Ericsson said it would cut 1,500 jobs as part of its broad restructuring plan. In addition, the vendor's profit plunged 92 percent in the fourth quarter, hit by higher restructuring costs and weaker sales.
The Swedish company reported net profit of $43.4 million in the quarter, down from $539.4 million in the year-ago quarter. Sales slumped 13 percent to $8.08 billion, down from $9.29 billion in the fourth quarter last year. Networks sales fell 16 percent in the quarter and professional services sales were flat year-over-year.
Ericsson CEO Hans Vestberg said in a statement that the decline in older GSM sales has not yet been offset by enough growth in mobile broadband and all-IP networks. He also said that during 2009, operators in a number of developing markets--especially Central Europe, the Middle East and Africa--were cautious about investing, while other markets like China, India and the United States continued to show strong growth.
In an interview with FierceWireless, Ericsson CFO Jan Frykhammer said the company has been impacted by the global economic turmoil, but that it has delivered well on its efficiency programs that it instituted early in 2009. In addition, Frykhammer said the additional 1,500 job cuts are part of the company's initial restructuring program announced in 2009, and that most of the people impacted have already been notified.
Nevertheless, the world's largest equipment vendor saw its balance sheet hit by larger restructuring costs, which came in at $596 million, up from $319 million in the year-ago quarter. The company said it expected its restructuring program to be completed by the second quarter.
On a positive note, Frykhammer said the firm's network outsourcing contract with Sprint is progressing very well, and that it is a model that Ericsson would like to grow. The company already has network outsourcing deals covering 370 million subscribers worldwide. In addition, Frykhammer said the company sees its professional services business becoming more critical to the company as competition increases from Asian vendors such as Huawei. "During the last couple of years, we have seen more competition from Asian providers. I think one way we compete is by having a strong services organization and sustaining our technology leadership."
During its earnings call the company took care to point out it recently won an LTE contract from TeliaSonera, and that it believed it has strong momentum for 2010. Ericsson has been under intense pressure in Scandinavia. In November, Norway's Telenor gave Huawei an LTE contract valued at $175.4 million over over the next six years. Additionally, in December Huawei was awarded an LTE contract from Tele2 and Telenor for their joint 4G network, Net4Mobility, in Sweden, shutting out Ericsson in its home market.
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