Ericsson said it will cut 2,200 jobs at its domestic research and development (R&D) and supply chain departments, as it ramps up a cost reduction programme designed to save the company SEK9 billion (€987 million/$1 billion) by 2017.
The Swedish infrastructure vendor said the headcount reduction forms part of a cost-saving scheme first detailed in November 2014, which also aims to reduce external costs by cutting the number of consultants the company employs, and through consolidation of its IT portfolio.
In a statement, Ericsson explained that the cost reduction scheme is a "long term initiative" that aims to cut expenditure across the board. The monies saved will be used "to fund growth in targeted growth areas" the company noted, adding that the programme will generate an additional SEK3 billion to SEK4 billion in restructuring costs between 2015 and 2017.
The vendor said it is focusing on its R&D, service delivery, and global supply operations in 2015 as part of the three-year cost reduction plan. The reduction in R&D staff is being aided by the establishment of three "global ICT centres with a common test and development strategy and methodology for R&D," Ericsson explained.
Ericsson is taking action to address a drop in net income through 2014. The figure fell from SEK12.2 billion in 2013 to SEK11.1 billion in 2014 despite sales growing SEK600 million year-on-year.
A slowdown in sales to North America limited sales growth to 1 per cent year-on-year in the fourth quarter of 2014, when net income fell 35 per cent compared to the same period of 2013.
When it announced its Q4 and full year earnings, Ericsson CEO Hans Vestberg predicted that North America would remain a weak spot for the company's mobile broadband equipment in the short term, as operators in the market remain "focused on cash flow optimisation."
Ericsson's share price rose this morning (Wednesday) after it revealed the plan to shed jobs, Bloomberg reported, adding that the vendor is losing out to rivals Huawei and Nokia in terms of sales growth.
For more:
- see Ericsson's announcement
- read this Bloomberg article
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