Ericsson announce 20,000 job cuts over two years

Swedish telecoms equipment company, Ericsson is set to cut 20,000 jobs over the next two years after announcing another quarter-year of heavy losses.

The jobs announcement came as the telecoms giant revealed that orders dropped 40 per cent in the first three months of the year, sending the firm into a pre-tax loss of £363 million. Gloom over Ericsson's prospects also sent shares falling 24 per cent to a five-year low.

Investor hopes are now pinned on the firm's drastic cost-cutting programme, under which 22,000 jobs went last year.

Now, 10,000 staff will lose their jobs in 2002, and the same number again next year, as the company plans to introduce numerous cost cutting exercises that will streamline the company by 2004.

Responding to the company results, Kurt Hellström, President and CEO of Ericsson said: “As expected, this past quarter was very challenging. Many operators have recently lowered investment plans further. As sales will be lower than anticipated, with ongoing aggressive cost cutting we plan to return to profit at some point in 2003.

“Our order intake demonstrates that the world’s leading operators continue to choose our equipment to build-out and upgrade their networks. At the same time, we are expanding our Services business by providing solutions that reduce our customers’ operating expenses.”

“Our handset strategy is proving successful. Sony Ericsson has now reached a break-even result and at the same time our new Mobile Platforms business is gaining speed with many important licensing agreements.”

“In the prolonged industry downturn, there will be winners and losers. We are stronger than ever in 2G and 3G, and we are winning market share in systems and services. With our drive for efficiency, unique competence and premier customer base we will emerge with an expanded position.”

“With the proposed rights offering, we will have the financial strength to fully leverage our strong competitive advantage. At the same time, we will also have a robust financial position with increased security if poor market conditions continue or deteriorate further.”

While Ericsson has lost a huge chunk of market share in mobile handsets, it claims to have steadied its mobile handset business, and has launched a raft of new products this year.

However the company's systems division has been hit hard by frozen and slashed investment budgets among telecoms operators worldwide.

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