Ericsson plans job cuts after sales slump
Published: 22 Apr 2002 11:04 BST
Over 20,000 Ericsson employees are facing redundancy after the company announced on Monday that it made a greater than expected loss in the first three months of this year, and expected to make an overall loss in 2002.
The telecoms equipment maker made a pre-tax loss of £363m in the first three months of this year, caused by a steep decline in revenue. Sales fell by 26 percent, and orders for new equipment were down 40 percent.
In an attempt to return to profit, Ericsson is planning to slash its global workforce from 85,000 to 65,000 by the end of 2003. However, some analysts have suggested that this cost cutting does not go far enough. Ericsson is also planning to raise funds through a rights issue.
Ericsson's mobile handset sales division -- now a partnership with Sony -- broke even. Its mobile network division sustained heavy losses, though, as network operators slashed infrastructure spending in an attempt to survive the downturn.
The mobile market will remain weak in 2002, according to Ericsson. The company agreed with Nokia's forecast last week that between 400 and 420 million handsets will be sold worldwide in 2002. Both companies had earlier predicted higher global mobile phone sales.
On the positive side, Ericsson said that the Sony Ericsson partnership was still on target for profitability this year, after shipping 5.8 million mobiles so far in 2002.
Shares in Ericsson and Nokia both fell in early trading on the London stock exchange following Ericsson's announcement.
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