off $1.875 to $106.4375, also on the Big Board.
In a statement Thursday, Ericsson said that full-year profit and sales will be
"somewhat below expectations." Analysts surveyed by First Call expected the
company to earn 87 cents per share in 1998 and $1.05 per share next year. In
1997, the company earned $1.49 billion, or 81 cents a share, on revenue of
$21.03 billion.
Ericsson also warned that when it issues its next financial report on Jan. 28, it
will include the heavy job cuts, which represent about 10% of the company's
work force of more than 100,000. It wasn't immediately known where those
jobs would be cut, but the company has operations in 140 countries.
Operating income, specifically in Ericsson's mobile phones business, was hurt
by a shift in demand toward entry-level phones with reduced margins.
Ericsson expects development for the next year to be below the company's
long-term growth objectives, but the company hasn't changed its long-term
goal of exceeding market growth. Ericsson said that although there are signs of
recovery in some Asian markets, the wider repercussions on global demand are
now affecting sales and income.
Copyright © 1998 Dow Jones & Company, Inc. All Rights Reserved. |
