Ericsson reportedly may slash 25K jobs as budget cuts continue

Ericsson
Ericsson last month posted an operating loss of $145.3 million in the second quarter.

Ericsson is reportedly considering slashing 25,000 jobs outside its native Sweden as part of its ongoing effort to cut costs.

The venerable telecom gear vendor said last month it would step up its restructuring initiative after it posted an operating loss of $145.3 million during the latest quarter, marking a dramatic reversal from the $338.2 million profit it posted during the same period a year ago and far worse than the $29.4 million loss that has been expected in a Reuters poll of analysts. Sales decreased by 8% year over year and revenue was down 7.7%.

Ericsson said at the time that it expected the global market for mobile equipment for 2017 “to show a high single-digit decline” compared to its previous estimate of contraction ranging from 2% to 6%. Investors responded by sending shares down more than 15%.

Reuters reported this morning that the company is mulling a round of job cuts as it works to reduce its annual cost reduction run rate of at least $1.2 billion by mid-2018. Reuters cited a report from the Swedish daily Svenska Dagbladet, which pointed to unidentified company sources.

Ericsson was particularly challenged in the second quarter by slowing growth in Europe and some emerging markets, analysts at Wells Fargo Securities noted.

“Sales in Europe and Latin America (down 11%) were impacted by lower broadband investments while Middle East and Africa (down 17%) faced difficulty (in) a macro environment,” Maynard Um of Wells Fargo wrote in a note to investors. “North Africa was stable though declined due to a loss of a service contract and North East Asia (down 3%) saw a decline in China partially offset by growth in Japan and Korea.”

Ericsson is in the midst of executing a turnaround plan it unveiled in March to streamline its operations by combining products and services and upping its investments in both R&D and “services capabilities” in several core areas. In May the company announced that Rima Qureshi, senior vice president and head of Market Area North America, had left the company.

As part its restructuring, the company plans to shift its internet of things strategy from a systems integration-led approach to a platform- and solutions-led strategy to better leverage its global scale and industry expertise.