Ericsson (NASDAQ:ERIC) said it will cut around 1,550 jobs in its home market of Sweden as the vendor responds to increased pricing pressure, lower margins and reduced carrier spending on network gear.
In a statement, the company said the headcount reductions will cover all areas, including sales, general and administration, research and development, supply and service delivery. The cuts, which amount to 8.7 percent of Ericsson's Swedish workforce, will hit the company's networks business the hardest. Ericsson has projected a total of $600 million in restructuring costs for 2012.
Ericsson's job cuts are not nearly as dramatic as those occuring at rivals Alcatel-Lucent (NASDAQ: ALU) and Nokia Siemens Networks, But they are an indication that market leader Ericsson is not immune to the pricing pressures affecting the wider infrastructure market. Alcatel-Lucent is cutting 5,550 jobs as it streamlines its operations and reduces costs. Meanwhile, Nokia Siemens Networks is making steady progress on its own major restructuring, which could ultimately include17,000 job cuts, as it shifts its focus squarely to mobile broadband.
Ericsson's announcement occurred a day after its annual investor conference and shortly after it reported weaker third-quarter earnings. The vendor said net profit in the quarter fell to $324 million, down from around $568 million in the year-ago period. Total sales slipped 1.7 percent to $8.11 billion. Ericsson's highly watched gross margin dropped to 30.4 percent, down from 35 percent in the year-ago period. Analysts polled by both Dow Jones Newswires and Bloomberg expected a gross margin of around 32 percent for the period.
"It is naturally a difficult message for our employees in Sweden," Tomas Qvist, head of Ericsson's human resources in Sweden, said in a statement. "We must ensure that we can continue to execute on our strategy to maintain our market leadership, invest in R&D and meet our customers' needs. To secure this we need to focus on reducing cost, driving commercial excellence and operational effectiveness. This will enable us to secure our future competitiveness."
- see this release
- see this Bloomberg article
- see this Reuters article
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