Ericsson to cut 5,000 jobs after $202M profit drop
updated 04:00 pm EST, Wed January 21, 2009
Ericsson announces cuts
Swedish network hardware maker Ericsson on Wednesday announced it will cut 5,000 worldwide jobs as its profits in the fourth quarter dropped by 31 percent, or about $202 million. The decline is said to be caused by restructuring charges and weaker handset sales, as its Sony Ericsson partnership last week announced its own fourth-quarter losses, shipping 6.2 percent less phones than in previous years. Ericsson said the joint venture had a fourth-quarter loss of $243 million.
Ericsson went on to say its core network business was holding strong, and was not yet affected by the global economic slowdown. Despite this, it is planning on restructuring its company in an effort to stay competitive. The 5,000 job cuts accounts for more than 6 percent of Ericsson's 79,000 employees,
"We're doing this of course because of the uncertainty in the market," Ericsson's Chief Executive Carl-Henric Svanberg said. In a web conference, the company said 2008 profits dropped 48 percent to the equivalent of about $1.35 billion from $2.16 billion in 2007 despite sales that were 11 percent higher.
With these cuts, Ericsson is taking preventative measures to avoid the fate of its one-time strong competitor, Nortel Networks Corp., which filed for bankruptcy last week in both Canada and the US, making it the first major technology company to do so.
