Ericsson AB plans to cut 3,000 jobs in Sweden, a fifth of the workforce in its home country, as it curbs production to cope with shifting technology and stagnant demand for wireless-network equipment. The company will reduce manufacturing in the towns of Boraas and Kumla - a move it signalled last month - as it turns its focus to software development.
Ericsson, which has 16,000 workers in Sweden, is also cutting jobs in sales, administration, research and development.The blow to its last remaining Swedish factories underscores the extent of Ericsson’s challenges as it tries to keep up with rising competition and slowing demand from phone carriers. As the slump ate into profit, Ericsson ousted its chief executive officer in July and has targeted cost cuts aimed at saving 9 billion kronor ($1.05 billion) a year by 2017.
“There is more to come,” said Sebastien Sztabowicz, ananalyst at Kepler Cheuvreux in Paris, estimating that the company needs to reduce at least 15,000 positions to achieve its target. “We are less thanhalfway there.”
The company is trying to revive earnings growth through savings as it competes with Huawei Technologies and Nokia for profits in an increasingly tough market. Sales in the second quarter slumped 11 per cent as phone carriers in Europe, Russia and Brazil curbed investments in wireless equipment.
As it cuts back, Ericsson said it needs to shore up its abilities in emerging areas that require software expertise. The company plans to recruit workers for about 1,000 research and development positions in Sweden in the next three years, mainly from universities, as it focuses on cloud software and new technologies such as fifth-generation networks, which allow mode devices from refrigerators to traffic lights to be connected.
Shares of Ericsson rose 0.2 per cent to 61.45 kronor at 2:22 p.m. in Stockholm. They’ve lost 25 per cent this year through Monday.
Ericsson, which traces its roots to a telegraph repair shop opened in 1876, will be left with little production in a country where it’s been a household name and a major employer for decades.
Boraas and Kumla are Ericsson’s last remaining factories in Sweden, after it already moved the bulk of production to lower-cost countries such as India, China and Estonia. Ericsson had about 116,000 employees in total at the end of June.
- Reuters
