Ericsson Q4 profits drop sharply as job cuts loom

Wireless equipment maker Ericsson reported a sharp drop in fourth-quarter net profits and said it would lay off around 1,000 employees in Sweden because of costs cuts, according to an Associated Press report.

The Associated Press report quoted Ericsson CEO Carl-Henric Svanberg as saying that additional job-cuts worldwide are forthcoming in order to reach an annual cost cut goal of $629 million.

One-time costs are expected to reach around $629 million.

Most of the cuts would be completed next year and most of the layoffs in Sweden would be made through voluntary programs 'as far as possible,' the Associated Press report, quoting the company, said.

The company also said that although industry fundamentals and consumer behavior back a positive longer-term outlook, 'we find it prudent to plan for a flattish mobile infrastructure market' in 2008 on the back of slowing market growth in the past year.

Operating margin for the quarter fell to 14%, from a previous 22.5% in the same three months in 2006, the report said.

The company said expansion in lower margin emerging markets is pressuring profitability.

A decline in network expansion and upgrades in mature markets have declined, leading to lower margins there as well, it said.

Fourth-quarter net profit fell 42% to 5.6 billion kronor ($868 million), down sharply from 9.73 billion kronor in the year-ago period.

For the full year 2007, net profit dropped around 16% to 22.1 billion kronor ($3.5 billion), compared with 26.25 billion in 2006.