Blaming its push into low-margin markets for a dramatic fall in profits, Ericsson's CEO, Carl-Henric Svanberg, is looking to reverse the situation by imposing a cost cutting programme that will see around 1,000 of its Swedish workers laid off.
The company reported a Q4 net profit decline of 42 per cent to 5.6 billion kronor (US$880 billion), down sharply from 9.73 billion kronor in the same period a year ago. However, most financial analysts seemed relaxed about this news, it having been anticipated ever since the Stockholm-based company had shocked the market last October with a hefty profit warning and a surprise cut in its 2007 outlook--forcing its CFO to step down.
Svanberg explained the profit decline on the continued rapid build out of the company's infrastructure products in emerging markets. "Our significant market share gains have resulted in a higher proportion of new network builds with initial lower margins."
Commenting on the news that Motorola might split its operations, Svanberg said he would be very cautious before making any acquisitions. "As business professionals we look at everything, but we would take a very cautious view on such a thing because we believe you are better off doing it on your own."