Ericsson announces job cuts as profit falls

Mumbai: Swedish telecom equipment maker Ericsson AB has announced sweeping job cuts after reporting lower-than-expected profits, and said the group expects a flat market this year as well.

Ericsson, the world's largest provider of mobile networks, reported a sharp drop in fourth-quarter 2007 profits and said it would cut 4,000 jobs globally - including 1,000 in Sweden - to rein in costs.

Ericsson, which shed thousands of jobs and recorded huge losses as the IT bubble burst early this decade, had a total of 74,000 employees, with just under 20,000 employed at its operations in Sweden.

It said the full effect of the savings would come in 2009.

Ericsson lowered its outlook for telecom-equipment demand in 2008, but said industry fundamentals remain unchanged.

The company said its net income in the fourth quarter fell to 5.64 billion kronor ($879 million) from 9.7 billion kronor a year earlier. Sales rose to 54.5 billion kronor from 54.2 billion kronor.

"We have steadily improved our leading position and market share in an increasingly challenging market," Ericsson chief executive Carl-Henric Svanberg said in a statement.

"The market growth, however, slowed during last year and for 2008 we find it prudent to plan for a flattish mobile infrastructure market."

Ericsson said its operating margin fell to 14.0 per cent, below forecasts for 14.7 per cent and well short of the 22.5 per cent reported a year earlier.

Operating earnings were 7.6 billion Swedish crowns ($1.2 billion) in the fourth quarter against 12.2 billion Swedish crowns a year earlier.

The erosion of earnings in recent quarters has been mainly due to the firm making less money from higher-margin network upgrades and more from the less profitable network rollouts, it said.